Cover (clock-wise):
Alison Ross (staff), Katherine NT
Peter and David Lehmann (clients), Caltowie SA
Don and Kelly White (clients), Bridge Creek Station, Adelaide River NT
Tahir Rashid (staff), Northam WA
C O N T E N T S
Cover (clock-wise):
Alison Ross (staff), Katherine NT
Peter and David Lehmann (clients), Caltowie SA
Don and Kelly White (clients), Bridge Creek Station, Adelaide River NT
Tahir Rashid (staff), Northam WA
From your Chair
CEO’s Report
Year in Brief
A Year of Progress
180 Years of Service
Operating and Financial Review
Material Business Risks
It’s More than a Business – It’s Personal, Too
Review of Operations
Board of Directors
Executive Management
The Wadlows’ Story
Directors’ Report
Remuneration Report
Annual Financial Report
Shareholder Information
Company Directory
2
4
6
7
10
12
20
22
24
33
36
41
42
48
66
122
123
F R O M
C H A I R
Y O U
It is an honour to have recently been appointed
Chair of Elders, a company that has been
proudly serving Australia’s agricultural
industries for 180 years.
Your company is an iconic Australian
institution, having grown from humble
beginnings in 1839 to today’s position as
the country’s largest listed rural services
business.
Few companies can lay claim to that
heritage or longevity. Although we’ve faced
and overcome many challenges in that
180 years, our commitment to Australia’s
rural communities has been constant.
There is no doubt conditions remain
extremely difficult for many of our customers,
with drought continuing to impact businesses
across much of the country.
Despite those challenges, Elders has provided
solid returns for our shareholders in the 2019
financial year, with our second Eight Point Plan
underpinning continued improvements across
our business.
Financial Results
Elders has delivered on its earnings guidance,
recording an underlying after-tax profit of
$63.6 million for the 2019 financial year.
Underlying Earnings Before Interest and
Tax (EBIT) was $73.7 million, marginally
below the result achieved in FY18.
The strength of those results can be attributed
to our diversified business model, together
with management’s highly disciplined approach
to managing and allocating costs and capital.
The Board has declared a final dividend of
9 cents per ordinary share, taking dividends
for the year to 18 cents fully franked.
Safety performance
Your Managing Director, Mark Allison, will
expand on initiatives being taken to improve
Workplace Health & Safety (WHS) outcomes
in his report, and I firmly believe that genuine
leadership is a key factor and driver of change.
Our WHS governance remains robust and both
our Board and Executive teams continue to be
committed to placing the highest priority on
the well-being of our people in all that we do.
It is an honour to have recently been appointed Chair of
Elders, a company that has been proudly serving Australia’s
agricultural industries for 180 years.
2
2019 Annual Report — Elders R
From your Chair
Growth and Innovation
We invested significantly in growing
our business in financial year 2019.
Our branch network continues to expand
through a combination of organic initiatives
and acquisitions, with a number of new
locations added to our national footprint,
and with 12 additional businesses extending
our customer reach.
We expanded our product range with the
introduction of our Livestock-in-Transit
Delivery Warranty, providing important
financial protection for our customers.
In July, we announced the proposed
acquisition of Australian Independent Rural
Retailers (AIRR). Once finalised, this key
investment will deliver Elders enhanced
scale and growth opportunities, with its
well-established wholesale business, access
to the pet and produce market segments
and portfolio of animal health product
registrations.
Our proposed investment in AIRR was
endorsed by institutional investors, who
strongly supported the capital raising for the
acquisition. I also thank the large number of
retail shareholders who chose to participate
in the retail offer component of the capital
raising.
Our continued investment in R&D and digital
technologies will help Australian agricultural
industries improve productivity and enhance
their competitiveness in global markets.
Partnerships during the year included the
South Australian Research and Development
Institute, the Bureau of Meteorology, Western
Sydney University, the Grains Research and
Development Corporation, Meat and Livestock
Australia, Wine Australia, AgriFutures, and
Primary Industries Regions SA with our
Struan Research Farm partnership.
Corporate Governance,
Risk and Compliance
Our five values – integrity, accountability,
customer focus, innovation and teamwork –
underpin all we do at Elders. Those values are
reflected in the strong corporate governance
and risk and compliance practices we
demonstrate every day.
Our ambition is to have governance practices,
tailored to Elders’ specific needs and
circumstances, equal to those demonstrated
by Australia’s very best companies. In 2019 we
entered the ASX 200 and we aspire to match the
best governance and sustainability standards
practised by ASX 100 and above companies. In
2020 we will pay particular regard to enhancing
our competence in all aspects of sustainability
to ensure we prosper well into the future,
meeting the legitimate interests of our clients,
employees, investors, communities and other
stakeholders.
Our Board is well-structured with an
appropriate depth and balance of skill,
knowledge and experience. As our business
grows, it is likely we will further broaden the
Board’s skill set through the appointment of
a new Non-Executive Director.
We are committed to compliance,
transparency, disclosure, and acting lawfully,
ethically and responsibly. We believe that
identifying risks allows us to not only manage
them, but to highlight opportunities for further
improvement and innovation. We believe this
approach builds resilience and strengthens
our business.
Looking ahead
Your Board has some clear priorities
for the year ahead.
We will focus on continuing to meet our
strategic targets as our second Eight Point
Plan enters its final year and confirm the
next strategic plan which will guide us
through to 2023.
The purchase of AIRR and its successful
integration will demonstrate our commitment
to grow our business not just organically, but
through disciplined acquisitions that meet our
strict financial criteria, ensuring they create
value for shareholders.
We will continue to grow our branch network
to enable us to better serve our customers,
with the ongoing pursuit of operational
improvements and efficiencies across our
business ensuring we remain competitive.
And our ongoing drive to seek innovative
solutions will see us expand our technical
and digital services.
In closing
Our continued success would not be possible
without the dedication and commitment of
our 1,900 employees, who work tirelessly
to serve and support our customers and
their communities. Even as we celebrate 180
years of helping build Australia’s great rural
industries, your Board is already looking to the
future, confident that we have the people and
the passion to continue creating real value for
shareholders.
Ian Wilton
Chair of the Board
3
C E O ’ S
R E P O R T
Safety performance
In FY19, Elders held its inaugural Safety
Summit day. The purpose of the Summit was
to identify and understand any barriers and
distractions that might exist that could prevent
the achievement of optimum Work Health and
Safety outcomes, and to devise strategies to
rejuvenate current practices or implement
new initiatives. The outcomes of the Summit
will help us drive new enhancements in the
coming year. In addition, we are investing in
new governance, risk and compliance systems
to improve the way we report and capture
information about safety and compliance.
The wellbeing of our people is a primary focus
of your Board and management and we strive
to provide a safe and healthy workplace. In
2019 our lost time injuries (LTIs) were 9, in
comparison to 5 in the previous year, which
falls short of our own high standards. Clearly,
we must strengthen our efforts to ensure that
employees return home in the same physical
and psychological state they arrived at work.
Our workplace culture of safety has been
embraced by our employees, with that positive
attitude evident in the results of this year’s
Employee Effectiveness Pulse Survey, which
achieved its best result since the survey was
launched five years ago. The scope of the
survey was broadened in FY19 to obtain deeper
insights, with similar favourable results
achieved. Respondents also said Elders
fostered a culture of safety and wellbeing
throughout the business.
In this, our 180th year of
business, Elders has
continued to build on the
platform of sustainable
growth established in 2014
when we implemented our
strategic Eight Point Plan.
In the original Eight Point Plan we set some
challenging targets for the business, using
our competitive advantages and strengthening
our services to pursue real value for our
stakeholders.
Whilst being both proud and respectful of our
heritage, we aren’t constrained by it. In FY19
we demonstrated that Elders’ five core values
of integrity, accountability, customer focus,
innovation and teamwork inspire not just how
we do business today, but how we’re building
the Elders of the future.
4
Operational performance
I am pleased to report that in FY19, we
recorded an underlying after-tax profit of
$63.6 million, in line with the previous year.
Underlying Earnings Before Interest and Tax
(EBIT) of $73.7 million were $0.8 million lower
than FY18, a creditable performance given the
challenges faced by rural businesses in many
parts of Australia.
The result highlights the resilience of our
business model and reaffirms that our target
of seeking 5 – 10% EBIT growth through the
FY17 to FY20 agricultural cycle to 2020 is both
realistic and achievable.
At 18.2%, Underlying Return on Capital (ROC)
approached our 20% target, with unfavourable
seasonal conditions resulting in lower wool
volumes and reduced summer cropping,
and the increased capital associated with
acquisition activity, including the TitanAg
and Livestock in Transit businesses.
Recent acquisitions drove an increase in
underlying profit of $10.2 million, primarily
earnings from TitanAg and Livestock in Transit
delivery warranty products.
Reduced summer cropping impacted our Rural
Products business with a $6.0 million fall in
margin, while Agency Services’ margin was
down by $5.2 million largely due to lower wool
volumes, with the Australian wool clip down.
2019 Annual Report — Elders Efficiency and Growth
The last year has seen consolidation, and
growing interest from offshore investors in
our industry sector. Rather than be distracted
by those events, Elders has reaffirmed our
commitment to growing our business and
exceeding the expectations of our customers.
We continue to expand our footprint in regional
Australia, through key strategic acquisitions
including Ace Ohlson, Kerr & Co Livestock
and TitanAg. Soon we expect to finalise the
purchase of Australian Independent Rural
Retailers, providing us with an entry into the
wholesale rural services market.
These acquisitions provide us with a strong
pathway to growth and the ability to better
meet the increasingly diverse needs of our
customers.
The growth of our specialist independent
consulting arm, Thomas Elder Consulting
(TEC), is being driven by our ability to apply
our skills and expertise in whole farm
management advice across all areas of
our clients’ operations.
Thomas Elder Institute (TEI) is Elders’
flagship research and development arm,
involved in key partnerships with public and
private research organisations, industry
bodies and education institutions. Our
partnerships with the South Australian
government’s Department of Primary
Industries and Regions South Australia will
help ensure the benefits of research and
development reach the farm gate.
In March 2019 Elders and Rural Bank, a wholly
owned subsidiary of Bendigo and Adelaide
Bank (ASX:BEN), successfully transitioned
to a new exclusive relationship agreement.
Under the new arrangement, around 90
Elders’ staff commenced employment with
Rural Bank. These employees will continue
to operate from Elders branches, ensuring
continuity of service to our mutual customers.
The new arrangements allow Elders to
reduce its employee cost base, while securing
a stable income stream in excess of $10 million
per annum.
Our People
Our annual Employee Effectiveness survey,
conducted by consulting firm Korn Ferry, again
showed pleasing results, with an increase
in Employee Engagement of 1% to 76% and
Employee Enablement remaining steady at
77%. 70% of our people took part in the survey.
These results place Elders well above
Australian benchmarks for each measure,
and higher than the High Performing
benchmarks of 74% and 73% respectively.
We continued to support our people
through training and development in FY19,
and consistent with the previous year, 320
employees took part in a formal learning and
development program, with an even balance
of male and female participants. We also
continued our support for the Australian Rural
Leadership Foundation, with two participants
in the Agribusiness Leadership Program and
18 people engaged in our Senior Leadership
Development Program.
Internally, we launched the Ignite Sales
Program across our zone network. The
program focuses on the agriculture industry,
how we deliver value for our clients, and
introduces Elders Sales Skills.
We continued to support the future of
Australian agriculture with eight new trainees
enrolled in our Livestock Trainee Program,
bolstering the 10 employees who are continuing
in the program. A further 19 are enrolled in the
Certificate IV in Agriculture.
Elders employed eight university agronomy
graduates this year; three within the national
program, two zone-based and three branch-
based graduates. Three staff from the 2018
graduate program have now moved to full-time
agronomy positions.
We are tracking towards our gender diversity
goals, with attracting and retaining key female
talent a particular focus. While an increase
of 16 women in management positions will be
required to meet our 2021 target, the pipeline
of female team leaders already stands at
31% against a goal of 25%. Additionally,
representation of women as Non-Executive
Directors on our Board already meets the
target of 40%.
CEO's Report
Our communities
Our community giving program, Elders Give
It, continues to partner with the Royal Flying
Doctor Service Central Operations. Our Big
BBQ month in February raising over $60,000,
with branches across the Elders network
supporting local events to help raise funds
for this valuable service.
Our partnership with Beyond Blue helps
ensure Australians have access to mental
health support which is critically needed in
regional areas, particularly when times are
tough on the land.
At the grass roots level, a review of our local
sponsorship arrangements highlighted the
involvement of our local branches in their
communities, with donations, support and
contributions reaching $1.3 million in FY19.
Our branch network initiatives are a small but
important component of the support we’ve
provided in rural and regional Australian for
the last 180 years.
Looking ahead, we will continue to seek
agriculture-focused partnerships and events,
looking to sponsor those focusing on innovation
and sustainable farming practices.
In 2020 Elders will support evokeAG as a
platinum partner for the second year. EvokeAG
is the Asia-Pacific’s largest agri-food tech
event, bringing together delegates from across
our region with a focus on technical innovation
and collaboration.
Our continued partnership with AgSafe
strengthens our commitment to safety and
provides access to training and accreditation
for the safe handling of chemicals across the
supply chain.
We’re proud of our history. As we celebrate
our 180th year, we acknowledge the support
of our customers and stakeholders who have
made that longevity possible. As we look to the
future, we’re confident that Elders’ growing
success will ensure we remain an integral
part of Australia’ rural landscape.
M C Allison
Managing Director
5
Y E A R I N B R I E F
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)
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 (30 September)
Market capitalisation
Number of ordinary shareholders
Ordinary shares on issue
6
$m
$m
$m
$m
$m
$m
$m
$m
$m
cents
cents
cents
cents
cents
cents
%
%
times
times
%
$
$m
FY19
1,667.3
78.8
73.7
7.7
68.9
63.6
94.3
492.9
11.2
57.0
56.1
52.6
51.8
9.0
9.0
4.4
18.2
2.4
11.6
38.9
FY18
1,599.4
78.9
74.5
6.9
71.6
63.6
173.4
308.5
(12.1)
62.0
60.7
55.0
53.9
9.0
9.0
4.7
24.2
2.0
11.5
52.3
6.32
895.2
12,325
7.09
821.2
12,598
141,650,621
115,818,637
2019 Annual Report — Elders A Y E A R O F P R O G R E S S
A Year of Progress
Safety Performance
Lost time injuries increased to 9 from 5, target is zero LTIs
134 days lost, compared to 51 last year
Continued emphasis on employee and community safety health and well-being
Operational Performance
$73.7m underlying EBIT, down $0.8m on last year
Key Relationships
Efficiency and Growth
Underlying ROC at 18.2%, down from 24.2% at September 2018
Leverage ratio increased to 2.4 from 2.0
Interest cover ratio remained consistent at 11.6
Fully franked interim dividend of 9.0c per share
Fully franked final dividend of 9.0c per share declared
New and extended relationship agreement with Rural Bank to provide our clients access to quality
banking services
Strengthened the “Elders Give It” program through continued Royal Flying Doctor Service
partnership and further community involvement
Formal engagement with all Rural Research Centres and government and university institutions
to enhance our agricultural research development and extension initiatives through the Thomas
Elder Institute
Achieving greater productivity for clients and the industry through the Thomas Elder Institute and
our expanded digital offerings
Acquisition of Australian Independent Rural Retailers (AIRR) to provide EBIT growth and strategic
presence in key geographical areas
Major business restructure to drive performance and focus heading into the final year of the
second Eight Point Plan
Launch of new Livestock and Wool in Transit (LIT/WIT) delivery warranty associated with Elders’
Agency services
Continued footprint expansion through acquisitions of Rural Products and Agency businesses
Divestment of Indonesian retail business
7
A L W A Y
I N
Y O U R
C O R N E
S
R
Clock-wise:
John Howard (client), Biloela QLD
Nathan Stevens (client), Yeppoon QLD
Tahir Rashid (staff), Northam WA
Yeppoon QLD
1 8 0
Y E A R S
O F
S E R V I C E
The story of Elders doesn’t begin in Australia’s farms and fields.
Instead, we need to travel halfway around the world to Kirkcaldy,
a trading port on the east coast of Scotland, where in 1839 the
Elder family was weighing up the opportunities to be had in the
newly-established colony of South Australia.
There have been tough times, for both Elders and Australian
agriculture. Since the early days of settlement, our harsh climate
has driven a boom and bust cycle that has tested the resilience of
our rural communities.
George Elder, the family patriarch, was a savvy trader and ship
owner. Enticed by the unlimited prospects of the young colony, he
commissioned an 89-tonne schooner Minerva, and provisioned the
vessel with rum, whisky and a full complement of the trading goods
and merchandise likely to be in demand in a new settlement.
Alexander, one of George’s sons, was appointed to fly the family
flag in Australia and Minerva sailed from the Kirkcaldy docks on
July 16, 1839.
On arrival, Alexander wasted no time going into business. Erecting
a sign, ‘AL Elder, General and Commission Agent’, he set about
selling his cargo and putting Minerva to work as a trading vessel.
It didn’t take long for news of Alexander’s success to reach Scotland,
and elder brother William decided to join him in South Australia.
The depression of the 1890s saw a near-collapse in the banking
system, spiralling land prices and a drought which persisted for
years in parts of the country. Elders survived.
After recovering from the impact of the First World War, Australia’s
rural industries were hit by the Great Depression which coincided
with another drought. Elders struggled for a decade, but endured.
Then in the 1980s, a frenzy of corporate action saw Elders merge with
Henry Jones IXL, take over Carlton United Breweries and make a bid
for BHP. The company lost more than half its value in the 1987 share
market crash, declaring a loss of nearly $1 billion five years later.
Following years of restructuring and asset sales, a decision
was made to go back to basics – to return Elders to its roots by
concentrating on services to our rural communities.
The family continued to prosper with investments in transport,
shipping wheat and wool, and the rest, as they say, is history.
A lot has changed since Alexander Elder bought his first
business premises in Hindley Street, Adelaide, in 1840.
The company that bears his name is now Australia’s largest
ASX-listed agribusiness, serving customers from hundreds
of outlets across every state of Australia.
Our specialist knowledge is helping our customers achieve success
and business growth in an increasingly complex global marketplace.
Our investment in innovation, research and technology is delivering
better outcomes for our farming partners.
What hasn’t changed over the course of our history is our
commitment to standing alongside our customers in rural Australia,
through good times and bad.
The modern Elders – your Elders – is respectful of our long history,
while looking to the future.
In 2014, we set some challenging goals for our business through
our Eight Point Plan, knowing our strengths lie in our commitment
to helping rural communities make the best of their opportunities.
That’s not a commitment we take lightly, either. The men and women
who wear the pink shirt with pride do so knowing that they represent
180 years of history, but more importantly, a tradition of service
unmatched in our industry.
As Australia’s leading agribusiness, we’re looking forward to
the future where we’ll continue to proudly stand with our clients,
backing communities in rural and regional Australia.
From left to right:
Lee Eaton, Cameron Smith, Jason Clarke (staff), Northam WA
O P E R A T I
A N D
F I N A N C I
R E V I E W
12
N G
A L
John Howard (client), Biloela QLD
13
O P E R A T I N
A N D
F I N A N C I A
R E V I E W
Elders is focused on
creating value for all its
stakeholders in Australia and
internationally. We achieve
this through approximately
1,900 employees across
Australia and in China.
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.
Profit and Loss
Profit: Reported and Underlying
$ million
Sales
Australian Network
Feed and Processing Services
Corporate Services and Other Costs
Underlying EBIT
Finance Costs
Fair Value Adjustments on Interest Rate Swaps
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
FY19
FY18
Change
1,667.3
1,599.4
108.8
7.6
(42.8)
73.7
(6.8)
(0.9)
65.9
(0.5)
(1.8)
63.6
5.3
68.9
78.8
114.3
6.7
(46.5)
74.5
(6.9)
-
67.7
(1.7)
(2.4)
63.6
8.0
71.6
78.9
67.9
(5.5)
0.9
3.8
(0.8)
0.1
(0.9)
(1.8)
1.2
0.6
-
(2.6)
(2.6)
(0.1)
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
FY19 Commentary
Acquisition costs
(2.6) Costs relating to acquisition activity, mainly Australian
Independent Rural Retailers (AIRR)
Divestment and planned exit of
discontinued operations
(5.9) Operating losses, impairment of investment and
associated exit costs
Restructure and redundancy costs
(2.3) Costs associated with major business restructure
One-off asset recovery/cost
2.4
Insurance recovery and final cost of FY18
infrastructure program
Unwinding discount expenses
and tax asset adjustments
13.7 Unwinding discount expenses on liabilities ($3.0
million) and $16.7 million recognition of tax losses
Items excluded from underlying profit
5.3
14
2019 Annual Report — Elders G
L
Key movements in profit
by product are:
– Acquisitions predominantly include
Operating and Financial Review
Chart 1 — Underlying performance by product ($ million)
Product margin
earnings from TitanAg and Livestock in
Transit (LIT) delivery warranty products
63.6
10.2
6.0
5.2
0.3
6.3
0.8
0.2
5.1
0.9
63.6
– Rural Products margin mainly down due
to reduced summer cropping
– Agency margin impacted by lower wool
bales sold across all geographies in line
with the overall fall in the market
– Financial Services consistent year on year,
with margin downside ($6 million) offset
by cost savings of $6 million, with new
Rural Bank distribution agreement,
which became effective on 4 March 2019
– Feed and Processing Services upside
mostly from increased Feedlot utilisation
and throughput
– Costs down due to new Rural Bank
distribution agreement and lower short-
term incentives, offset by geographical
footprint growth and increased investment
in technology, digital and technical areas
FY18
Underlying
Profit
Acquisitions
Rural
Products
Agency
Services
Real Estate
Services
Financial
Services1
Feed and
Processing
Services
Digital and
Technical
Costs1
Interest,
tax and
NCI
FY19
Underlying
Profit
Chart 2 – Underlying EBIT by product ($million), including acquisitions
FY19
FY18
5
.
2
5
1
5
.
8
4
1
1
.
6
1
1
3
.
9
1
1
3
.
4
3
6
.
3
3
4
.
3
3
3
.
8
3
0
.
5
1
2
.
4
1
8
.
0
5
.
0
7
.
3
7
5
.
4
7
)
5
.
8
7
2
(
)
8
.
9
7
2
(
Rural
Products
Agency
Services
Real Estate
Services
Financial
Services1
Feed and
Processing
Services
Digital and
Technical
Costs1
Underlying
EBIT
1 As a result of a change to the Rural Bank distribution agreement effective 4 March 2019, the impact on Elders’ financial results
is a reduction in Financial Services gross margin, offset by lower costs
15
Key movements in profit
by geography are:
– Acquisitions predominantly include
earnings from TitanAg and Livestock in
Transit (LIT) delivery warranty products
– Northern Australia impacted by dry
conditions with reduced activity across
mainly Wool and Rural Products
– Southern Australia down on prior year
mainly due to lower Wool volumes and
higher costs
– Western Australia upside resulting mostly
in Livestock and Real Estate margin, offset
by lower Rural Products
– Corporate and other costs savings primarily
from lower short term incentives, offset by
increased investment in technology, digital
and technical areas
Chart 3 – Underlying performance by geography ($ million)
10.2
9.1
63.6
7.2
0.1
0.3
5.4
0.9
63.6
FY18
Underlying
Profit
Acquisitions
Northern
Australia1
Southern
Australia
Western
Australia
International
Corporate
and other
costs
Interest,
tax and
NCI
FY19
Underlying
Profit
Chart 4 – Underlying EBIT by geography ($million), including acquisitions
FY19
FY18
4
.
0
3
4
.
8
3
6
.
7
5
3
.
0
6
4
.
9
2
3
.
3
2
7
.
3
7
5
.
4
7
)
1
.
1
(
)
7
.
0
(
)
6
.
2
4
(
)
7
.
6
4
(
Northern
Australia1
Southern
Australia
Western
Australia
International
Corporate and
other costs
Underlying
EBIT
1 Northern Australia includes Killara feedlot
16
2019 Annual Report — Elders Operating and Financial Review
Balance Sheet
$ million as at end
Inventory
Livestock
Trade and other receivables
Trade and other payables
Working Capital
Property, plant and equipment
Investments, including assets held for sale
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
Average capital (excluding brand name)
Working capital
$ million
Rural Products
Agency Services
Real Estate Services
Financial Services
Feed and Processing Services
Other
Working capital (balance date)
Working capital (average)
Working capital
Working capital as at September 2019 was
$287.1 million, 19% higher than last year.
This largely relates to higher trade and
other receivables due to:
– Higher Livestock debtors with early timing
of spring sales
– Additional StockCo advances (livestock
funding investment) through provision
of short term funding
Average working capital increased by
$51.7 million to $288.6 million for the year.
This increase reflects seasonal conditions
with:
– Additional stock net of creditors from the
backward integration investment TitanAg
– Increased Rural Products balances due to
lower stockturns and higher debtor days
– Higher Livestock debtors with debtor days
up in the first six months
Return on capital
Change
(1.6)
2.8
36.3
9.1
46.5
0.1
(4.2)
37.9
4.1
84.4
83.5
(4.3)
79.2
20.7
184.3
(6.0%)
Chart 5 – Underlying return on capital
89.4
Change
6.6
17.3
(1.0)
14.7
5.3
3.6
46.5
51.7
24.2%
18.2%
FY19
FY18
Elders’ underlying return on capital was
18.2% as a result of:
– Lower earnings due to reduced wool
volumes and poor summer cropping season
– Increase in Rural Products and Livestock
capital balances
– Capital deployed in acquisitions, including
TitanAg and Livestock in Transit (LIT)
FY18
147.8
32.5
444.8
(384.6)
240.5
27.3
59.2
129.0
(50.9)
405.1
(185.1)
11.6
(173.4)
76.8
308.5
24.2%
317.8
FY18
185.2
31.0
1.9
15.8
43.5
(36.9)
240.5
236.9
FY19
146.1
35.3
481.1
(375.5)
287.1
27.4
55.0
166.9
(46.8)
489.6
(101.6)
7.3
(94.3)
97.6
492.9
18.2%
407.3
FY19
191.8
48.3
0.9
30.5
48.8
(33.3)
287.1
288.6
17
Net debt
Chart 6 – Net debt
173
192
161
94
e
t
a
d
e
c
n
a
l
a
b
t
A
e
g
a
r
e
v
a
D
T
Y
FY19
FY18
FY19
FY18
Key ratios
Leverage (average net debt to EBITDA)
Interest cover (EBITDA to net interest)
Gearing (average net debt to closing equity)
FY19
2.4
11.6
38.9%
FY18
Change
2.0
11.5
52.3
0.4
0.1
(13.4%)
Net debt at balance date was $79 million lower than the prior year. This was mainly due to net
proceeds received from equity raised, net of capital raise and transaction costs, for the Australian
Independent Rural Retailers (AIRR) acquisition of $130 million, offset by:
– Increased capital associated with acquisition activity, mainly in TitanAg and the Livestock
in Transit product
– Higher Livestock debtors with early timing of spring sales
– Increased StockCo advances (livestock funding investment) through provision
of short term funding
Average net debt was $31 million higher than prior year due to:
– Additional stock net of creditors from the backward integration investment in TitanAg
– Increased Rural Products balances due to lower stockturns and higher debtor days
– Higher Livestock debtors with debtor days up in the first six months
Provisions
Provisions decreased by $4.1 million on last year due to lower employee entitlements partially
offset by the recognition of an unwinding discount expense on long service leave provisions.
Shareholders’ equity
Shareholders’ equity increased by $184.3 million to $492.9 million at September, contributed
mostly by gross proceeds received from equity raised for the Australian Independent Rural
Retailers (AIRR) acquisition of $137 million and FY19 profit of $68.9 million. This is offset by
$21.0 million of dividend distributions to shareholders.
18
2019 Annual Report — Elders
Operating and Financial Review
Cash Flow
$ million
Operating cash flow
Investing cash flow
Financing cash flow
Total cash flow
Chart 7 – Cash flow ($ million)
72.1
0.4
19.5
Working capital movements
1.0
2.5
2.2
19.0
FY19
11.2
(42.5)
26.9
(4.3)
FY18
(12.1)
(38.4)
27.0
(23.5)
Change
23.4
(4.1)
(0.1)
19.2
3.3
26.3
15.0
11.2
5.5
5.6
Operating cash inflow of $26.3 million
(excluding StockCo funding of $15.0 million)
reflected an EBITDA of $72.1 million, offset
by increased working capital relating to:
– Higher Livestock debtors with early
timing of spring sales
– Other, which relates to payment of
provisions including leave and incentives
– Short term related party advances
(StockCo)
Investing outflow of $42.5 million represents
the purchase of the Livestock and Wool in
Transit delivery warranty product, and other
bolt on acquisitions completed in the period.
Financing inflow of $26.9 million includes net
proceeds received from equity raised for the
Australian Independent Rural Retailers (AIRR)
acquisition of $130 million, offset by repayment
of borrowings and dividends distributed to
shareholders.
EBITDA
Rural
Products
Agency
Services
Real Estate
Services
Financial
Services
Other
Feed and
Processing
Services
Interest,
tax and
dividends
StockCo
funding
Opertating
cash flow
Capex
Free Cash
Flow
Opertating
cash flow
(excl
StockCo
funding)
$ million
EBITDA
Movements in assets
and liabilities
Related party
advances
Interest, tax
and dividends
Operating
cash flow
Rural
Products
Agency
Services
Real
Estate
Financial
Services
Feed and
Process
Other
Total
55.9
24.5
(0.4)
(19.5)
13.9
1.0
-
-
-
-
-
-
10.5
(2.5)
(15.0)
-
6.2
(2.2)
(38.9)
(19.0)
72.1
(42.6)
-
-
-
(15.0)
(3.3)
(3.3)
55.5
4.9
14.9
(6.9)
4.0
(61.2)
11.2
19
M A T E R I A L
B U S I N E S S
R I S K S
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 maximise opportunities and prevent or reduce losses.
Risks comprehensively reviewed and 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.
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.
More detail on Elders’ approach to managing risk is contained
in the Corporate Governance Statement on Elders’ website at
elderslimited.com/investor-centre.
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.
The safety of our people and an effective safety culture within Elders is a critical and
non-negotiable corporate objective. Through the implementation of a safety management
system based on continuous improvement, we reduce risks which might impact our
operations. We recognise and reward safety initiatives and safe behaviours via our
monthly One Elders Awards program. This initiative values and promotes safety and
ensures our positive safety culture is embedded throughout our operations.
Animal welfare
The safety and welfare of livestock is of paramount
importance to Elders and the Company has controls
in place to ensure the wellbeing and proper treatment
of all animals within our control. Failure to protect
the welfare of livestock in our control might result
in stakeholder activity, business disruption and
reputational damage.
Commodity pricing
Elders has exposure to commodity price fluctuations
in its Agency, Rural Products 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 weather events
Adverse weather events 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.
20
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.
Maintain robust incident response and business continuity systems.
In addition, Elders maintains a conservative balance sheet and diverse funding lines
supported by an appropriate level of covenant headroom, to manage this potential
volatility.
2019 Annual Report — Elders Material Business Risks
Material Business Risk
Our strategy
Climate change
Climate change has the potential to impact on Elders’
business. Impacts such as increased temperatures
and varied rainfall patterns may have significant
implications for the environment and conditions in
which Elders conducts business.
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 and credit
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 domestic and foreign jurisdictions
where the business may be affected by changes
implemented by governments. In addition, subsidies
given to foreign rural producers may adversely affect
the competitive position of Australian rural outputs.
Cyber threats
In 2020 we will continue to develop:
– our strategy in relation to measuring ESG risks and investigating opportunities; and
– our reporting framework for climate change impacts and opportunities, with the
establishment of dedicated sustainability resourcing within the group to ensure our
stakeholders have ‘decision useful’ information,
as it relates to our performance, prospects and longer-term strategic objectives.
To manage the impact, Elders has in place employee training and disease management
protocols. In addition, Elders also has a business continuity framework 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 operate
with complex supply chain challenges and work
with numerous logistics suppliers in a dynamic
operational and regulatory environment.
This operational risk continues to be a strong focus in 2020 and work with government
regulators and other parties will continue to improve our processes across our supply
chain as well as educate and inform the logistics providers we operate 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
A
I T ’ S M O R E
T H A N
B U S I N E S S
I T ’ S
P E R S O N A L
T O O
The Lehmann family have been farming in
the Caltowie district, in South Australia’s
mid north, since the region was opened
up for settlement in 1871. Today, Campbell
View is a 900 hectare mixed cropping
property, run by fourth-generation farmer
Peter Lehmann and his son David.
A jovial pair, the Lehmanns have faced their fair share of challenges,
with David’s mother passing in early 2000 and Peter facing a second
round of chemotherapy this year. But you wouldn’t know it from their
dispositions – their smiles are as bright as the canola crops blooming
behind them as they talk of how they enjoy working together, and how
embracing change is part of their job description.
Modern farming has been transformed by machinery – Peter
speaks of how the pioneer settlers spread grain by hand – but it
was still a tough job when he started farming more than 50 years
ago. “We controlled our weeds by cultivation, we didn’t have cabins
on tractors, the work was physically very hard,” he says.
In 2002, David turned his back on city life and teamed up with
his father.
“The thing that probably convinced me to come home was Dad’s
approach to farming and his willingness to change things that
perhaps weren’t working, that could be machinery or agronomy,”
he says. “Dad’s always been very open to new ideas, so it was an
obvious choice in the end.”
And the pair are facing a new set of challenges as they look to
the future. “Scale is very important now in agriculture to remain
competitive,” David says. “Trying to do things as efficiently as
possible is really important so that we can try to expand.”
“Weather and environment are probably our greatest challenge,
we’re finding the seasons very hard to predict,” David says. “To be
able to successfully grow the crops we have in the past requires
a lot more attention and focus.”
“Technology’s helping us a lot there,” he says. “Cropping in this
area hasn’t massively changed in a long time, but we’ve got a lot
of technology to help us do things better”.
David says working alongside their agronomist, Darren Pech,
and the Elders Jamestown team has helped drive their success.
“When I came home in 2002 we were dealing with Elders in agronomy
and we’re still with Elders now,” he says. “We liked what they’ve done
– we’ve had good agronomists and people that we’ve been able to
build a really good relationship with.”
“It’s more than business, its personal too. It’s a pleasure to have
these guys on the farm,” David says.
“We like what Elders are doing with agronomy, they have so many
links to not only other properties within the district, but also
interstate.”
“We can get a really good perspective of what’s happening season
to season and how we can tackle issues, and capitalise on higher
yields with cropping.”
Peter says the association with Elders has endured for generations.
“When I entered farming in 1966 we sold all of our stock and wool
through Elders, and we still do,” he says.
“One thing we particularly like about Elders is their people will
go that extra mile for you, and give you support when you really
need it,” he says.
Top right:
Peter Lehmann (client), Caltowie SA
Top and bottom left:
David Lehmann (client), Caltowie SA
R E V I E W
O F
O P E R A T I
24
O N S
Bridge Creek Station, Adelaide River NT
25
R E V I E W O
O P E R A T I O
Key Statistics
Rural Products
Farm Supplies
Fertiliser
Agency Services
Livestock
Wool
Real Estate Services
Farmland
Residential
Property Management
Franchise
Financial Services
Agri Finance
$1.2 billion retail sales
695k tonnes fertiliser
9.5 million head sheep
1.7 million head cattle
289k wool bales
$1.0 billion farmland sales
$0.7 billion residential sales
9,300 properties under management
126 franchisees
$3.0 billion loan book
$1.7 billion deposit book
$60.7 million StockCo book
Elders Insurance (20%)
$737.3 million gross written premium
Digital and Technical Services
Fee for Service
Auctions Plus (50%)
Elders Weather
Clear Grain Exchange (30%)
Feed and Processing Services
Killara Feedlot
Elders Fine Foods
159 agronomists
694k head sheep
78k head cattle
190 million hits
71k grain tonnes
63k head cattle
$13.7 million sales
26
2019 Annual Report — Elders F
N S
Rural 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 159 agronomists nationwide, including
7 specialists operating through Thomas Elder Consulting.
Elders also holds over 190 Australian Pesticides and
Veterinary Medicines Authority (APVMA) registrations,
which supports our backward integration strategy.
Performance
Rural Products margin improved $4.0 million (3%) on last year, mostly from the acquisition of
TitanAg. Dry conditions in key areas has continued to subdue demand for crop protection and
fertiliser, with northern New South Wales most affected.
Strategy
To deliver capital light, profitable growth of our Rural Products businesses by offering innovative
products and superior customer experience, combined with targeted upstream investment.
Strategy
Achievement
Plan
Capital light,
return on
capital driven
business model
– Enhanced retail capability and
exposure to a higher value crop
segment in the first year of the
backward integration strategy
(TitanAg model)
– Implementation of rebate deal
software to develop and improve
processes
– Further development in supplier
trading agreements, including
improvement in terms and
performance-based target rebates
– Continued focus on margin
improvement through price
book management
– Focus on business improvement to
drive margin growth and inventory
management
– Establish ‘best practice’
procurement initiatives through
a comprehensive review of the
supply chain
– Deliver synergies associated with
Australian Independent Rural
Retailers (AIRR) acquisition and
the backward integration model
Customer and
product focus
People
– Increased customer loyalty
– Establish a new wholesale
through the growth in agronomy
services
– Expansion into selected
geographical gap areas through
acquisition activity
channel through the acquisition
of Australian Independent Rural
Retailers (AIRR)
– Better capture of customer metrics
to improve product ranging
initiatives
– Continued selective recruitment
of high performing staff in key
agricultural areas
– Roll out a new incentive model to
drive organic growth and financial
targets
– Implemented various branch
– Launch new reporting and
efficiency programs
dashboard tools to assist business
performance
– Establish a structured training
program for managers in our
branch network
Review of Operations
Rural Products margin ($m)
126.2
134.0
111.2
148.5
152.5
FY15
FY16
FY17
FY18
FY19
Margin by product
78%
Farm Supplies
17%
Fertiliser
5%
TitanAg
Margin split by geography
23%
West
44%
South
33%
North
27
Agency Services
Elders provides a range of marketing options for livestock,
wool, and grain.
Agency Services margin ($m)1
106.3
111.4
122.6
119.3
116.1
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.
FY15
FY16
FY17
FY18
FY19
Elders’ grain marketing model provides prices from multiple buyers and offers a cutting
edge commodity origination platform, maximising choice for growers.
Margin by product
Performance
Agency margin declined $3.2 million (3%) on last year. This is mainly attributable to lower Wool
activity, with fewer bales sold across all geographies in line with the overall fall in the market.
Cattle margin benefitted from increased volumes due to dry conditions and lack of feed, partially
offset by easing prices. Sheep margin was boosted by strong prices, despite a decline in volumes,
mainly in Southern Australia.
86%
Livestock
14%
Wool
Margin split by geography
Strategy
To deliver profitable growth of the Agency Services portfolio through business improvement,
recruitment and acquisition for our Livestock and Wool businesses and through focussed growth
of our Grain business.
Strategy
Achievement
Plan
16%
West
56%
South
28%
North
Operating
model
People
– Invest in Livestock, Wool and Grain
product development to improve
and expand offering
– Continue footprint expansion
through targeted acquisitions
– Acquisition of wool specialists
BN Proud in south western
New South Wales
– Livestock agency footprint
expansion through acquisition of
Livestock Consulting Tasmania
– Restructure of Grain model
including additional 10%
investment in Clear Grain
Exchange (CGX)
– Progress transition to variabilised
remuneration structures, with
appropriate systems, which reward
outperformance
– Geographical expansion through
recruitment of key operatives with
aligned values
– Relaunch Elders Trainee program
– High retention of trainees
to build long term capability
in Livestock program
– Selective recruitment of Livestock
and Wool personnel
– Leverage 30% shareholding in CGX
to improve grain value proposition
and grow revenue
1 Includes equity earnings from investments
28
2019 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 $0.7 million (2%) on last year, with the Southern and Western
geographies driving the uplift. Broadacre turnover increased on last year, despite easing cattle
prices and drought conditions continuing to affect Northern Australia. Additionally, property
management and turnover for water broking services has contributed to the upside for the year.
Real Estate Services margin ($m)
33.6
34.3
31.9
27.5
29.2
FY15
FY16
FY17
FY18
FY19
Margin by product
84%
Agency
16%
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
Strategy
Achievement
Plan
Operating model
– Implementation of numerous
– Continue to grow company owned
22%
West
39%
South
39%
North
business improvement initiatives,
primarily focussed at brand
enhancement, digital strategy and
people development
– Established a capital light water
markets business and achieved
significant market share growth
– Established a significant rent
roll asset through organic and
acquisitive growth
People
– Established a strong attraction
and retention proposition through
continued business improvement
initiatives
– Excellent retention rates for
high performing sales agents
– Strong participation levels in
a modern training program
farmland agency, residential
agency and property management
presence in major regional centres
– Continue to grow market share
in water broking
– Enhance productivity and
efficiency initiatives in our
property management business
– Continued enhancement of digital
marketing and lead generation
activity
– Potential laddered branding
strategy into additional markets
– Ongoing recruitment of high
performing real estate sales
representatives and water brokers
– Recruitment of home loan brokers
and real estate franchisees
– Increased productivity through
technology initiatives and training
29
Financial Services
Elders distributes a wide range of banking and insurance
products and services through its Australian network.
We work together with a number of partners to deliver these
offerings; Rural Bank and StockCo for banking and livestock
funding products and Elders Insurance (a QBE subsidiary) for
general insurance. Collectively, these relationships enable
us to offer a broad spectrum of products designed to help
our customers grow their business and manage cash flow
and risk.
Financial Services margin ($m)1
38.3
35.1
33.4
25.4
26.2
FY15
FY16
FY17
FY18
FY19
Margin by product
Performance
Financial Services margin was down $4.9 million (13%) on last year. This is mainly due to the new
relationship agreement with Rural Bank resulting in margin decline ($6 million), which is offset by
cost savings of $6 million post enactment.
61%
Agri Finance
35%
Insurance
4%
LIT Delivery Warranty
An additional $1.4 million margin was earned through the new Livestock in Transit delivery
warranty launched on 12 June 2019.
Margin split by geography
Strategy
To deliver profitable growth of the Financial Services portfolio through business improvement,
product development and upstream investment in our services business.
Strategy
Achievement
Plan
21%
West
47%
South
32%
North
Deeper, more
productive
partnerships
– Increased digital presence through
direct email and social media
campaigns
– New and extended relationship
agreement with Rural Bank to
provide our clients access to
quality banking services
– Embed new Rural Bank distribution
agreement and operating model
and support growth in loan and
deposit facilities through cross-
promotion and referral
– Collaborate with StockCo to expand
and improve product offering
– Engage in joint marketing and
referral campaigns with Elders
Insurance to grow gross written
premiums
Expand Elders
issued product
offerings
– Launch of new Livestock and
– Develop and enhance new and
Wool in Transit delivery warranty
associated with Elders’ Agency
Services
existing on balance sheet finance
products to help growers fund
inputs and manage cashflow
– Grow Livestock and Wool in Transit
revenue through increased uptake
– Expand Elders finance footprint
and capability through recruitment
and training
1 Includes equity earnings from investments
30
2019 Annual Report — Elders Review of Operations
Feed and Processing Services
In Australia, Elders operates Killara Feedlot, a beef cattle
feedlot near Tamworth in New South Wales. Elders imports,
processes and distributes premium Australian meat in China.
Feed and Processing Services margin ($m)
13.8
12.9
11.5
14.2
15.0
Performance
Killara gross margin was up by $1.4 million (10%) on the prior year, which resulted mainly from
higher utilisation and throughput.
The China business was back $0.6 million on last year (50%) on last year due to lower margins,
partially offset by cost savings.
Strategy
To deliver continuous improvement in EBIT and ROC for all businesses with active portfolio
composition management.
Strategy
Achievement
Plan
Robust systems
– Improved sales channel for online
and supermarkets in China to
increase customer portfolio
– Further develop management
systems and operational
competencies in China
Return on
capital focus
– Capital improvement at Killara
has allowed high utilisation and
efficiencies
– Sustainable supply chain at Killara
through use of backgrounding and
external facilities
– Continued focus on procurement
strategies and expansion
opportunities at Killara
– Allocation of capital based on
approved business case discipline
FY15
FY16
FY17
FY18
FY19
Margin by product
96%
Killara (Aus)
4%
China
Margin split by geography
4%
China
96%
Australia
31
O U T L O O K
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 agricultural
cycle, while maintaining a
return on capital between
15-18%. 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 FY20:
Rural Products
Reduced summer cropping as dry conditions persist across north eastern and southern Australia,
whilst winter cropping will increase but remain below long term average
TitanAg earnings to grow into second full year of strategy
Completion of Australian Independent Rural Retailers (AIRR) acquisition to provide entry to
wholesale market and increased product diversification
Agency Services
Wool margin increase with significant wool bales held in store in September
Australian beef production and export volumes are projected to decrease due to reduced
slaughter rates and a rebuild of the national herd, while low cattle supply and strong demand in
China will increase prices
Uplift in Australian sheep flock to be supported by strong sheep prices, which are forecasted to
rise to historical highs due to strong saleyard competition and increased demand from China
Real Estate Services
Demand for farmland property to remain strong
Gains expected from residential and property management
Financial Services
Financial Services to benefit from a full year of earn from Livestock in Transit (LIT) and Wool
in Transit (WIT) delivery warranty products
Full year impact of the new Rural Bank distribution agreement is anticipated to be a marginal
increase in EBIT on last year
Additional investment through shareholder advances to StockCo will generate greater earnings
Feed and Processing Services
Killara feedlot earnings continue to be maintained at strong levels through high utilisation,
easing feed costs and improved efficiencies
Costs and Capital
Costs are expected to increase in line with footprint growth and continued Eight Point Plan
investment
Increased investment in digital and technical areas and information technology to continue
32
2019 Annual Report — Elders B O A R D O F
D I R E C T O R S
Board of Directors
Mr Ian Wilton
Mr Mark Charles Allison
MSc, FCCA, FCPA, FAICD, CA
Appointed Chair on 11 September 2019 and Non-Executive Director
since April 2014. He is also Chair (appointed 11 September 2019) of the
Work Health and Safety Committee and the Nomination and Prudential
Committee and a member of the Audit, Risk and Compliance Committee
(former Chair) and the Remuneration and Human Resources Committee.
Mr Wilton is an experienced Non-Executive Director and former Senior
Executive with extensive knowledge of the agricultural sector. He has
held Chief Financial Officer positions with Ridley Corporation Limited,
CSR Sugar and GrainCorp Limited and was President and Chief
Executive Officer of GrainCorp Malt. Ian is a Non-Executive Director
and Chair of the Sheep CRC Limited (ceasing 31 January 2020) and a
Non-Executive Director of Tivoli Investments Pty Ltd. He is also Chair
of the advisory board of MacKay’s Banana Marketing. Ian is a resident
of New South Wales.
BAgrSc, BEcon, GDM, FAICD, AMP (HBS)
Mr Allison joined Elders Limited as a Non-Executive Director in
December 2009 and was appointed Managing Director and Chief
Executive Officer in May 2014. Between July 2013 and May 2014 he
served as Elders’ Executive Chairman then Chairman. Mark’s 35-year
agribusiness career spans manufacturing, supply and distribution
businesses.
Former senior roles include the positions of Managing Director
with Farmoz Pty Ltd, Wesfarmers Landmark Limited, Wesfarmers
CSBP Limited and CropCare Australia. He is currently Chair of both
Agribusiness Australia and AuctionsPlus, and a Non-Executive
Director of Graingrowers Limited.
Mark oversaw the development and implementation of Elders’ Eight
Point Plan in 2014 which returned the company to pure play agribusiness
and resulted in the first shareholder distribution in nearly a decade.
The current strategic Eight Point Plan runs to 2020, with the aim of
achieving earnings growth of 5-10% with a sustainable return on
capital over the full agricultural cycle.
33
Ms Robyn Clubb
Ms Diana Eilert
BEc, CA, F Fin, MAICD
Non-Executive Director since September 2015. She is Chair of the Audit,
Risk and Compliance Committee (appointed on 11 September 2019) and a
member of the Remuneration and Human Resources Committee (former
Chair), the Work Health and Safety Committee and the Nomination and
Prudential Committee.
BSc (Syd), MCom (UNSW), GAICD, member of Chief Executive Women
Non-Executive Director since November 2017. She was appointed
Chair of the Remuneration and Human Resources Committee on
11 September 2019. She is also a member of the Audit, Risk and
Compliance Committee, the Work Health and Safety Committee
and the Nomination and Prudential Committee.
Ms Clubb 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.
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.
She is currently a Director of Craig Mostyn Holdings Pty Limited,
Essential Energy, Chair of V&V Walsh Limited, Chair of the Australian
Wool Exchange Limited, Chair of ProTen Limited and Member of the Rice
Marketing Board for the State of NSW. 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. Robyn is a resident of New South Wales.
Diana’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. 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.
Diana is currently a Non-Executive Director of ASX listed companies
Domain Holdings Australia Limited and Super Retail Group Limited, and
has previously been a director of Navitas Limited, realestate.com.au
(REA Group), Veda (data and analytics) and digital start-ups “onthehouse”
and “OurDeal”. Diana is a resident of New South Wales, sharing her time
between Sydney and the family cattle farm on the NSW South Coast.
34
2019 Annual Report — Elders
Board of Directors
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. He 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.
Sanjeeta has extensive experience in all governance activities having
served with Elders for over 10 years.
Mr Michael Carroll
B.Ag.Sc., MBA, FAICD
Non-Executive Director since September 2018 and former Chair (having
stepped down from the latter role on 11 September 2019). He is also a
member of the Nomination and Prudential Committee, the Work Health
and Safety Committee, the Audit, Risk and Compliance Committee and
the Remuneration and Human Resources Committee, having stepped
down as Chair of the first two Committees on 11 September 2019.
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, Sunny
Queen Australia Pty Limited and Meat and Livestock Australia Limited.
Mike 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, Mike 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.
Mike comes from a family who has been involved in agriculture for
over 145 years and operates a cattle property in western Victoria.
Mike is a resident of Victoria.
35
E X E C U T I V E
M A N A G E M E N T
Mark Charles Allison
Managing Director & Chief Executive Officer
Richard Davey
Chief Financial Officer
Peter Hastings
Company Secretary & General Counsel
BAgrSc, BEcon, GDM, FAICD, AMP (HBS)
Mark joined Elders Limited as a Non-Executive
Director in December 2009 and was appointed
Managing Director and Chief Executive Officer
in May 2014. Between July 2013 and May 2014
he served as Elders’ Executive Chairman
then Chairman. Mark’s 35-year agribusiness
career spans manufacturing, supply and
distribution businesses.
Former senior roles include the positions
of Managing Director with Farmoz Pty Ltd,
Wesfarmers Landmark Limited, Wesfarmers
CSBP Limited and CropCare Australia.
He is currently Chair of both Agribusiness
Australia and AuctionsPlus, and a Non-
Executive Director of Graingrowers Limited.
Mark oversaw the development and
implementation of Elders’ Eight Point Plan
in 2014 which returned the company to pure
play agribusiness and resulted in the first
shareholder distribution in nearly a decade.
The current strategic Eight Point Plan runs
to 2020, with the aim of achieving earnings
growth of 5-10% with a sustainable return
on capital over the full agricultural cycle.
B.Ec Acc, FCA, AMP (HBS)
Richard has more than 17 years with Elders,
7 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. Until recently he also had
operational responsibility for the feed and
processing area of the business.
Prior to joining Elders in 2002, Richard spent
7 years with PricewaterhouseCoopers in both
Australia and Canada.
BA, LLB, GDLP, FGIA, Grad Dip Applied Corporate
Governance, GAICD
Peter is a highly experienced corporate lawyer
with over 28 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.
36
2019 Annual Report — Elders Executive Management
James Cornish
General Manager Network & Northern
Malcolm Hunt
Zone General Manager South
Olivia Richardson
General Manager People & Culture
DipBusM, AMP (HBS)
Since 2011 James has overseen the West Zone
branch network as Zone General Manager
West. He was appointed General Manager
Network & Northern in October 2019, this
role will see James lead the national branch
network and take on the Zone General
Manager role for the North zone.
With more than 24 years’ experience in
agribusiness, James has worked across a
range of locations and products throughout
Elders. Over the past 12 months, James has
successfully integrated numerous acquisitions,
has achieved significant growth and excellent
EBIT performance in the West.
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’
Zone 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.
BMgmt (Hons)
Olivia was appointed General Manager People
and Culture in January 2018. Having been with
Elders for 13 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
include maintaining an engaged and enabled
workforce, investment in learning and
development programs, creating a diverse and
inclusive workforce, and building on the pride
in the pink shirt. Notable achievements include
refreshing the learning and development
framework to ensure people are equipped with
the relevant skills and technical expertise to
do their job; and the refresh of our Employee
Value Proposition aimed at promoting Elders
as a great place to work to drive retention and
attraction of high calibre staff.
Prior to Elders, Olivia has worked across
Human Resources in FMCG, Financial Services
and Telecommunications throughout Australia,
the UK and Europe.
37
David Adamson
General Manager Agency & Financial Services
Liz Ryan
General Manager Strategy, Customer & Digital
Kiim Lim
General Manager Business Development
MBus (Acct), BAgBus, GAICD, Cert Pastoral
Production — Longreach Pastoral College
General Manager Agency since 2014, David was
appointed General Manager Agency & Financial
Services in October 2019 and is responsible for
product strategy and implementation across
the livestock, wool, grain and financial services
product suite.
David’s background in agricultural production,
agri-finance and operations mean he is well
positioned to lead product development
across all parts of the agency and financial
services businesses. David sits on the boards
of our joint venture partners StockCo, Elders
Insurance and Clear Grain Exchange.
BCom/DipArts, MBA (Cambridge), GAICD
Liz was appointed General Manager Strategy,
Customer & Digital in October this year, which
will provide us clear focus on the Elders
strategy beyond the Eight Point Plan in 2020.
With dedicated attention to the customer
experience across all channels integrated
with digital solutions, marketing and strategy,
Liz is excited for the challenge.
Liz joined Elders in 2016 as General Manager
Financial Services, and during her tenure
in this role she led the Rural Bank contract
renegotiation, StockCo and Elders Insurance
equity acquisitions and the new Livestock in
Transit delivery warranty launch. Financial
Services contribution to Elders earnings has
grown significantly during this period. Prior
to Elders, Liz worked in the management
consulting sector and across strategy and
business development roles at General
Electric.
BCom, CPA
Kiim commenced with Elders in March 2006
in various roles within the finance team
prior to leading the Business Development
function as General Manager Business
Development in 2018.
This year, Kiim has successfully led the
completion of many acquisitions including
Australian Independent Rural Retailers
(AIRR), Livestock and Wool in Transit delivery
warranty, various retail, agency and real
estate bolt-ons and the wind down of the
Indonesian beef retail business. Prior to
Elders, Kiim’s career included working with
PricewaterhouseCoopers for 5 years
in Penang, Malaysia and Adelaide.
38
2019 Annual Report — Elders Executive Management
Tom Russo
General Manager Real Estate
Richard Norton
General Manager Rural Supplies
Nick Fazekas
Zone General Manager West
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.
GradDip Business, MBA, GAICD International,
Licensed Real Estate, Stock & Station and
Business Agent NSW
Richard joined Elders as General Manager
Network in January 2019 and has been
appointed to General Manager Rural Supplies
from October 2019 to maximise synergies
across warehousing and distribution,
management of patents, leverage supplier
relationships and lead our advisor network,
Thomas Elder Institute and Thomas Elder
Consulting. Richard comes from a fifth
generation beef and sheep farming family from
Monaro, NSW and has over 20 years industry
experience as a stock agent and auctioneer.
Richard has held the position of Managing
Director Meat & Livestock Australia and
has held executive positions in retail,
manufacturing, logistics and warehousing
with Woolworths, Coca-Cola, Wesfarmers
and Toll Holdings. Richard was a Non-
Executive Director of Agrium Asia Pacific, the
Australian Wheat Board, RD1 New Zealand,
and Australian Wool Handlers. He was head
of Live Export and International Trade and
subsequently Managing Director of Landmark
Operations Australia as well as holding the
position of Chairman of Integrated Traceability
Solutions (Global) and AuctionsPlus. Richard is
a Non-Executive Director of Rifa Salutary and
Rifa Investments, a privately owned Australian
pastoral company.
BAppSc – Ag
Nick has more than 28 years of experience in
agricultural services. Since 2014 he has lead
the Retail function as General Manger Retail.
Having focussed on overseeing the strategy
and procurement functions for the wider
Elders retail business he is well placed to
lead the West Zone to support the delivery
of greater revenue and margin recently
appointed in October 2019 as Zone General
Manager West.
Nick is excited about the opportunity to provide
further direction to the West and is particularly
focussed on increasing the Elders footprint
through additional acquisitions across all
product groups.
Nick’s initial focus will be spending time in
the field with staff and clients to gain valuable
feedback on increasing our service offering
and building on our existing client base.
39
Nick Clark
General Manager Business Improvement
Bernard Seal
Zone General Manager Central
BCom, CA, GAICD
Nick was appointed General Manager Business
Improvement in October 2019. He joined Elders
in 2010, becoming Group Financial Controller
in 2013. In that role, Nick showed an affinity
for driving continuous improvement across
both the finance function and the general
business. His achievements include leading
the successful implementation of enhanced
retail rebate software, and an upgraded
sales performance measurement tool. Nick’s
current priorities relate to the successful
design, implementation and execution of
efficiency gains and improvements across
Elders’ systems, processes, employee
capabilities, and customer experience.
BBus, Registered Land Agent (SA)
Bernard joined the executive team as General
Manager Central Zone in October 2019. Hailing
from a wheat and sheep farm on the Eyre
Peninsula, Bernard’s career began in the wool
industry, before working as an Agribusiness
Manager with the NAB in regional Victoria and
Regional Manager for the Eastern Zone with
Viterra.
Bernard’s career with Elders spans 14
years, the last 7 as Operations Manager for
the South Zone. With experience across
multiple products and geographies, he is now
responsible for leading the continued growth
of the Central Zone.
40
2019 Annual Report — Elders From left to right:
Sarah, Audrey, Kate and Nick Wadlow (clients), Old Ashrose, Hallett SA
T H E
W A D L O W S ’
S T O R Y
The Wadlows are intrinsically tied
to the land, and to Elders.
Nick Wadlow’s ancestral family includes Sir Thomas Elder, youngest
of the Elder brothers, and the man largely responsible for building
Elders into one of the world’s largest wool-selling firms by the
middle of the 19th Century. Sir Thomas also drove the extension of
pastoral land into untouched parts of South Australia, including the
mid north, where Nick and his family breed some of the best merino
in the country.
Kate, Nick’s wife also has a long association with the land. Originally
an Ashby, her family came to Australia and settled in the area in 1910,
with her great-grandfather founding the Ashrose stud.
Having just taken out Supreme Merino Exhibit at the Royal Adelaide
Show for the first time since 1994, the Wadlows are quick to recognise
the contribution of their local Elders team to the success of their
business, and to the local community.
“I can’t remember when we didn’t have Elders in our household,”
Kate says. “They’ve always been part of the furniture as agronomists
and livestock agents. It’s been fantastic, and not just in work, but
across the community in the local area. Elders has been part of
everything we do,” she says.
Nick says that despite the environmental challenges of farming
and a shrinking population in rural areas, he’s confident of Elders’
support well into the future.
“Elders being a South Australian company means a lot to us.
We value that, and the fact it’s Australian”.
“The Elders staff we deal with – our kids have grown up with
them – they know them all personally. They’re part of the family
really,” he says.
“Our biggest achievement is growing our business,” Nick says.
“The stud’s been a big part of that, having the clients we have
and the relationships we’ve built, particularly with Elders”.
D I R E C T O
R E P O R T
42
R S ’
Don White (client), Bridge Creek Station, Adelaide River NT
43
D I R E C T O R
R E P O R T
Current Directors
The Directors of Elders in office during
the financial year and until the date of this
report were:
Results and Review of Operations
The consolidated entity recorded a profit for the year, after tax and non-controlling interests,
of $68.9 million (2018: profit of $71.6 million). A review of the operations and results of the
consolidated entity and its principal businesses during the year is contained in pages 26 to 31
of this report.
Significant Changes in the State of Affairs
In August 2019, Elders successfully completed a capital raise. In total, 24,684,685 new shares were
issued under an entitlement offer and placement to raise approximately $137 million. The capital
was raised to part fund the purchase of AIRR Holdings Limited (AIRR).
On 13 November 2019, 13,050,001 shares will be issued to the vendors of shares in AIRR.
Events Subsequent to Balance Date
Subsequent to 30 September 2019, AIRR Holdings Limited’s shareholders approved the necessary
resolutions to give effect to the scheme of arrangement for Elders to acquire 100% of the fully paid
ordinary shares in AIRR. On 29 October 2019 this scheme of arrangement was approved by the
Federal Court of Australia. The acquisition is expected to be effective on 13 November 2019.
There are no other matters or circumstances that have arisen since 30 September 2019 which
are not otherwise dealt with in this report or in the consolidated financial statements that have
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 other likely developments in the operations of the consolidated entity and the
expected results for those operations in future financial years is included on page 32 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
12 November 2018
857,200 Shares issued upon vesting of performance rights in
accordance with Elders Limited Long-term Incentive Plan
14 December 2018
61,609 Shares issued in accordance with Elders Dividend
Reinvestment Plan for dividends paid on 14 December 2018
21 June 2019
228,490 Shares issued in accordance with Elders Dividend
Reinvestment Plan for dividend paid on 21 June 2019
24 July 2019
24 July 2019
7,234,079 Shares issued under Institutional Placement
10,710,995 Shares issued under the Institutional component of Elders’
Entitlement Offer
12 August 2019
6,739,611 Shares issued under Retail Component of Elders’
Entitlement Offer
The total number of ordinary shares on issue at the date of this report is 141,650,621.
Non-Executive Directors
– Ian Wilton, Chair
– Robyn Clubb
– Diana Eilert
– Michael Carroll
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 33 to 40 of this annual report.
Ceased Director
James Hutchison Ranck, was appointed as
Non-Executive Director in June 2008 and
as Chairman in April 2014. Mr Ranck retired
from the Elders Board of Directors at the
conclusion of the 2018 Annual General
meeting on 13 December 2018.
Principal Activities
The principal activities of Elders during
the year were:
– the provision of retail products (farm
supplies and fertilisers) and associated
services to the rural sector;
– the provision of livestock and wool agency
services;
– the provision of real estate sales agency
services (both company owned and
franchised) and property management
services;
– the provision of, or arrangement for the
provision of, financial services to rural
and regional customers;
– the provision of digital and technical
services and investments in the Auctions
Plus and Clear Grain online trading
platforms;
– feedlotting of cattle; and
– red meat supply chains in China.
44
2019 Annual Report — Elders S ’
Directors' Report
Dividends and Other Equity Distributions
On 8 November 2019 the Directors resolved to pay a final dividend of $0.09 per ordinary share, fully franked, bringing dividends for 2019 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
Final Dividend for Year Ended 30 September 2018
9 November 2018
14 December 2018
Interim Dividend for Year Ended 30 September 2019
17 May 2019
21 June 2019
$0.09
$0.09
100
$10,063,126.17
100
$9,203,672.16
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 48 of this annual report,
and summarised below.
The total quantity of performance rights disclosed in table 5 on page 55 of the Remuneration Report on issue at 30 September 2019, if vested, would
represent 0.76% of the Company’s issued ordinary shares.
2,357,200
857,200
476,000
626,250
267,750
1,082,000
No. of rights
as at
30-Sept-18
No. vested on
12-Nov-18
No. granted on
13-Nov-18
No. vested on
12-Nov-19
No. lapsed from
30-Sept-18 to
date of report
No. of rights
outstanding at the
date of the report
No other options are on issue at the date of this report.
45
Directors’ Interests
At the date of this report, the relevant interests of the Directors in shares and other equity securities of Elders are detailed on page 64 of the
Remuneration Report.
Non-Executive Directors do not participate in Elders’ cash or equity incentive plans.
Attendance at Meetings by Directors
Details of Director attendance at meetings in the 12 months to 30 September 2019 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
20
20
20
20
5
20
20
20
20
20
5
20
-
2
2
2
-
2
-
2
2
2
-
2
-
6
6
6
2
6
-
6
6
6
2
6
Remuneration and Human
Resources Committee
Nomination and Prudential Committee
Attended
No. of meetings
held during
relevant period
Attended
No. of meetings
held during
relevant period
-
6
6
6
3
6
-
6
6
6
3
6
5
5
5
5
2
5
5
5
5
5
2
5
M C Allison
M Carroll
R Clubb
D Eilert
J H Ranck
I Wilton
M C Allison
M Carroll
R Clubb
D Eilert
J H Ranck
I Wilton
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 of the holding company 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.
46
2019 Annual Report — Elders Directors' Report
Remuneration of Directors
and Senior Executives
Details of the remuneration arrangements
in place for Key Management Personnel
of Elders are set out in the Remuneration
Report commencing on page 48. In compiling
this report Elders has met the disclosure
requirements prescribed in the Australian
Accounting Standards and the Corporations
Act 2001.
Environmental Performance
Regulation
A number of Elders’ operations are subject
to environmental legislation. Such legislation
is diverse and varies between state, territory
and local authorities and various regulators.
Detail of Elders’ performance in relation to
the various regulations is as follows.
Feedlots
Elders operates the Killara feedlot in Quirindi,
New South Wales. Killara is subject to both
state and local government environmental
legislation. In August 2019, Killara received
an official caution and two penalty notices
for drawing water from wells in excess of its
licensed allocation. Otherwise, no breaches
of environmental regulations affecting
Killara were reported during the year ended
30 September 2019 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 2019
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. Elders has an internal
branch audit program to help ensure that it
complies with these regulations. In addition,
many of Elders’ branches and personnel
participate in an accreditation, training
and audit program operated by Agsafe.
In August 2018, the Environmental Protection
Agency attended the Barmera (SA) branch
and determined that wastewater had been
discharged onto neighbouring land. The EPA
subsequently conducted a full investigation,
directed that certain remediation works be
carried out, and issued expiation notices
(totaling $1,420) to Elders. The remediation
works have been completed and the expiation
notices paid.
Elders is not aware of any other breaches of
environmental regulations affecting Elders’
retail operations that were reported during the
year ended 30 September 2019 or to the date of
this report.
Rounding of Amounts
The parent entity is a Group of the kind
specified in ASIC Corporations (Rounding
in Financial/Director’s Report) Instrument
2016/191 issued by the Australian Securities
and Investments Commission. In accordance
with that class order, amounts in the Financial
Report and Directors’ Report have been
rounded to the nearest thousand dollars
unless otherwise stated.
Non-Audit Services
Non-audit services provided by Elders’
auditor, PricewaterhouseCoopers, to Elders
during the financial year are disclosed below.
Based on advice received from the Audit, Risk
and Compliance Committee, the Directors
are satisfied that the provision of non-audit
services is compatible with the general
standard of independence for auditors imposed
under the Corporations Act 2001 for the
following reasons:
– all non-audit services have been reviewed
by the Audit, Risk and Compliance
Committee to ensure they do not impact
on the impartiality or objectivity of the
auditor; and
– the nature and scope of each type of
non-audit service provided means
that auditor independence was not
compromised.
PricewaterhouseCoopers received or is due to
receive the following amount for the provision
of non-audit services:
– Other compliance and assurance services
$8,000
– Other non-audit services $29,566
A copy of the auditor’s independence
declaration as required under section 307C of
the Corporations Act 2001 is set out on page 114.
This report, including the Remuneration Report
commencing on page 48 is made in accordance
with a resolution of Directors.
Ian Wilton
Chair
Adelaide
11 November 2019
M C Allison
Managing Director
47
R E M U N E R
R E P O R T
48
A T I O N
Nick and Kate Wadlow (clients), Old Ashrose, Hallett SA
49
R E M U N E R A
R E P O R T
The Directors of Elders Limited present the Remuneration
Report for the consolidated entity for the year ended
30 September 2019. 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.
Key Messages
Section 1
Key Management Personnel
Section 2
Remuneration Governance
Section 3
Remuneration Framework and Policy
Section 4
Link between Elders’ financial performance and remuneration
Section 5
Executive KMP remuneration details
Section 6
Executive KMP contract terms, loans and transactions
Section 7
Non-Executive Director remuneration
Section 8
Additional statutory information
50
52
52
53
57
60
61
62
63
Key Messages
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.
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), GM
Network and those Executives 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.
A summary of key remuneration outcomes for
the 2019 financial year is set out in table 1.
50
2019 Annual Report — Elders T I O N
Remuneration Report
Changes to KMP
The following changes in KMP occurred
in the year ended 30 September 2019:
Senior Executives
– Richard Norton appointed to the position
of GM Network and commenced from
7 January 2019.
Non-Executive Directors
– Hutch Ranck resigned as Chair
effective 13 December 2018
– Michael Carroll appointed as Chair
for the period 13 December 2018 to
11 September 2019
– Ian Wilton appointed as Chair
effective from 11 September 2019.
FY19 Performance
Our strategic Eight Point Plan targets
sustainable earnings growth over the
agricultural cycle.
Lower wool volumes and reduced summer
cropping during the reporting period impacted
the 2019 result, with a ROC of 18.2% recorded,
6% lower than that achieved over the prior year
at a higher point in the cycle.
KMP remuneration outcomes for 2019 financial
year reflect those factors.
Fixed Remuneration
At the start of 2019 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, effective from 1 January
2019, each Senior Executive KMP received
a fixed remuneration increase ranging
from 1.0% to 1.5%, being in line with market
movements and the MD & CEO received a
fixed remuneration increase of 5%. The Board
reviewed market data for CEO comparator
companies and relevant peers and determined
it appropriate to award Mr Allison the TFR
adjustment in recognition of his achievements
in performance outcomes.
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.
As Elders did not achieve threshold EBIT
performance there is no 2019 short-term
incentive payments for the MD & CEO and
Senior Executives.
Long-term incentive (LTI) grant
in the year
The rights granted in 2019 financial year to the
CEO & MD were approved by shareholders
at Elders’ AGM held on 13 December 2018.
Following this, the Board approved a grant
of performance rights to selected senior
management.
The performance measures of this grant are
in accordance with the 2017 and 2018 grant
with key metrics of Absolute Total Shareholder
Return (TSR), Earnings per Share growth (EPS)
and Return on Capital (ROC) over a 3-year
performance period ending 30 September 2021.
These measures are designed to focus
executives on continuing to drive sustainable
growth and shareholder return aligned to our
strategic plan. Details of this grant are outlined
in table 5.
Long-term incentives vesting in the year
The performance rights granted in 2017
financial year (grant date 16-Dec-16) under
the Long-term Incentive Plan had a three-
year performance period which concluded
30 September 2019. Testing against the
three performance conditions, being Elders’
Absolute Total Shareholder Return, Earnings
per Share growth and Return on Capital
resulted in 75% vesting.
Further details on the vesting are outlined
in table 8.
Summary of Remuneration outcomes for 2019
Table 1 below presents the remuneration paid or payable, or vested for, the MD & CEO and Senior Executive KMP in respect of the 2019 financial year.
The information in Table 1 is unaudited and is different from and additional to that required by Accounting Standards and statutory requirements which
is provided in Table 9 on page 60.
Table 1 — Remuneration outcomes for 2019 (unaudited and non-IFRS)
$
Base
Salary
STI1
LTI2
Super-
annuation
Other
(monetary)
Other (non-
monetary)3
Termination
benefits4
Total
M C Allison
MD & CEO
R I Davey
CFO
R L Norton5
GM Network
J H Cornish
GM Zone West
M L Hunt
GM Zone South
896,447
511,109
367,636
357,387
387,912
-
-
-
-
-
2,277,600
657,000
-
481,800
525,600
20,649
20,649
15,516
20,649
20,649
50,000
4,730
1,200
33,474
-
-
-
-
-
3,194,696
1,188,758
437,882
861,036
967,635
1 STI that will be paid for performance in the 2019 financial year.
2 Value of any performance rights that vested during the 2019 financial year based on the closing share price on the date of vesting. This figure does not represent the value of rights granted during
the 2019 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)
5 Figures relate to part-service for R L Norton who commenced 7 January 2019. Other Monetary relates to sign-on bonus payable as part of Mr Norton’s recruitment.
51
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 (Executive KMP) during the
financial year:
Table 2 — Key Management Personnel
Name
Position/s held
Period held in 2019 (if not full year)
Non-Executive Directors (NED)
Commenced
Ceased
J H Ranck
Chair
R Clubb
I Wilton1
D Eilert
Director
Chair
Director
M Carroll1
Director
13 December 2018
11 September 2019
MD & CEO and Senior Executives (Executive KMP)
M C Allison
Managing Director and CEO
R I Davey
Chief Financial Officer
R L Norton
General Manager Network
7 January 2019
J H Cornish
Zone General Manager West
M L Hunt
Zone General Manager South
1 I Wilton served as a Director for the period in 2019 prior to being appointed Chair and M Carroll held the role of Chair from 13
December 2018 to 11 September 2019.
Section 2 —
Remuneration
Governance
A. Role of the Board and the
Remuneration and Human
Resources Committee
The Remuneration and Human Resources
Committee (Committee) is responsible for
reviewing and making recommendations to
the Board in relation to people management
and remuneration strategies and policies
aligned with Elders’ overall objectives and
to ensure that remuneration outcomes for
KMP are appropriate and aligned to company
performance and shareholder expectations.
The Committee operates in accordance with
the guidance set out in the ASX Corporate
Governance Council Principles and
Recommendations.
Further information on 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
independent Non-Executive Directors.
B. 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 2019,
the Committee engaged remuneration
advisors Guerdon Associates and received
remuneration and market practice advice and
information relating to remuneration of MD
& CEO and remuneration of Non-Executive
Directors.
No remuneration recommendations, as
defined by the Corporations Act 2001 (Cth),
were made by remuneration advisors.
52
2019 Annual Report — Elders
Section 3 —
Remuneration
Framework & Policy
A. Remuneration structure
The remuneration for Executive KMP 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 described in Table 3.
B. Remuneration mix
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 assumes the at-risk remuneration
components are at their maximum, and
represents Elders’ intended policy in
respect of remuneration structure.
Remuneration Report
Table 3 — Remuneration Structure
Remuneration
Component
Total fixed remuneration
(TFR)
Short-term incentive (STI) Long-term incentive (LTI)
Purpose
TFR is set with reference
to external market for
like positions and takes
into account:
STI rewards for in-year
performance for Elders’
overall and business unit
level results.
LTI supports alignment
to long-term overall
company performance
rewarding for delivery
of longer term strategy
and creating shareholder
value.
Performance rights
(vesting after three years,
subject to performance).
Payments are made in
cash or elected to be
paid as shares; Executive
KMP, excluding the MD &
CEO may elect to salary
sacrifice to acquire
Elders’ shares via the
Deferred Employee
Share Plan.
Assessment of Executive
KMP performance
against the relevant KPIs
is determined by the MD
& CEO (except for himself
which is determined by
the Committee) with
recommendations
referred to the Board for
approval.
Table 4 summarises the
key components of the
STI plan.
LTI grants are made
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.
Table 5 summarises the
current LTI grants.
Delivery
Approach
– size and complexity
of role;
– individual
responsibilities; and
– capabilities, skills
and experience.
Base salary,
superannuation and any
other benefits (including
Fringe Benefits Tax
on those benefits) the
Executive KMP has
nominated to receive as
part of their package.
These benefits may
include motor vehicle
leases, car parking
and any additional
superannuation
contributions beyond the
statutory maximum.
Reviewed annually and
adjusted according to
market relativity, Elders’
overall performance
and the Executive KMP
performance over the
previous year. The Board
monitors the CEO’s
performance on an
ongoing basis throughout
the year through
regular management
reporting and reporting
of the various Board
Committees.
Chart 1 — Remuneration structure at maximum
CEO
Senior Executives
35%
27%
32%
32%
24%
49%
TFR
STI
LTI
53
C. Short-term incentive
The key features of the short-term incentive plan applying to the MD & CEO and Senior Executives during the year are set out in the table below:
Table 4 — Short-term incentive plan
MD & CEO
Maximum STI opportunity as % of TFR
100% of TFR
Senior Executives
50% of TFR
Performance measure(s)
The MD & CEO and Senior Executives are eligible for an STI if Elders achieves threshold financial
performance hurdles including Underlying EBIT and ROC.
For the MD & CEO the metrics below are based on Elders’ overall performance and the Senior Executives
STI is based on Elders’ overall performance, business unit and individual performance against KPIs.
Safety
Driving significant progress in achieving an injury free workplace.
Financial and Operational
Performance
Achievement of financial outcomes including Underlying Earnings
Before Interest and Tax (EBIT) and Return on Capital (ROC) targets.
People and Key
Relationships
Efficiency and Growth
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.
10%
40%
15%
35%
Weighting
Exercise of discretion
Service condition
The MD & CEO may recommend discretionary incentive payments to Executive KMP (except himself) for
approval by the Committee.
Any STI payable to Senior 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.
Clawback
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.
54
2019 Annual Report — Elders Remuneration Report
D. Long-term incentive
The current LTIPs and equity participation plans are summarised within the following table.
Table 5 — Summary of current Long-Term Incentive grants (excludes grant vesting in Table 8)
Maximum LTI opportunity as % of TFR: 110%
55%
MD & CEO
Senior Executives
Grant date
As at 30 September 2019
No. of rights outstanding
and no. of participants
Performance period
(3 years)
FY18
14-Dec-17
16-Feb-18
MD & CEO
other participants
FY19
13-Dec-18
15-Feb-19
MD & CEO
other participants
200,000 Rights
430,000 Rights
MD & CEO
12 other participants
146,000 Rights
306,000 Rights
MD & CEO
11 other participants
1 October 2017 to 30 September 2020
1 October 2018 to 30 September 2021
Performance conditions
The performance rights will be split into three tranches, each carrying a different performance condition and weighting.
Performance measures
and vesting
Tranche 1
Tranche 2
Tranche 3
Absolute Total Shareholder Return (TSR)
Earnings per Share (EPS) growth
Return on Capital (ROC)
Tranche 1 – Absolute TSR Performance Rights
50% weighting
25% weighting
25% weighting
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. The % of TSR rights that will
vest is determined as follows:
Absolute TSR over performance period
% of rights in tranche that vest
Target
Stretch
FY18
12%
15%
FY19
10%
14%
50%
100%
– Less than Target no rights vest
– If greater than Target but less than Stretch is achieved, 50-100% of rights vest on a straight line sliding scale.
Absolute TSR will be measured using opening and closing share prices determined as follows:
– the opening share price value, being the 5 trading day VWAP up to and including 30 September the day prior
to the first day of the performance period; 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.
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 Target for the performance period. The % of EPS rights that will vest is determined as follows:
EPS CAGR over performance period
% of rights in tranche that vest
Target
Stretch
FY18
n/a
10%
FY19
7%
10%
– Less than Target no rights vest
– If greater than Target but less than Stretch is achieved, 50-100% of rights vest on a straight line sliding scale.
50%
100%
55
Performance measures
and vesting
FY18
FY19
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 on the last day of
performance period.
Additional vesting condition
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 being a day prior to the start
of the performance period.
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 relevant performance period have been audited
and approved by the Board. There will be no re-testing of performance.
Other
Clawback
Dividends
The Board may determine that any unvested rights will lapse or be forfeited, and/or the participant must pay or repay as
a debt, proceeds from shares allocated in certain circumstances such as in the case of fraud, gross misconduct, breach
of duties or obligations.
For each fully paid ordinary share allocated on vesting, participants will receive additional ordinary shares equivalent
to the value of the dividends paid (but not received) over the performance period. No dividend equivalent shares are
provided on rights which do not vest.
Treatment of unvested rights
on cessation of employment
The Board has overriding discretion over the treatment of unvested performance rights when an Executive KMP ceases
employment. On cessation of employment the Board may at its discretion allow the Executive KMP to retain a pro-rated
number of rights based on the portion of the performance period the participant has worked and the rights to remain
“on foot” until the end of the performance period. All other performance rights will lapse on cessation.
Dealing in Securities
KMP are not permitted to deal in Elders’ securities without prior permission from Elders and are only permitted to
trade during open periods and are required to disclose all dealings. The measures are designed principally
to manage insider trading risk and align the interests of KMP with Elders’ security holders.
Corporate actions/
reconstructions
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.
Impact of AIRR acquisition and leasing standard on performance measures
During FY20 the Board will review the performance targets for the 2018, 2019 and 2020 LTI grants with reference to the AIRR acquisition and changes to
leasing standards to determine if the current performance conditions remain fair and reasonable. If the Board determines any adjustments are required
the Board will ensure the participants are not materially prejudiced or advantaged relative to the position reasonably anticipated at the time of the original
grant.
Other equity schemes in which one or more KMP participate
Mr Allison previously held shares of 1,685 under Elders Deferred Employee Share Plan (DESP). The DESP enabled participants to salary sacrifice up to
$5,000 of salary to acquire restricted shares and the income tax on the acquisition of the plan shares could be deferred for up to 7 years. Elders makes
no contribution to this plan other than funding the cost of administration. As at 30 September 2019 no KMP have holdings under the DESP.
56
2019 Annual Report — Elders Section 4 —
Link Between
Elders’ Financial
Performance and
remuneration
A. Elders performance
Our remuneration strategy is aligned to our
strategic and business objectives, designed
to create shareholder wealth and linking
our executive remuneration outcomes to
performance.
STI payments are awarded to our Executive
KMP on achievement of a range of financial
and non-financial performance targets (see
Table 4).
The performance conditions of our current
LTI grants, outlined in Tables 5 and 8 include
absolute Total Shareholder Return (TSR),
Earnings Per Share (EPS) and Return on
Capital (ROC).
Table 6 shows Elders’ performance in relation
to a number of financial and operational
performance measures over a five-year period.
Remuneration Report
Table 6 — Elders’ performance and Remuneration Outcomes
Performance measure ($ millions)
2015
2016
2017
2018
2019
0%
75%
Sales revenue
Underlying EBIT
Statutory profit
Return on Capital based
on underlying earnings
Cashflow from operating activities
STI Outcomes – average %
received of maximum opportunity
1,502.0
1,519.3
1,582.5
1,599.4
1,667.3
40.5
38.3
56.1
51.6
71.0
116.0
74.5
71.6
73.7
68.9
21.9%
28.1%
28.6%
24.2%
18.2%
(5.3)
55%
48.7
54%
81.6
88%
(12.1)
11.2
81%
LTI Outcomes – vesting %
70%1
n/a2
100%
100%
1 This represents the vesting of Tranche 3 of the 2011 Grant with Tranche 1 and Tranche 2 lapsing in full.
2 No Long-term incentive grants were due to vest in the 2016 financial year hence the reason of nil vesting in 2016.
Note: The 2018 figures in the table above are restated to reflect continuing operations as at 30 September 2019. 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.
118.3%
150%
100%
50%
0%
%
R
S
T
e
t
u
l
o
s
b
A
13.2%
4.8%
25.3%
9.2%
(0.7%)
51.2%
14.0%
12.5%
(7.4%)
(50%)
2015
2016
2017
2018
2019
Elders
ASX200
Source: Thomson Reuters
57
Chart 3 — Elders five year share price history
No dividends were declared or paid (interim or final) in the 2015 or 2016 financial years. A final dividend and special dividend of 7.5 cents each (15 cents
total) were paid for 2017. An interim and final dividend of 9 cents each (18 cents total) were declared for each of the 2018 and 2019 years.
10
9
8
7
6
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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.
B. Executive KMP 2019 STI Outcomes
All STI outcomes for 2019 performance were determined according to plan performance measures. As threshold financial performance hurdles
weren’t achieved, no STI payments were awarded for 2019. The following table provides a summary of the KMP performance targets and outcomes for
2019:
Table 7 — STI outcomes and performance against targets for 2019
KMP
Safety
Financial and
Operational
Performance
People and Key
relationships
Efficiency
and Growth
Maximum STI
Opportunity
Awarded
STI
Forfeited
STI
$
%
%
Name
Position Title
M C Allison
MD & CEO
R I Davey
CFO
R L Norton
GM Network
J H Cornish
Zone GM West
M L Hunt
Zone GM South
Company
Business
Unit
Company
Business
Unit
Company
Business
Unit
-
-
928,145
-
266,539
195,1991
189,719
205,038
0
0
0
0
0
100%
100%
100%
100%
100%
Maximum performance achieved
Threshold/Minimum performance achieved
Threshold/Minimum performance not met
1 R L Norton Maximum STI Opportunity pro-rated for period of service completed in FY20.
58
2019 Annual Report — Elders
Remuneration Report
C. Executive KMP 2019 LTI Outcomes
The 3 year performance period of the 2017 financial year performance rights granted under the Long-term Incentive Plan concluded on 30 September
2019.
The rights were split into three tranches, each carrying a different performance condition. The testing resulted in 75% vesting of total rights with the
outcomes as follows:
Table 8 — Finalised long-term incentive – 2017 grant
% of total grant
Performance measures
Tranche 1 – Total Shareholder Return (TSR)
50%
Based on Elders’ average annual compound TSR over the three year performance
period 1 October 2016 ending on 30 September 2019.
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 the performance period
% of Rights that vest
Less than 12%
Equals 12%
Nil
50%
Greater than 12% but less than 20%
50-100%, on a straight-line sliding scale
Equal to or greater than 20%
100%
Absolute TSR was measured using opening and closing share prices determined as follows:
– the opening share price value of $3.8426;
– 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
– dividends 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 2019.
Outcome of testing
Elders’ TSR Compound Average
Growth Rate over the performance
period was 20.6% being higher than
the stretch hurdle of 20%.
Resulting in 100% vesting of this tranche.
Notes regarding calculation:
The starting price to calculate the
Compound Average Growth Rate
was VWAP $3.8426 and the closing
share price was VWAP $6.2658.
Dividends paid over the performance
period were $0.42.
Elders’ EPS Compound Annual Growth
Rate over the performance period was
15% based on a starting EPS of 36.2 (as
at 30 September 2016) and 55.0 at the
end of the performance period.
Resulting in 100% vesting of this tranche.
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 2019 was 18.18% being less
than the 20% performance condition.
Resulting in 0% vesting of this tranche.
The total number of vested performance rights under the 2017 grant is 626,250. In addition, 41,942 additional shares will be allocated at time of vesting for the value of dividends forgone on the
vested rights during the performance period. Individual vesting outcomes are outlined in Table 13.
59
42%
67%
23%
46%
8%
n/a
24%
47%
21%
48%
n/a
27%
Section 5 — Executive KMP Remuneration
Table 9 — Details of MD & CEO and Senior Executive remuneration for the 2018 and 2019 financial years
Short-term payments
Post-
employment
Share-based
payments
Long-term
payments
Termination
benefits2
Total % perfor-
mance-
related3
Base
salary
STI
Other1
Super-
annuation
Options
Share
Rights
Long Service
Leave
M C Allison
2019
896,447
-
R I Davey
R L Norton
2018
2019
2018
2019
2018
M L Hunt
G J Dunne4
2018
2019
2018
2019
2018
J H Cornish
2019
357,387
858,810
835,541
511,109
-
505,681
184,800
367,636
n/a
-
n/a
-
-
-
-
-
54,730
n/a
1,200
1,200
351,829
130,900
387,912
-
33,474
380,905
202,100
33,770
20,649
20,169
20,649
20,169
15,516
-
-
-
-
-
708,037
1,018,533
169,553
273,225
37,800
n/a
n/a
n/a
20,649
20,169
20,649
20,169
-
-
-
-
126,715
207,625
126,715
212,425
n/a
n/a
n/a
n/a
n/a
n/a
41,896
24,740
40,919
11,797
-
n/a
26,952
5,655
28,250
17,328
n/a
-
-
-
-
-
1,667,029
2,757,793
742,230
995,672
475,682
n/a
n/a
-
-
-
-
532,903
717,378
597,000
866,697
n/a
n/a
Total
2019
2,520,491
-
89,404
378,393
140,600
4,654
2018
2,475,618
1,493,941
39,624
100,845
20,169
98,112
-
-
-
212,425
8,394
538,465
1,303,100
1,168,820
138,017
-
4,014,844
1,924,233
67,914
538,465 6,640,640
1 Comprising the provision of leased car parking (Cornish, Hunt, Norton, Dunne), company leased vehicle (Hunt) and once-off sign on bonus of $50,000 (Norton).
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 13.
4 G J Dunne ceased employment 30 September 2018.
60
2019 Annual Report — Elders Remuneration Report
Section 6 — Executive KMP Contract Terms,
Loans and Transactions
A. Contractual arrangements with Executive KMP
In 2019 Elders had employment contracts with Executive KMP. Details of the employment contracts are set out in Table 10.
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
Change of Control
Not specifically referenced
in contract
Due to genuine redundancy, as defined by the Fair Work Act 2010, the Senior
Executive is entitled to a retrenchment payment in accordance with Elders’
policy. This payment is also subject to the rules and limitations specified in
the Corporations Act 2001 and Corporations Regulations.
In the event of a Change of Control or Disposal of Business resulting in a
material diminution in the roles and responsibility of the Senior Executive,
the Senior Executive may terminate their contact on three months’ notice.
If this occurs, Elders will pay the Senior Executive the equivalent of up to 12
months TFR.
B. Other transactions with KMP
There are no loans to KMP outstanding in the current 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.
61
Section 7 —
Non-Executive
Director
Remuneration
A. Remuneration Framework
& Policy
Non-Executive Directors are remunerated
by way of fees in the form of cash and
superannuation, and in accordance with
Recommendation 8.2 of the ASX Corporate
Governance Council Principles and
Recommendations.
The MD & CEO and Senior Executives do not
receive directors’ fees.
Non-Executive Directors do not participate
in Elders’ cash or equity incentive plans and
do not receive retirement benefits other than
superannuation contributions disclosed in
this report.
Non-Executive Directors have formal letters
of appointment with Elders. Length of tenure
is governed by Elders’ Constitution and the
ASX Limited Listing Rules, which provides
that all Non-Executive Directors are subject
to re-election by shareholders in the manner
set out in the Corporate Governance Statement
published at elders.com.au.
Non-Executive Director fees are reviewed
by the Board on an annual basis, taking into
consideration the accountability and time
commitment of each director, supported,
where appropriate and necessary, by advice
from external remuneration consultants.
The Board believes Elders’ Non-Executive
Directors should own securities in Elders to
further align their interests with the interests
of other shareholders. Details of Non-
Executive Directors’ shareholdings in Elders
can be found in Table 14 of this Report.
62
B. Non-Executive Director fees in 2019
Total fees for the financial year ended 30 September 2019 remain well within the aggregate fee limit
of $1,200,000 per annum, approved by the Board following Elders’ 2013 Annual General Meeting.
Statutory superannuation guarantee contributions are excluded from the aggregate fee limit.
During the financial year ended 30 September 2019 the following fees applied:
Table 11 — Non-Executive Director fee details
Board and Committee Fees ($)
Board
Audit, Risk and Compliance Committee
Work Health and Safety Committee
Remuneration and Human Resources Committee
Nomination and Prudential Committee
FY19 Fee Excl. Super
Chair
Member
$240,0001
$100,000
$30,000
$16,000
$10,000
$10,000
$15,000
$10,000
Nil
Nil
1 The Chair of the Board does not receive additional committee fees.
Actual Committee fees paid are provided as “Board Committee Fees” in Table 12 below. The base
Board fee has remained unchanged since 2014.
C. Non-Executive Director remuneration in 2019
The table below sets out the remuneration for the Chair and Non-Executive Directors for the
financial years 2018 and 2019.
Table 12 — Non-Executive Director remuneration details
Short-term payments
Post-employment
Total
Base Board Fee
Board
Committee Fees
Superannuation
J H Ranck2
R Clubb1
J A Jackson2
I Wilton5
D Eilert3
M Carroll4
Total
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
48,571
240,000
100,000
100,000
n/a
20,635
107,222
100,000
100,000
88,258
205,000
8,333
560,793
557,226
-
-
41,464
39,988
n/a
8,460
47,421
50,000
36,258
28,714
9,000
3,000
134,143
130,162
4,614
20,169
13,439
13,299
n/a
2,764
14,691
14,250
12,945
11,112
18,686
1,077
64,375
62,671
53,185
260,169
154,903
153,287
n/a
31,859
169,334
164,250
149,203
128,084
232,686
12,410
759,311
750,059
1 R Clubb ceased as Chair of Remuneration and Human Resources Committee effective 11 September 2019 and appointed as Chair
of Audit, Risk and Compliance Committee with an increase in her Committee fees from this date to reflect this appointment.
2 J A Jackson and J H Ranck ceased as Non-Executive Director on 14 December 2017 and 13 December 2018 respectively.
3 D Eilert commenced as a Non-Executive Director 14 November 2017 and was appointed Chair of the Remuneration and Human
Resources Committee effective 11 September 2019.
4. M Carroll appointed as Chair for the period 13 December 2018 up to and including 11 September 2019.
5 I Wilton appointed as Chair from 11 September 2019.
2019 Annual Report — Elders Remuneration Report
Section 8 — Additional Statutory Information
Table 13 — 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.
$
$
- Nov-19
210,000
75
70,000
25
-
(16,800)
785,400
-
-
-
-
-
70,000
-
-
-
200,000
460,333
1,381,000
146,000
346,000
264,503
793,510
708,037
2,959,910
- Nov-19
56,250
75
18,750
25
-
(2,687)
234,375
-
-
-
-
-
-
-
18,750
-
-
-
-
-
-
-
60,000
39,000
99,000
30,000
30,000
123,100
369,300
49,140
147,420
169,553
751,095
37,800
37,800
113,400
113,400
45,000
75
15,000
25
-
(2,150)
187,500
-
-
-
-
-
15,000
-
-
-
45,000
29,000
74,000
92,325
36,540
276,975
109,620
126,715
574,095
280,000
200,000
Nov-20
-
146,000 Nov-21
480,000
146,000
210,000
75,000
60,000
Nov-20
-
39,000 Nov-21
135,000
39,000
56,250
-
-
30,000 Nov-21
30,000
-
-
60,000
45,000
- Nov-19
- Nov-20
-
29,000 Nov-21
105,000
29,000
45,000
60,000
45,000
Nov-20
-
29,000 Nov-21
105,000
29,000
45,000
-
-
-
-
-
-
-
-
- Nov-19
45,000
75
15,000
25
-
(2,150)
187,500
-
-
-
-
-
15,000
-
-
-
45,000
29,000
74,000
92,325
36,540
276,975
109,620
126,715
574,095
M C Allison
16-Dec-16
14-Dec-17
13-Dec-18
R I Davey
17-Feb-17
16-Feb-18
15-Feb-19
R L Norton
15-Feb-19
J H Cornish
17-Feb-17
16-Feb-18
15-Feb-19
M L Hunt
17-Feb-17
16-Feb-18
15-Feb-19
G J Dunne3
17-Feb-17
16-Feb-18
40,000
15,000
55,000
- Nov-19
- Nov-20
-
30,000
75
10,000
25
-
(43,100)
187,500
-
30,000
-
-
-
10,000
-
-
15,000
15,000
-
276,975
(43,100)
464,475
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 has continued on foot, based on the percentage of performance period
completed for each grant as at termination date.
Note: The grant dates are aligned to the requirements under the Accounting Standards. For the LTI grants that vested Nov-19, additional shares of 23,861 will be allocated to the Executive KMP in
this table at the time of vesting for the value of dividends forgone on the vested rights during the performance period.
63
$
-
460,333
529,007
989,340
-
123,100
98,280
221,380
75,600
75,600
-
92,325
73,080
165,405
-
92,325
73,080
165,405
-
-
-
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.
Performance Rights
16 December 2016
Performance Rights
14 December 2017
Performance Rights
13 December 2018
MD & CEO Grant
Senior Executive Grant
Tranche 1
Tranche 2 & 3
Tranche 1
Tranche 2 & 3
Tranche 1
Tranche 2 & 3
$ 1.63
$ 3.98
$ 6.64
$ 7.17
$ 4.92
$ 5.95
Tranche 1
Tranche 2 & 3
Tranche 1
Tranche 2 & 3
Tranche 1
Tranche 2 & 3
$ 1.94
$ 4.31
$ 5.81
$ 6.50
$ 3.23
$ 4.33
Table 14 — Non-Executive Directors shareholdings
Shares held
at start of year
Shares acquired during the
year as part of remuneration
Other shares acquired
(disposed of) during the year
Balance of shares held at end
of financial period
M Carroll
R Clubb
I Wilton
D Eilert
J H Ranck1
J A Jackson2
Total
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
-
-
3,400
3,400
108,486
105,000
-
-
134,317
130,000
n/a
10,000
246,203
248,400
-
-
-
-
-
-
-
-
-
-
n/a
-
-
-
25,027
-
7,000
-
19,768
3,486
9,769
-
-
4,317
n/a
-
61,564
7,803
25,027
-
10,400
3,400
128,254
108,486
9,769
-
134,317
134,317
n/a
10,000
307,767
256,203
1 J H Ranck ceased as a Director on 13 December 2018, balance at end of financial period is at date of cessation.
2 J A Jackson ceased as a Director on 14 December 2017.
64
2019 Annual Report — Elders Remuneration Report
Table 15 — Executive KMP shareholdings
Shares held
at start of year
Shares acquired
during the year as
part of remuneration
Shares acquired
during the year through
the vesting of LTI
Other shares acquired
(disposed of) during
the year
Balance of shares
held at end of financial
period
M C Allison
R I Davey
R L Norton
J H Cornish
M L Hunt
G J Dunne1
Total
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
2019
2018
654,344
54,344
51,750
1,750
-
n/a
-
29,190
-
-
n/a
43,459
706,094
128,743
-
-
-
-
-
n/a
-
-
-
n/a
-
-
-
260,000
600,000
75,000
150,000
-
n/a
55,000
120,000
60,000
130,000
n/a
130,000
450,000
1,130,000
136,470
-
(16,982)
(100,000)
-
n/a
8,209
(149,190)
8,956
(130,000)
n/a
(148,953)
136,653
(528,143)
1,050,814
654,344
109,768
51,750
-
n/a
63,209
-
68,956
-
n/a
24,506
1,292,747
730,600
1 G J Dunne ceased employment on 30 September 2018, no balances provided for FY19.
Note: No other changes occurred during the year. None of the shares in tables 14 and 15 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.
65
E L D E R S
L T D
A N N U A L
F I N A N C I
R E P O R T
66
A L
Randall Spann (staff), Biloela QLD
67
E L D E R S L I M I T E D
A N N U A L F I N A N C I A L
R E P O R T
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
14
15
Cash Flow Statement Reconciliation
Interest Bearing Loans and Borrowings
68
Risk Management
16
Financial Instruments
Equity
17
18
19
20
Contributed Equity
Reserves
Retained Earnings
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
69
70
71
72
73
75
77
79
81
83
84
85
86
87
88
90
92
93
95
96
97
102
102
103
103
104
107
108
109
110
110
111
111
112
112
113
2019 Annual Report — Elders Continuing operations
Sales revenue
Cost of sales
Gross profit from continuing operations
Equity accounted profits
Distribution expenses
Administrative expenses
Finance costs
Other items of income/(expense)
Profit from continuing operations before income tax benefit
Income tax benefit
Profit from continuing operations after income tax benefit
Net 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 profit/(loss) for the period, net of tax
Total comprehensive income for the period
Profit for the period is attributable to:
Non-controlling interest
Owners of the parent
Total comprehensive income for the period is attributable to:
Non-controlling interest
Owners of the parent
Reported operations
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Continuing operations
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Discontinued operations
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
Note
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.
2019
$000
1,667,347
(1,321,557)
345,790
6,313
(235,468)
(42,981)
(10,771)
(2,468)
60,415
17,336
77,751
(7,024)
70,727
1,151
1,151
2018
$000
1,599,430
(1,252,111)
347,319
7,016
(232,741)
(47,056)
(6,854)
(6,093)
61,591
19,342
80,933
(7,006)
73,927
(328)
(328)
71,878
73,599
1,792
68,935
70,727
1,792
70,086
71,878
57.0¢
56.1¢
62.8¢
61.9¢
(5.8)¢
(5.8)¢
2,359
71,568
73,927
2,359
71,240
73,599
62.0¢
60.7¢
68.0¢
66.7¢
(6.1)¢
(6.1)¢
69
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOMEFor the year ended 30 September 2019Elders Limited Annual Financial Report
Current assets
Cash and cash equivalents
Trade and other receivables
Livestock
Inventory
Assets classified as held for sale
Current tax receivable
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)
4
12
10
11
4
9
15
4
13
9
15
13
17
18
19
2019
$000
7,313
481,131
35,309
146,121
-
398
670,272
1,269
53,746
27,405
166,854
97,184
346,458
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
1,016,730
930,219
359,224
100,695
-
44,228
504,147
16,287
870
2,543
19,700
371,907
184,001
1,166
45,856
602,930
12,668
1,074
4,998
18,740
523,847
621,670
492,883
308,549
1,562,377
(27,230)
(1,043,490)
491,657
1,226
492,883
1,426,835
(26,034)
(1,094,027)
306,774
1,775
308,549
The accompanying notes form an integral part of this consolidated statement of financial position.
70
CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAs at 30 September 20192019 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
Payments associated with sale of controlled entity
Proceeds from sale of feedlot assets
Net investing cash flows
Cash flow from financing activities
Proceeds from issue of shares, net of costs
Proceeds/(repayment) of borrowings
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)
2019
$000
7,325,677
(7,310,945)
6,725
(6,791)
(3,430)
11,236
(3,718)
(400)
(26,667)
(13,727)
275
(951)
2,700
2018
$000
7,122,234
(7,133,344)
7,338
(5,513)
(2,847)
(12,132)
(4,099)
(650)
(1,605)
(32,329)
292
-
-
(42,488)
(38,391)
132,476
(83,944)
(19,267)
(2,341)
26,924
(4,328)
11,641
7,313
2,651
52,867
(25,819)
(2,721)
26,978
(23,545)
35,186
11,641
The accompanying notes form an integral part of this consolidated statement of cash flows.
71
CONSOLIDATED STATEMENT OF CASH FLOWSFor the year ended 30 September 2019Elders Limited Annual Financial Report $000
As at 1 October 2018
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
Transaction costs incurred on share issue, net of tax
Dividends paid
Dividend reinvestment plan
Partnership profit distributions/dividends paid
Cost of share based payments
Recognition of put options
Reallocation of equity
As at 30 September 2019
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
Issued capital
Reserves
Retained
earnings
Non-controlling
interest
Total equity
1,426,835
(26,034)
(1,094,027)
-
-
-
-
68,935
1,151
1,151
-
68,935
137,000
(3,198)
-
1,740
-
-
-
-
-
-
-
-
-
1,812
(1,550)
(2,609)
-
-
(19,267)
(1,740)
-
-
-
2,609
1,775
1,792
-
1,792
-
-
-
-
(2,341)
-
-
-
308,549
70,727
1,151
71,878
137,000
(3,198)
(19,267)
-
(2,341)
1,812
(1,550)
-
1,562,377
(27,230)
(1,043,490)
1,226
492,883
1,422,255
(27,596)
(1,139,118)
-
-
-
2,651
-
1,929
-
-
-
-
71,568
(328)
(328)
-
71,568
-
-
-
-
3,161
(1,271)
-
(25,819)
(1,929)
-
-
1,271
2,137
2,359
-
2,359
-
-
-
(2,721)
-
-
257,678
73,927
(328)
73,599
2,651
(25,819)
-
(2,721)
3,161
-
1,426,835
(26,034)
(1,094,027)
1,775
308,549
The accompanying notes form an integral part of this consolidated statement of changes in equity.
72
CONSOLIDATED STATEMENT OF CHANGES IN EQUITYFor the year ended 30 September 20192019 Annual Report — Elders ABOUT THIS REPORT
Corporate information
The consolidated financial report of Elders Limited for the year ended 30 September 2019 was authorised for issue in accordance with a resolution of
the Directors on 11 November 2019. 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 2019. 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
73
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2019Elders Limited Annual Financial Report ABOUT THIS REPORT
New accounting standards and interpretations
(i) New and Revised Accounting Standards
The following new amendments to standards and interpretations became operative for the financial year ended 30 September 2019 and have been
applied in preparing these consolidated financial statements:
– AASB 9 Financial Instruments
– AASB 15 Revenue from Contracts with Customers
As a result of adopting AASB 9 Financial Instruments, Elders has changed the accounting policy for trade receivables, specifically the provisioning for
trade debtors where Elders now utilises the expected credit loss model to calculate the provision for doubtful debts. The new policy for provisioning of
trade debtors has had no significant impact to the balance calculated under the previous accounting policy.
The adoption of AASB 15 Revenue from Contracts with Customers has changed Elders’ revenue accounting policy through application of the control
principle, with revenue now recognised at the point at which control passes to the customer. The adoption has not had any significant impact on the
timing of revenue recognition or financial position and performance of Elders.
(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.
The adoption of AASB 16 Leases (effective for Elders reporting period beginning 1 October 2019) will replace all existing lease requirements.
For lessees, the distinction between operating and finance leases will no longer exist, and leases will be accounted for under a single, on-balance
sheet model. At the commencement of the lease, a lessee will recognise a liability representing its obligation to make future lease payments and an
asset representing its right to use the underlying asset for the lease term. Lessees will be required to separately recognise interest expense on the
lease liability and depreciation expense on the asset.
Elders will apply AASB 16 using the modified retrospective approach to retrospectively measure the right-of-use asset as equal to the lease liability.
Elders will elect to implement the following transition practical expedients:
– leases for which the underlying asset is of low value (less than USD5,000) are excluded;
– the exclusion of any initial direct costs incurred;
– discount rate applied to a portfolio of leases with similar characteristics; and
– the use of hindsight with regards to determination of the lease term.
The most material impact identified is that Elders will recognise new assets and liabilities for its operating leases related to property and vehicles.
Based on current information as at 30 September 2019, Elders estimates the impact on the consolidated statement of financial position to be a right-
of-use asset of $116.4 million and a lease liability of $116.4 million. Elders will monitor any developments and interpretations on an ongoing basis which
may impact the amounts currently estimated.
Key metrics such as gearing and finance ratios, debt covenants and earnings before interest, taxes, depreciation and amortisation will be impacted.
The impact on earnings before interest and taxes will also be material to Elders. Additionally, the statement of cash flow will be impacted as payments
for the principal portion of the lease liability will be presented within financing activities.
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:
Group performance
Provides additional information regarding financial statement lines that are most relevant to explaining Elders’
performance during the period.
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.
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.
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.
Summarises how the group structure affects the financial position and performance of Elders as a whole.
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.
Working capital
Capital employed
Net debt
Risk management
Equity
Group structure
Other information
74
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 20192019 Annual Report — Elders GROUP PERFORMANCE — NOTE 1: SEGMENT INFORMATION
Identification of reportable segments
Elders has identified its operating segments to be Network, Feed and Processing 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 China, Elders imports, processes and
distributes premium Australian meat. During the period, Elders has sold the Indonesian Feedlot and Abattoir assets and decided to close the
remaining Retail business.
– 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.
2019
Sale of goods and biological assets
Debtor interest associated with sales
Interest revenue from related party advances
Commission revenue
Sales revenue
Equity accounted profits
Earnings before interest, tax, depreciation and amortisation
Depreciation and amortisation
Segment result
Interest expense
Fair value adjustments of financial instruments
Unwinding discount expense in regards to liabilities
Finance costs
Profit from ordinary activities before tax
Network
$000
1,189,182
6,343
2,763
276,958
1,475,246
6,313
108,160
(3,098)
105,062
Feed and
Processing
$000
199,700
-
-
-
199,700
-
7,707
(1,024)
6,683
Other
$000
772
-
-
-
772
-
(45,448)
(1,008)
(46,456)
Segment result
Discontinued operations results
Continuing profit/(loss) before net borrowing costs and tax expense
105,062
1,479
106,541
6,683
4,418
11,101
(46,456)
-
(46,456)
Total
$000
1,389,654
6,343
2,763
276,958
1,675,718
6,313
70,419
(5,130)
65,289
(6,791)
(934)
(3,046)
(10,771)
54,518
65,289
5,897
71,186
(6,791)
(934)
(3,046)
(10,771)
60,415
Interest expense
Fair value adjustments of financial instruments
Unwinding discount expense in regards to liabilities
Finance costs
Continuing profit before tax expense
Segment assets
Segment liabilities
Net assets
772,423
327,379
445,044
69,646
9,214
60,432
174,661
187,254
(12,593)
1,016,730
523,847
492,883
75
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2019Elders Limited Annual Financial Report GROUP PERFORMANCE — NOTE 1: SEGMENT INFORMATION
2019
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
2018
Sale of goods and biological assets
Debtor interest associated with sales
Interest revenue from related party advances
Commission revenue
Sales revenue
Equity accounted profits
Earnings before interest, tax, depreciation and amortisation
Depreciation and amortisation
Segment result
Interest expense
Fair value adjustments of financial instruments
Unwinding discount expense in regards to liabilities
Finance costs
Profit from ordinary activities before tax
Network
Feed and
Processing
$000
$000
53,746
40,587
(4,862)
166
-
2,197
(80)
-
Other
$000
-
1,728
5,421
-
Total
$000
53,746
44,512
479
166
1,141,674
189,438
530
1,331,642
5,655
2,015
284,007
1,433,351
7,016
117,240
(2,914)
114,326
-
-
-
189,438
-
3,292
(1,282)
2,010
-
-
-
530
-
(51,981)
(638)
(52,619)
Segment result
Discontinued operations results
Continuing profit/(loss) before net borrowing costs and tax expense
114,326
-
114,326
2,010
4,728
6,738
(52,619)
-
(52,619)
Interest expense
Fair value adjustments of financial instruments
Unwinding discount expense in regards to liabilities
Finance costs
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
76
705,166
333,753
371,413
54,337
35,546
(1,868)
(122)
66,933
8,282
58,651
-
1,619
(779)
-
158,120
279,635
(121,515)
-
1,518
1,471
-
5,655
2,015
284,007
1,623,319
7,016
68,551
(4,834)
63,717
(5,918)
(60)
(876)
(6,854)
56,863
63,717
4,728
68,445
(5,918)
(60)
(876)
(6,854)
61,591
930,219
621,670
308,549
54,337
38,683
(1,176)
(122)
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 20192019 Annual Report — Elders GROUP PERFORMANCE — NOTE 2: DISCONTINUED OPERATIONS
Financial period 30 September 2019
During the period, Elders has sold the Indonesian Feedlot and Abattoir assets and decided to close the remaining Retail business. Additionally, Elders
has planned to exit the Elders Financial Planning network and impaired its investment in the business. As required by AASB 5 Non-current Assets
Held for Sale and Discontinued Operations, the 2018 comparative discontinued operations disclosed below has been represented to show the effects
of this classification.
Financial period 30 September 2018
Elders’ investment in the Indonesian Feedlot and Abattoir operations was held for sale during the period and classified as a discontinued operation.
Sales revenue
Cost of sales
Gross profit
Equity accounted profits
Distribution expenses
Administration expenses
Other items of income/(expense)
Profit/(loss) before finance costs
and tax expense
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
Cont
2019
$000
1,667,347
Disc
2019
$000
8,371
Total
2019
$000
Cont
2018
$000
Disc
2018
$000
Total
2018
$000
1,675,718
1,599,430
23,889
1,623,319
(1,321,557)
(8,756)
(1,330,313)
(1,252,111)
(23,378)
(1,275,489)
345,790
6,313
(235,468)
(42,981)
(2,468)
71,186
(10,771)
60,415
17,336
77,751
(1,792)
(385)
345,405
6,313
347,319
7,016
511
-
347,830
7,016
(235,468)
(232,741)
(4,489)
(237,230)
(44,117)
(6,844)
65,289
(47,056)
(6,093)
68,445
-
(750)
(4,728)
(47,056)
(6,843)
63,717
-
-
(1,136)
(4,376)
(5,897)
-
(10,771)
(6,854)
36
(6,818)
(5,897)
(1,127)
(7,024)
54,518
16,209
70,727
61,591
19,342
80,933
(4,692)
(2,314)
(7,006)
56,899
17,028
73,927
-
(1,792)
(2,359)
-
(2,359)
Net profit/(loss) attributable to members
of the parent entity
75,959
(7,024)
68,935
78,574
(7,006)
71,568
Revenue and expenses
Sales revenue:
Sale of goods and biological assets
1,381,283
8,371
1,389,654
1,307,753
23,889
1,331,642
Debtor interest associated with sales
Interest revenue from related party advances
Commission revenue
Other income/(expense):
IT infrastructure transition
Acquisition costs
Insurance proceeds
Restructure and redundancy costs
Additional costs associated with previously
acquired businesses
Planned exit of Elders Financial Planning
network
Sale and closure of Indonesian business
6,343
2,763
276,958
1,667,347
(1,064)
(983)
3,486
(2,265)
(1,642)
-
-
(2,468)
-
-
-
6,343
2,763
5,655
2,015
276,958
284,007
-
-
-
5,655
2,015
284,007
8,371
1,675,718
1,599,430
23,889
1,623,319
-
-
-
-
-
(1,064)
(983)
3,486
(2,265)
(1,642)
(1,479)
(1,479)
(2,897)
(4,376)
(2,897)
(6,844)
(3,933)
(2,160)
-
-
-
-
-
(6,093)
-
-
-
-
-
-
(3,933)
(2,160)
-
-
-
-
(750)
(750)
(750)
(6,843)
77
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2019Elders Limited Annual Financial Report 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
Accounting Policy
2019
$000
(1,983)
2,700
(1,133)
(416)
2018
$000
3,586
(505)
(2,916)
165
-
3,568
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.
78
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 20192019 Annual Report — Elders GROUP PERFORMANCE — NOTE 3: REVENUE AND ExPENSES
Sales revenue
Sale of goods and biological assets
Debtor interest associated with sales
Interest revenue from related party advances
Commission revenue
Discontinued operations
Other items of income/(expense)
IT infrastructure transition
Acquisition costs
Insurance proceeds
Restructure and redundancy costs
Additional costs associated with previously acquired businesses
Discontinued operations
Finance costs/(income)
Interest expense
Fair value adjustments of financial instruments
Unwinding discount expense 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
Note
26
2
2
2
2019
$000
2018
$000
1,381,283
1,307,753
6,343
2,763
276,958
1,667,347
8,371
1,675,718
(1,064)
(983)
3,486
(2,265)
(1,642)
(2,468)
(4,376)
(6,844)
6,791
934
3,046
10,771
-
10,771
5,130
5,130
-
5,130
146,444
28,897
1,812
177,153
986
178,139
5,655
2,015
284,007
1,599,430
23,889
1,623,319
(3,933)
(2,160)
-
-
-
(6,093)
(750)
(6,843)
5,918
60
876
6,854
(36)
6,818
4,396
4,396
438
4,834
152,599
28,891
3,161
184,651
2,415
187,066
Operating lease expenditure
34,856
34,445
79
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2019Elders Limited Annual Financial Report GROUP PERFORMANCE — NOTE 3: REVENUE AND ExPENSES
Accounting Policy
Elders recognises revenue as or when each performance obligation from contracts with customers are satisfied and considers whether there
are separate elements of each transaction to which a portion of the transaction price needs to be allocated to. The majority of Elders’ revenue
is recognised at a point in time and attributable to the sale of retail products and provision of agency services, with the exception being certain
financial services revenue which is recognised over a period of time. There were no significant judgements in revenue recognition. The following
specific recognition criteria must also be met before revenue is recognised:
(i) Sale of goods and biological assets
Revenue from the sale of goods predominantly relates to sales of agricultural retail products and is recognised at the point in time when control
has been transferred to the customer, generally through the execution of a sales agreement at point of sale or when the delivery of goods has
occurred.
(ii) Commission revenue
Commission revenue is derived from the rendering of agency services and financial services and is generally recognised at the point in time
when the service is provided. In some cases, Elders will enter into contracts with customers that contain multiple performance obligations and
revenue will be recognised as each of these is satisfied. The transaction price is allocated to each performance obligation accordingly.
(iii) Interest income
Interest income predominantly relates to revenue derived from trade receivables related to the sale of agricultural retail products and is
recognised as it accrues using the effective interest rate method.
80
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 20192019 Annual Report — Elders 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
Income tax benefit reported in the statement of comprehensive income
2019
$000
(1,895)
(181)
18,285
16,209
2018
$000
(3,884)
66
20,846
17,028
(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% (2018: 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 (receivable)/payable
60,415
(5,897)
54,518
(16,355)
(181)
1,894
(955)
35,705
(3,899)
16,209
17,336
(1,127)
16,209
(398)
61,591
(4,692)
56,899
(17,070)
66
2,105
(2,734)
38,957
(4,296)
17,028
19,342
(2,314)
17,028
1,166
Tax losses not recognised as an asset
Elders has tax losses for which no deferred tax asset is recognised in the statement of financial position of $95.8 million (2018: $131.5 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.
81
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2019Elders Limited Annual Financial Report 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
2019
$000
100,613
13,066
2,947
3,830
1,233
2018
$000
82,037
14,875
1,657
2,516
1,152
2019
$000
18,576
(1,809)
1,290
1,314
81
19,452
(599)
83
234
(282)
19,170
18,285
2018
$000
24,600
32
(1,548)
(2,315)
89
20,858
(3)
(2,292)
69
(2,226)
18,632
20,846
(486)
(2,214)
1,371
19,170
-
18,632
Gross deferred income tax assets
121,689
102,237
Deferred income tax liabilities
Inventory
Intangibles
Other
Gross deferred income tax liabilities
Movement in net deferred tax asset
Deferred income tax benefit recognised in the statement
of comprehensive income
Deferred income tax (assets)/liabilities recognised
for acquisitions and disposals of businesses
Deferred income tax benefit recognised in equity
(1,471)
(22,513)
(521)
(24,505)
(872)
(22,596)
(755)
(24,223)
Net deferred tax asset
97,184
78,014
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.
82
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 20192019 Annual Report — Elders 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)
The following reflects the net profit/(loss) and share data used in the calculations of earnings per share (EPS):
2019
121,006
1,785
122,791
2019
$000
2018
115,523
2,357
117,880
2018
$000
Reported operations
Basic and dilutive
Net profit attributable to members (after tax)
68,935
71,568
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
Net (loss)/profit of discontinued operations (net of tax)
Discontinued operations earnings per share:
Basic earnings per share (cents per share)
Diluted earnings per share (cents per share)
57.0 ¢
56.1 ¢
68,935
7,024
75,959
62.8 ¢
61.9 ¢
62.0 ¢
60.7 ¢
71,568
7,006
78,574
68.0 ¢
66.7 ¢
(7,024)
(7,006)
(5.8) ¢
(5.8) ¢
(6.1) ¢
(6.1) ¢
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.
83
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2019Elders Limited Annual Financial Report WORKING CAPITAL — NOTE 6: RECEIVABLES
Current
Trade debtors
Loss allowance
Amounts receivable from equity accounted investments
Prepayments
Other receivables
Total current receivables
2019
$000
439,480
(4,641)
434,839
34,341
2,419
9,532
481,131
2018
$000
424,094
(3,141)
420,953
17,216
1,318
5,309
444,796
Included in trade debtors is $85.5 million (2018: $74.7 million) which is subject to credit insurance with various terms and conditions.
Trade debtors are generally on 30 to 90 day terms with the exception of livestock debtors which are on 10 day terms. In some instances deferred terms
in excess of 90 days are offered, where Elders also receives extended creditor terms.
Previously an impairment loss was recognised when there was objective evidence that an individual trade debtor is impaired.
On application of AASB 9, trade debtors are reviewed in accordance with the simplified approach to measuring expected credit losses based on the
payment profile of sales over a period of 5 years and the historical default experience within this period, which is reassessed annually. The historical
loss rates are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle
the debtors. On that basis, the loss allowance (on adoption of AASB 9) was determined as follows for trade debtors:
2019
Expected loss rate
Gross carrying amount
Loss allowance
2018
Expected loss rate
Gross carrying amount
Loss allowance
Current
1-30 days
past due
31-60 days
past due
61-90 days
past due
$000
$000
$000
$000
< 1%
327,005
109
< 1%
333,243
211
< 1%
83,887
235
< 1%
70,016
525
< 1%
7,937
79
< 1%
10,753
108
< 1%
4,028
56
< 1%
2,510
25
+91 days
past due
$000
25%
16,623
4,162
30%
7,572
2,272
Total
$000
439,480
4,641
424,094
3,141
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 expected credit losses. To measure the expected credit losses, trade receivables have been grouped on days past due. The expected credit
loss rates are based on payment profile over a historical period and the credit losses experienced within this period. The historical loss rates
are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the
receivables.
84
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 20192019 Annual Report — Elders WORKING CAPITAL — NOTE 7: BIOLOGICAL ASSETS
Livestock
Current
Fair value at the end of the period
2019
$000
2018
$000
35,309
32,528
At balance date 21,273 head of cattle (2018: 20,635) are included in livestock. This represents cattle held in Australia for feedlotting purposes.
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, and through the sale of
livestock on forward contracts.
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.
85
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2019Elders Limited Annual Financial Report 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. Inventory on hand is recognised net of rebates.
Current
Retail
Other
Total inventory
2019
$000
138,323
7,798
146,121
2018
$000
137,102
10,655
147,757
Inventory write-downs recognised as an expense totalled $1.1 million (2018: $1.6 million).
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.
86
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 20192019 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
2019
$000
314,605
42,974
1,645
359,224
2018
$000
326,405
43,933
1,569
371,907
16,287
12,668
375,511
384,575
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.
87
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2019Elders Limited Annual Financial Report 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
improve-
ments
Plant and
equipment
(owned)
Plant and
equipment
(leased)
Assets
under
construction
Total
$000
$000
$000
$000
$000
$000
$000
2019
Carrying amount at beginning of period
3,418
Additions
Additions through business combinations
Disposals
Depreciation expense
Impairment
Exchange fluctuations
Transfers from assets under construction
-
-
-
-
-
-
-
Carrying amount at end of period
3,418
6,842
1,396
-
(24)
(578)
-
-
224
7,860
5,671
408
-
(40)
(832)
-
-
-
9,475
1,163
196
(45)
(1,802)
(214)
7
-
1,641
434
-
-
(697)
-
-
-
5,207
8,780
1,378
Cost
3,418
15,849
12,958
26,448
2,825
Accumulated depreciation and impairment
-
3,418
(7,989)
7,860
(7,751)
(17,668)
(1,447)
5,207
8,780
1,378
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)
-
-
-
-
Carrying amount at end of period
3,418
6,842
5,671
9,475
1,641
Cost
Accumulated depreciation and impairment
3,418
14,336
12,794
26,799
-
3,418
(7,494)
6,842
(7,123)
(17,324)
5,671
9,475
2,545
(904)
1,641
All property, plant and equipment is pledged as security, refer to note 15 for interest bearing loans and borrowings.
271
751
-
-
-
-
-
(260)
762
762
-
762
319
262
-
-
-
-
(20)
-
(290)
271
271
-
271
27,318
4,152
196
(109)
(3,909)
(214)
7
(36)
27,405
62,260
(34,855)
27,405
29,885
5,662
464
(376)
(3,974)
(750)
(3,568)
(25)
-
27,318
60,163
(32,845)
27,318
88
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 20192019 Annual Report — Elders 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
Straight line
Lease term
Straight line
3 to 10 years
Straight line
Lease term
Straight line
5 to 25 years
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.
89
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2019Elders Limited Annual Financial Report 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:
Goodwill
Rent rolls &
loan books
Brand names
Distribution
rights
$000
$000
$000
$000
Non current
2019
Carrying amount at beginning of period
Additions
Additions through business combinations
Transfers from assets under construction
Amortisation
Carrying amount at end of period
Cost
Accumulated amortisation and impairment
2018
Carrying amount at beginning of period
Additions
Additions through business combinations
Disposals
Amortisation
47,918
-
12,059
-
-
59,977
59,977
-
59,977
9,216
-
38,702
-
-
7,563
-
1,980
-
(967)
8,576
10,924
(2,348)
8,576
7,734
-
710
(38)
(843)
71,148
-
212
-
-
-
23,000
-
-
-
71,360
23,000
71,360
23,000
-
-
71,360
23,000
62,979
-
8,169
-
-
-
-
-
-
-
-
-
-
-
Other
$000
2,362
1,797
-
36
(254)
3,941
4,212
(271)
3,941
1,301
1,078
-
-
(17)
2,362
2,379
(17)
2,362
Total
$000
128,991
24,797
14,251
36
(1,221)
166,854
169,473
(2,619)
166,854
81,230
1,078
47,581
(38)
(860)
128,991
130,390
(1,399)
128,991
Carrying amount at end of period
47,918
7,563
71,148
Cost
Accumulated amortisation and impairment
47,918
-
47,918
8,945
(1,382)
7,563
71,148
-
71,148
90
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 20192019 Annual Report — Elders CAPITAL EMPLOyED — NOTE 11: INTANGIBLES
For impairment testing purposes, all intangibles except for the Elders’ Brand Name are allocated to the Network CGU, which is also an operating
segment.
Elders Brand Name
For the purposes of impairment testing, the Elders Brand Name has not been allocated to individual CGU’s but rather assessed against all 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 9.7% pre-tax (2018: 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 in financial year 2020 levels due to:
– Increased earnings from geographical expansion through acquisitions and footprint growth
– Higher earnings from continued organic growth focus across our product and service portfolio
– Additional growth through the continued expansion of the backward integration strategy
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 2020 budget. No growth rate 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 indicator 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.
(iv) Distribution rights
Amount relates to a livestock and wool delivery warranty distribution right. After initial recognition, distribution rights are measured at cost less
any accumulated impairment losses. These intangible assets have been assigned an indefinite life and are subject to impairment testing on an
annual basis or whenever there is an indicator of impairment.
(v) Other
Other intangibles mainly relate to software and development of IT infrastructure and are carried at cost less accumulated amortisation and
impairment losses. Software and IT intangible assets have been determined to have finite useful lives and are amortised over their useful lives of
5 years and tested for impairment whenever there is an indicator of impairment. Other intangibles also include indefinite life assets.
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.
91
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2019Elders Limited Annual Financial Report CAPITAL EMPLOyED — NOTE 12: EqUITy ACCOUNTED INVESTMENTS
Balance Date
Ownership interest
Auctions Plus Pty Ltd
Elders Financial Planning Pty Ltd
Elders Insurance (Underwriting Agency) Pty Ltd
StockCo Holdings Pty Ltd
Clear Grain Pty Ltd
30-Jun
30-Sep
31-Dec
30-Jun
30-Jun
2019
%
50
49
20
30
30
2018
%
50
49
20
30
20
Auctions Plus Pty Ltd
Elders Financial Planning Pty Ltd
Elders Insurance (Underwriting Agency) Pty Ltd
StockCo Holdings Pty Ltd
Clear Grain Pty Ltd
Equity accounted investments
Consolidated entity investment
Contribution to net profit
Dividends received
2019
$000
1,297
-
42,361
8,866
1,222
53,746
2018
$000
1,362
729
42,134
9,481
631
54,337
2019
$000
849
-
6,038
(614)
40
6,313
2018
$000
979
-
6,575
(574)
36
7,016
2019
$000
913
-
5,812
-
-
2018
$000
1,067
245
5,804
-
55
6,725
7,171
All equity accounted investments are Australian resident companies. On 30 September 2019, Elders acquired another 10% in Clear Grain Pty Ltd for
$0.4 million. A fair value adjustment of $0.2 million was also applied to the original investment.
During the period, a $0.7 million impairment was recognised against the investment in Elders Financial Planning Pty Ltd. This amount is included in
the expense related to the planned exit of Elders Financial Planning Pty Ltd in note 2 for discontinued operations.
In addition to the contribution to Elders’ net profit from its investment in StockCo Holdings Pty Ltd, Elders also receives income from other revenue
streams. Further details are provided in note 26.
Summary financial information for equity accounted investees is as follows:
Profit/(loss)
after income tax
Assets
Liabilities
2019
Auctions Plus Pty Ltd
Elders Financial Planning Pty Ltd
Elders Insurance (Underwriting Agency) Pty Ltd
StockCo Holdings Pty Ltd
Clear Grain Pty Ltd
Total
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
Accounting Policy
$000
$000
1,698
(186)
30,190
(2,050)
133
29,785
1,958
(144)
32,880
(1,913)
180
32,961
4,992
1,991
72,762
222,858
2,179
304,782
3,749
3,791
61,077
221,310
911
290,838
$000
2,397
960
62,208
226,809
2,061
294,435
1,088
470
51,654
223,378
991
277,581
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.
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.
92
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 20192019 Annual Report — Elders 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
2019
As at beginning of period
Arising during year
Utilised
Unused amounts reversed
Discount rate adjustment
Provisions arising from entities acquired
Disposals
Disclosed as:
Current
Non current
Total
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
49,866
5,064
(11,958)
-
2,083
67
(1,348)
43,774
41,231
2,543
43,774
49,755
14,570
(15,167)
-
412
296
-
49,866
44,868
4,998
49,866
100
2,535
(100)
-
-
-
-
2,535
2,535
-
2,535
1,115
-
(915)
-
-
-
(100)
100
100
-
100
196
121
(46)
-
-
-
-
271
271
-
271
265
20
(89)
-
-
-
-
196
196
-
196
227
-
(168)
-
-
-
-
59
59
-
59
1,005
-
(878)
-
-
-
100
227
227
-
227
465
117
(120)
(330)
-
-
-
132
132
-
132
861
254
(440)
(210)
-
-
-
465
465
-
465
Total
$000
50,854
7,837
(12,392)
(330)
2,083
67
(1,348)
46,771
44,228
2,543
46,771
53,001
14,844
(17,489)
(210)
412
296
-
50,854
45,856
4,998
50,854
93
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2019Elders Limited Annual Financial Report 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.
94
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 20192019 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
Impairments
Doubtful debts
Employee entitlements
Other provisions
Other write downs
Net (profit)/loss on sale of non-current assets
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
2019
$000
70,727
5,130
3,046
(6,313)
6,725
(150)
(134)
943
2,245
7,147
2,443
1,626
(166)
(21,195)
3,138
75,212
(39,208)
1,946
(26,714)
11,236
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)
7,313
11,641
7,313
(100,695)
(870)
(94,252)
7,313
(61,416)
(40,149)
(94,252)
11,641
(184,001)
(1,074)
(173,434)
11,641
(121,621)
(63,454)
(173,434)
At balance date, Elders held $23.5 million (2018: $22.0 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.
95
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2019Elders Limited Annual Financial Report
NET DEBT — NOTE 15: INTEREST BEARING LOANS AND BORROWINGS
Current
Trade receivables and other working capital funding
Lease liabilities
Non current
Lease liabilities
2019
$000
100,149
546
100,695
870
870
2018
$000
183,454
547
184,001
1,074
1,074
Total current and non current
101,565
185,075
Elders also has an ancillary facility in relation to contingent funding, such as bank guarantees. As at 30 September 2019, $6.6 million had been issued
(2018: $5.5 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.
96
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 20192019 Annual Report — Elders 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 2019
interest on $60.0 million (2018: $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
2019
$000
7,313
7,313
(40,149)
(32,836)
2018
$000
11,641
11,641
(63,454)
(51,813)
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)
(328)
328
(518)
518
97
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2019Elders Limited Annual Financial Report 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 2019. 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
7,313
485,772
493,085
(101,717)
(375,511)
-
7,313
485,772
493,085
(101,717)
(375,511)
(6,572)
7,313
485,772
493,085
(100,149)
(359,201)
(6,572)
(477,228)
(483,800)
(465,922)
15,857
9,285
27,163
11,641
447,937
459,578
11,641
447,937
459,578
(185,290)
(185,290)
(381,710)
(381,710)
-
(5,528)
11,641
447,937
459,578
(183,454)
(365,049)
(5,528)
(567,000)
(572,528)
(554,031)
(107,422)
(112,950)
(94,453)
-
-
-
(616)
(849)
-
(1,465)
(1,465)
-
-
-
(631)
(6,990)
-
(7,621)
(7,621)
-
-
-
(952)
(16,287)
-
(17,239)
(17,239)
-
-
-
(1,205)
(10,497)
-
(11,702)
(11,702)
2019
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)
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)
98
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 20192019 Annual Report — Elders 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.
2019
Derivative liabilities – net settled
Total outflow
2018
Derivative assets – net settled
Total inflow
(c) Credit risk
Carrying
amount
Contractual
cash flows
6 months
or less
6-12 months
1-5 years
$000
$000
$000
$000
$000
(803)
(803)
312
312
(803)
(803)
312
312
(803)
(803)
312
312
-
-
-
-
-
-
-
-
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.
Trade receivables are reviewed in accordance with the simplified approach to measuring expected credit losses which uses a lifetime expected loss
allowance. To measure expected losses, trade receivables have been grouped on days past due. Expected credit losses are based on the payment
profile of sales over a period of 5 years and the historical default experience within this period. The historical loss rates are adjusted to reflect current
and forward-looking information on macroeconomic factors affecting the ability of the customers to settle the receivables.
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
2019
$000
7,313
485,772
-
493,085
486,424
6,661
493,085
2018
$000
11,641
447,625
312
459,578
452,215
7,363
459,578
99
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2019Elders Limited Annual Financial Report 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 2019,
Elders had the following AUD exposures to foreign currencies that were not designated in cash flow hedges:
Financial assets
Cash and cash equivalents – CNY
Cash and cash equivalents – IDR
Cash and cash equivalents – other
Receivables – CNY
Receivables – IDR
Financial liabilities
Payables – CNY
Payables – IDR
Interest bearing loans and borrowings – CNY
2019
$000
515
885
151
3,017
2,092
6,660
(1,083)
(1,098)
-
(2,181)
2018
$000
609
1,301
-
2,733
2,720
7,363
(1,224)
(1,599)
(3,286)
(6,109)
Net exposure
4,479
1,254
Given the foreign currency balances included in the statement of financial position at balance date, if the Australian dollar at that date strengthened
by 10% with all other variables held constant, then the impact on post tax profit/(loss) arising on the balance sheet exposure would be as follows:
CNY
IDR
Other
Post tax profit
Higher/(lower)
(245)
(188)
(15)
117
(242)
-
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.
100
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 20192019 Annual Report — Elders 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:
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)
2019
$000
-
-
2019
$000
(803)
(803)
2019
$000
2018
$000
-
-
-
-
2018
$000
312
312
2018
$000
-
-
Financial assets and liabilities
Derivatives
101
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2019Elders Limited Annual Financial Report EqUITy — NOTE 17: CONTRIBUTED EqUITy
Issued and paid up capital
141,650,621 ordinary shares (September 2018: 115,818,637)
The movement in the dollar balance of share capital is a result of:
2019
$000
2018
$000
1,562,377
1,426,835
– $1.7 million of dividends where the shareholders have participated in the dividend reinvestment plan; and
– $137.0 million increase due to shares issued in relation to the share placement and entitlement offers, less transactions costs net of tax
of $3.2 million.
The following ordinary shares were issued during the year:
– 857,200 shares issued upon vesting of performance rights in accordance with Elders long term incentive plan;
– 290,099 shares issued in accordance with Elders dividend reinvestment plan; and
– 24,684,685 shares issued under the Institutional Placement and Elders’ Entitlement Offers.
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
Total
$000
$000
$000
$000
2019
Carrying amount at beginning of period
(25,945)
5,806
Exchange differences on translation of foreign operations
Transfer to statement of comprehensive income from sale
or closure of controlled entity
Cost of share based payments
Transfer to retained earnings
Recognition of put options
Carrying amount at end of period
2018
Carrying amount at beginning of period
Exchange differences on translation of foreign operations
Cost of share based payments
Transfer to retained earnings
Carrying amount at end of period
-
-
-
-
(1,550)
(27,495)
(25,945)
-
-
-
(25,945)
-
-
1,812
(2,609)
-
5,009
3,916
-
3,161
(1,271)
5,806
(5,895)
(108)
1,259
-
-
-
(26,034)
(108)
1,259
1,812
(2,609)
(1,550)
(4,744)
(27,230)
(5,567)
(328)
-
-
(27,596)
(328)
3,161
(1,271)
(5,895)
(26,034)
102
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 20192019 Annual Report — Elders 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 disposed of, 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
Reallocation of equity
Retained earnings at the end of the financial year
2019
$000
2018
$000
(1,094,027)
(1,139,118)
68,935
(19,267)
2,609
(1,740)
71,568
(25,819)
1,271
(1,929)
(1,043,490)
(1,094,027)
EQUITY — NOTE 20: DIVIDENDS
On 14 December 2018, Elders paid a fully franked final dividend of 9 cents per share. This distribution totalled $10.5 million (2017: $17.3 million).
The cash outflow was $10.1 million, with the difference reinvested by shareholders.
On 21 June 2019, Elders paid a fully franked interim dividend of 9 cents per share. This distribution totalled $10.5 million (2018: $10.4 million).
The cash outflow was $9.2 million, with the difference reinvested by shareholders.
Subsidiary equity dividends on ordinary shares:
Dividends paid to non-controlling interests during the year
2,341
2,721
Franking credits available to the parent for subsequent financial years based on tax rate of 30% (2018: 30%)
15,500
20,300
103
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2019Elders Limited Annual Financial Report 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 PT Indonesia
Elders Real Estate (Tasmania) Pty Ltd
Elders Real Estate (WA) Pty Ltd
Elders Rural Services Australia Limited
Elders Rural Services Limited
Elders Services Company Pty Ltd
Elders Telecommunications Infrastructure Pty Ltd
Elders Victorian Feedlot Pty Ltd
Family Hospitals Pty Ltd
Fares Exports Pty Ltd
ITC Timberlands Pty Ltd
JS Brooksbank & Co Australasia Ltd
JSB New Zealand Limited
Keratin Holdings Pty Ltd
Killara Feedlot Pty Ltd
Manor Hill Pty Ltd
New Ashwick Pty Ltd
Prestige Property Holdings Pty Ltd
104
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
Indonesia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
Australia
New Zealand
New Zealand
Australia
Australia
Australia
Australia
Australia
(a)
(a)
(c)
(e)
(b)
(c)
(c)
(d)
(c)
(c)
(c)
(c)
(c)
(c)
(a)
(e)
(c)
(c)
(c)
(c)
(c)
(c)
(c)
(c)
(a)
(e)
(c)
(c)
(c)
(c)
(c)
(c)
(a)
(c)
(c)
(c)
% Held by Group
2018
100
100
100
100
100
100
100
77
100
100
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
2019
100
100
100
100
-
100
100
77
100
100
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
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 20192019 Annual Report — Elders GROUP STRUCTURE — NOTE 21: INVESTMENTS IN CONTROLLED ENTITIES
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
Country of
Incorporation
Australia
Australia
Indonesia
Australia
Australia
Australia
Australia
Australia
(c)
(c)
(c)
(a)
(a)
(a)
(c)
% Held by Group
2019
2018
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). No parties were added or removed from the closed group this year.
– No entities were acquired or registered during the period.
– Entities exempted from audit requirements due to overseas legislation or non-corporate status are denoted by (b).
– Entities classified by the Corporations Act as small proprietary companies relieved from audit requirements are denoted by (c).
– The entity denoted by (d) is a controlled special purpose entity related to trade receivable financing program.
– Entities denoted by (e) 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.
105
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2019Elders Limited Annual Financial Report 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 2019 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
106
2019
$000
288,774
(252,863)
35,911
25,000
(17,670)
(38,778)
78,383
(2,275)
80,571
16,028
96,599
6,399
17,719
36,320
11,215
71,653
318,784
11,360
1,301
97,621
429,066
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
500,719
319,186
6,354
1,482
7,836
7,836
492,883
9,404
1,233
10,637
10,637
308,549
1,562,377
5,009
1,426,835
5,806
(1,074,503)
(1,124,092)
492,883
308,549
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 20192019 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
2019
$000
48,204
48,204
546
493,403
493,949
1,066
1,066
492,883
1,562,377
(1,115,749)
41,246
5,009
492,883
2018
$000
48,420
48,420
305
308,906
309,211
662
662
308,549
1,426,835
(1,161,344)
37,252
5,806
308,549
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.
107
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2019Elders Limited Annual Financial Report GROUP STRUCTURE — NOTE 23: BUSINESS COMBINATIONS – CHANGES IN THE COMPOSITION OF THE ENTRy
(a) Acquisitions
Current period acquisitions
During the current period, Elders acquired a number of small retail and agency businesses for a total consideration of $14.3 million, including
$6.9 million of deferred consideration. These transactions resulted in the recognition of $12.3 million of goodwill and associated brand names.
These acquisitions are not material to the group.
Prior period acquisitions
In the prior period, Elders acquired Titan Ag Pty Ltd, Kerr & Co and other retail and agency businesses for a total consideration of $45.1 million,
including $14.2 million of deferred consideration. These transactions resulted in the recognition of $46.7 million of goodwill and brand name.
(b) Disposals
Current period disposals
Elders disposed of the Indonesian Feedlot and Abattoir assets and the Elders Services Company. Proceeds from disposals were equal to the carrying
amounts of assets held.
Prior period disposals
There were no disposals during the prior period.
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.
108
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 20192019 Annual Report — Elders 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
Accounting Policy
2019
$000
27,042
36,136
2,443
65,621
2018
$000
26,094
32,076
4,024
62,194
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.
109
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2019Elders Limited Annual Financial Report 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:
quantifiable contingent liabilities
– Elders was provided professional services in respect of the acquisition of AIRR Holdings Limited prior to balance date. However, fees totalling
$2.6 million for services rendered is only payable should certain conditions be met. These conditions could only be satisfied after balance date.
Although quantifiable, as required by AASB 137 Provisions, Contingent Liabilities and Contingent Assets, Elders has not recognised a liability for
this portion of the service fees due on the basis that there was no existing constructive obligation at balance date.
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 planation 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.
From time to time, Directors of Elders, or third parties of which a Director of Elders is also a Director, engage in transactions with Elders or entities in
which Elders has an investment. These transactions are immaterial and generally in the nature of the acquisition of goods or services from Elders or
an entity in which Elders has an investment or the supply of services to Elders or an entity in which Elders has an investment. Such transactions are
on arm’s length commercial terms and procedures are in place to manage any actual or potential conflicts of interest.
As part of sharing office space with branches in the Network segment, Elders incurred costs on behalf of Elders Financial Planning Pty Ltd and Elders
Insurance (Underwriting Agency) Pty Ltd and recharged these at arm’s length.
During the year, Elders provided an advance of $15.0 million to StockCo Holdings Pty Ltd (2018: $4.0 million). Each advance is made out on a 12 month
term rolling basis with an effective interest rate of 15% per annum. As at balance date, Elders has a total receivable from StockCo Holdings Pty Ltd of
$31.9 million (2018: $15.1 million) and recognised interest revenue of $2.8 million (2018: $2.0 million) during the period. Elders also received trail and
exclusivity fees of $2.5 million (2018: $2.7 million).
110
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 20192019 Annual Report — Elders OTHER INFORMATION — NOTE 27: SHARE BASED PAyMENT PLANS
Long Term Incentive Performance Rights
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.
Set out below are a summary of rights granted under the plan:
CEO Plan
Executive Plan
CEO Plan
Executive Plan
CEO Plan
Executive Plan
CEO Plan
Executive Plan
Grant Date
Vesting date
17-Dec-15
Nov-18
25-Feb-16
Nov-18
16-Dec-16
17-Feb-17
Nov-19
Nov-19
14-Dec-17
Nov-20
16-Feb-18
Nov-20
13-Dec-18
Nov-21
15-Feb-19
Nov-21
Balance
at start of
period
260,000
597,200
280,000
555,000
200,000
465,000
Granted
Vested
Lapsed
Balance at
end of period
-
-
-
-
-
-
260,000
597,200
-
-
-
-
-
-
-
-
-
-
70,000
138,750
-
35,000
-
210,000
416,250
200,000
430,000
146,000
24,000
306,000
-
-
146,000
330,000
For long term incentive performance rights vesting in November 2019, additional shares of 41,942 will be allocated under the CEO and Executive plans
at the time of vesting for the value of dividends forgone on the vested rights during the performance period.
The fair value at grant date of the long term incentive performance rights issued during the year was as follows:
2,357,200
476,000
857,200
267,750
1,708,250
Absolute TSR
EPS Growth
Return on Capital
2019
$4.92
$5.95
$5.95
CEO Plan
Executive Plan
2018
$6.64
$7.17
$7.17
2019
$3.23
$4.33
$4.33
2018
$5.81
$6.50
$6.50
In calculating the fair value of the long term incentive performance rights issued the share price at valuation date was $6.99 for the CEO plan
and $5.79 for the Executive plan (2018: $7.33 for the CEO plan and $6.74 for the Executive plan).
During the period, long term incentive performance rights expense of $1,811,676 (2018: $3,160,969) was recognised.
The weighted average remaining life of the long term incentive performance rights outstanding at the end of the financial year was 1.0 year.
(2018: 1.0 year).
Performance rights associated with the 2016 long term incentive plan vested during the period. As a result, a total of 857,200 shares were issued
to relevant participants.
OTHER INFORMATION — NOTE 28: AUDITORS’ REMUNERATION
Amounts received or due and receivable by the auditor PricewaterhouseCoopers for:
– auditing or review of financial statements
– other compliance and assurance services
– other non-audit services
2019
$
540,000
8,000
29,566
577,566
2018
$
486,000
-
-
486,000
111
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 2019Elders Limited Annual Financial Report 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
2019
$
2018
$
3,304,831
4,766,571
138,017
162,487
-
1,168,820
4,774,155
67,914
163,516
538,465
1,924,233
7,460,699
OTHER INFORMATION — NOTE 30: SUBSEQUENT EVENTS
Subsequent to 30 September 2019, AIRR Holdings Limited’s shareholders approved the necessary resolutions to give effect to the scheme of
arrangement for Elders to acquire 100% of the fully paid ordinary shares in AIRR. On 29 October 2019 this scheme of arrangement was approved
by the Federal Court of Australia. The acquisition is expected to be effective on 13 November 2019.
There are no other matters or circumstances that has arisen since 30 September 2019 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.
112
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTSFor the year ended 30 September 20192019 Annual Report — Elders D I R E C T O R S ’
D E C L A R A T I O N
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 2019 are in accordance with the Corporations Act 2001, including:
(i) Giving a true and fair view of its financial position as at 30 September 2019 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 2019.
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
Ian Wilton
Chair
M C Allison
Managing Director
Adelaide
11 November 2019
Directors' Declaration
113
Auditor’s Independence Declaration
As lead auditor for the audit of Elders Limited for the year ended 30 September 2019, 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
11 November 2019
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.
114
2019 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 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 2019 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 2019
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 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 (including Independence
Standards) (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.
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.
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.
115
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:
Rural 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 and services.
Elders provides feed and processing services in Australia and operates the Killara feedlot which is a
beef cattle feedlot near Tamworth in New South Wales. Elders has a business in China which imports,
processes and distributes premium Australian meat in China. The Group operated a meat distribution
business in Indonesia until it exited this business in the current year.
Materiality
For the purpose of our audit we used overall Group materiality of $2.9 million, which represents approximately
5% of the Group’s profit before tax excluding amounts associated with the planned exit of the Elders Financial
Planning business, exit of the Indonesian business and acquisition related expenses and revenues.
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 Group 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 associated with the
planned exit of the Elders Financial Planning business, exit of the Indonesian business and acquisition related
expenses and revenues, specifically the due diligence costs associated with an acquisition as these costs 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 thresholds.
2
116
2019 Annual Report — Elders
Elders Limited Annual Financial Report
Audit Scope
Our audit focused on where the Group made subjective judgements; for example, significant accounting estimates
involving assumptions and inherently uncertain future events.
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 visited
the Killara feedlot, a sample of branches across the Australian network and the China business during the year.
The operations in Indonesia and China did not contribute materially to the Group profit before tax. We performed
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
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. Further, any commentary on the outcomes of a
particular audit procedure is made in that context. We communicated the key audit matters to the
Audit, Risk and Compliance Committee.
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 $95.8
million available for use in future periods.
Elders recognised net deferred tax assets of $97.2
million at 30 September 2019 in the consolidated
statement of financial position, of which $100.6
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.
Reperformed the 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.
3
117
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 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 has taken steps to further
automate elements of rebate accounting, 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 amount 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 to supplier credit
notes or individual supplier agreements and
recalculated the amount of the rebate; and
tested 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
agreed the key components of rebates receivable,
including rebate accruals and amounts received
over the course of the year, to relevant supporting
evidence.
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.
4
118
2019 Annual Report — Elders
Elders Limited Annual Financial Report
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 2019, 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
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 on the other information that we obtained prior to the date of
this auditor’s report, 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.
5
119
Report on the remuneration report
Our opinion on the remuneration report
We have audited the remuneration report included in pages 48 to 65 of the directors’ report for the
year ended 30 September 2019.
In our opinion, the remuneration report of Elders Limited for the year ended 30 September 2019
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
11 November 2019
6
120
2019 Annual Report — Elders
Elders Limited Annual Financial Report
Total Units
Holders
2,709,138
9,757,937
5,546,383
16,650,167
106,986,996
141,650,621
A S X A D D I T I O N A L
I N F O R M A T I O N
a) Distribution of Ordinary Shares as at 1 November 2019
Holdings Ranges
1-1,000
1,001-5,000
5,001-10,000
10,001-100,000
100,001-maximum
Totals
The number of holders holding less than a marketable parcel
b) Voting Rights
All ordinary shares carry one vote per share without restriction
c) Stock Exchange Quotation
Elders has one class of quoted securities, being the ordinary shares (ELD) which is listed on the Australia Securities Exchange.
The Home Exchange is Sydney.
d) Twenty Largest Shareholders as at 1 November 2019
The twenty largest holders of Elders Ordinary Shares were as follows:
No. of shares
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
J P MORGAN NOMINEES AUSTRALIA PTY LIMITED
CITICORP NOMINEES PTY LIMITED
NATIONAL NOMINEES LIMITED
BNP PARIBAS NOMINEES PTY LTD
BNP PARIBAS NOMS PTY LTD
WARBONT NOMINEES PTY LTD
BRAZIL FARMING PTY LTD
MR MARK CHARLES ALLISON
VENN MILNER SUPERANNUATION PTY LTD
HSBC CUSTODY NOMINEES (AUSTRALIA) LIMITED
BNP PARIBAS NOMINEES PTY LTD
MR JAMES GARDINER
CITICORP NOMINEES PTY LIMITED
JOHN DRAGUN SUPERANNUATION PTY LTD
PACIFIC AGRIFOODS INVESTMENTS PTY LTD
MR KWOK CHING CHOW & MS PIK YUN PEGGY CHAN
SARGON CT PTY LTD
V M NOMINEES PTY LTD
CS FOURTH NOMINEES PTY LIMITED
45,476,271
18,629,015
13,888,108
9,241,862
3,467,963
1,836,109
1,442,727
1,378,339
1,050,814
911,941
748,004
549,727
440,000
434,698
363,523
335,456
330,000
318,065
297,314
291,233
6,648
4,226
781
693
59
12,407
1,027
%
32.105%
13.151%
9.804%
6.524%
2.448%
1.296%
1.019%
0.973%
0.742%
0.644%
0.528%
0.388%
0.311%
0.307%
0.257%
0.237%
0.233%
0.225%
0.210%
0.206%
Total Securities of Top 20 Holdings
101,431,169
71.607%
121
The number of shares held by substantial shareholders in the Company, as disclosed in substantial holding notices given to the Company
as at 1 November 2019.
Shareholder
Yarra Funds management Limited
Yarra Capital Management Holdings Pty Ltd
Yarra Management Nominees Pty Ltd
AA Australia Finco Pty LTd
TA SP Australia Topco Pty Ltd
TA Universal Investment Holdings Ltd
(Collectively “Yarra”)
Pendal Group Limited
H.E.S.T. Australia Limited as trustee of Health Employees Superannuation Trust
Australia
No. of shares
Percentage of shares
held at date of notice
Date of Notice
11,942,026
8.43%
16/8/2019
8,241,158
5,848,969
6.11%
5.01%
24/7/2019
31/5/2019
122
2019 Annual Report — Elders Shareholder Information and Company Directory
S H A R E H O L D E R
I N F O R M A T I O N
Share Registry
Boardroom Pty Limited
Level 12, 225 George Street,
Sydney, NSW, 2001
1300 737 760
+61 (0)2 9279 0664
enquiries@boardroomlimited.com.au
boardroomlimited.com.au
Enquiries
Shareholders with enquiries about their
shareholdings should contact the Company’s
share registry, Boardroom, on the above
contact details.
Online shareholder information
Shareholders can obtain information
about their holdings or view their account
instructions online.
For identification and security purposes, you
will need to know your Reference Number
(HIN/SRN), Surname/Company Name and
Post/Country Code to access. This service
is accessible via the Investor Centre on the
Company’s website or direct via the Boardroom
website at investorserve.com.au.
Tax and dividend/interest payments
Elders is obliged to deduct tax from dividend/
interest payments (which are not fully franked)
to holders registered in Australia who have
not quoted their Tax File Number (TFN) to the
Company. Shareholders who have not already
quoted their TFN can do so by contacting
Boardroom.
Change of address
Issuer Sponsored Shareholders who have
changed their address should advise
Boardroom in writing. Written notification can
be emailed, posted or faxed to Boardroom at
the address given above and must include both
old and new addresses and the Securityholder
Reference Number (SRN) of the holding.
Alternatively, holders can amend their details
on-line via Boardroom’s website. Shareholders
who have broker sponsored holdings should
contact their broker to update these details.
Annual Report mailing list
Shareholders who wish to vary their annual
report mailing arrangements should advise
Boardroom online or in writing.
Electronic versions of the report are available
to all via the Company’s website. Annual
Reports will be mailed to all shareholders who
have elected to be placed on the mailing list for
this document.
Investor information
Information about the Company is available
from a number of sources:
Website:
elders.com.au
Subscribe:
Shareholders can nominate to receive
company information electronically via the
Investor Centre on the Company’s website.
This service is also hosted by Boardroom and
holders can register through InvestorServe on
Boardroom’s website.
Publications:
The annual report is the major printed source
of company information. Other publications
include the half-yearly report, company
press releases, presentations and Investor
Presentations.
All publications can be obtained either through
the Company’s website or by contacting the
Company.
123
C O M P A N Y
D I R E C T O R Y
Share Registry
Boardroom Pty Limited
Level 12, 225 George Street
Sydney, NSW, 2001
1300 737 760
+61 (0)2 9279 0664
boardroomlimited.com.au
Auditor
PricewaterhouseCoopers
Bankers
– Australia & New Zealand Banking Group
– National Australia Bank
– Coöperative Centrale Raiffeisen –
Boerenleenbank (Rabobank Australia)
Stock Exchange Listing
Elders Limited ordinary shares are listed on
the Australian Securities Exchange under the
ticker code “ELD”
Directors
Mr Ian Wilton
MSc, FCCA, FCPA, FAICD, CA
Mr Mark C Allison
BAgrSc, BEcon, GDM, FAICD, AMP (HBS)
Ms Robyn Clubb
BEc, CA, F Fin, MAICD
Ms Diana Eilert
BSc (Syd), MCom (UNSW), GAICD
Mr Michael Carroll
B.Ag.Sc., MBA, FAICD
Secretaries
Mr Peter G Hastings
BA, LLB, GDLP, FGIA, Grad Dip Applied
Corporate Governance, GAICD
Ms Sanjeeta Singh
BEd (Primary), FGIA, Grad Dip Applied
Corporate Governance
Registered Office
Level 10, 80 Grenfell Street
Adelaide, South Australia, 5000
(08) 8425 4000
(08) 8410 1597
CompanySecretary@elders.com.au
elders.com.au
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2019 Annual Report — Elders