Elders Limited Investor Presentation
Released
Released
Announcement PDF
30 May 2023
Elders Limited Investor Presentation
Attached is a presentation to be given today, 30 May 2023, to the 21st Australasian AgFood Conference
hosted by PAC Partners. The presentation will be given by Elders Limited’s (ASX:ELD) Managing Director
and Chief Executive Officer, Mr Mark Allison.
Further Information:
Mark Allison, Managing Director & Chief Executive Officer, 0439 030 905
Authorised by:
Peter Hastings, Company Secretary, 0419 222 489
Elders Limited ABN 34 004 336 636.
Registered Office: Level 10, 80 Grenfell Street, Adelaide SA Australia 5000
PAC Partners - 21st Australasian AgFood Conference
30 May 2023
Presented by
Mark Allison
Managing Director and CEO
1
Agenda
Business Model
Sustainable Growth
Eight Point Plan
Sustainability
Questions
2
Business Model
Diversification by product, service, market segment and geography
RURAL PRODUCTS
AGENCY SERVICES
REAL ESTATE
SERVICES
FINANCIAL
SERVICES
FEED &
PROCESSING
SERVICES
DIGITAL AND
TECHNICAL
SERVICES
Killara Feedlot
Fee for Service
(200 agronomists)
RETAIL PRODUCTS
WHOLESALE
PRODUCTS
Rural Products
Rural Products
Livestock
Broadacre
Agri Finance
Fertiliser
Pet Supplies
Wool
Residential
Elders Insurance (20%)
AuctionsPlus (50%)
Grain
Property Management
LIT Delivery Warranty and
Livestock Funding Products
Elders Weather
Agcrest (33%)
Clear Grain Exchange
(30%)
Franchise
Key metrics
$2.5b retail sales
$0.4b wholesale sales
9.0m head sheep
$2.5b broadacre sales
232 stores
372 member stores
1.4m head cattle
$1.8b residential sales
435 APVMA registrations
360k wool bales
1.0m tonnes fertiliser
10.6k properties under
management
$3.0b loan book
$1.5b deposit book
$29.9m livestock funding
$120.0m StockCo book
67k Killara Feedlot cattle
head
AuctionsPlus
126k head cattle
1.2m head sheep
$1.0b GWP
$12m China sales
9.6m Elders Weather users
CGX 0.2m tonnes
41% LIT penetration rate
Gross margin
$310.0m
$73.1m
$147.0m
$61.6m
$44.2m
$16.8m
Included in products
$99.9m
$58.7m
$0.4m
$9.4m
$83.4m
Other – ($28.8m)
Working capital
$401.9m
Statistics and financial information based on FY22 full year
3
Earnings Growth and Resilience Despite Seasonal Variability
Resilient earnings growth with geographical, product and service diversity insulating against severe weather events
El Niño
Underlying
EBIT
2017-2019 Drought
La Niña
FY23 Guidance
$232m
Drought
Underlying EBIT
Range
$200m³
$167m
Bushfires
$180m³
2H23
$121m 5
Floods
$180m - $200m
Key Drivers
45%
QLD in drought1
$71m
$75m
$83m2
$74m
1.
Rural products gross
margin weighted to H2
$52m
2.
$41m
$28m
Heatwaves &
prolonged warm
spells
FY14
Prolonged warm
spells
FY15
Esperance
and Pinery
bushfires
Floods,
Cyclone Debbie
FY16
FY17
1.
2.
3.
4.
5.
As at 1 August 2022 Drought Declarations | LongPaddock | Queensland Government
HY23 EBIT
FY23 EBIT Guidance
Supported by the USA import beef price improvement
FY20 AIRR Acquisition
NSW &
QLD floods
FY20
FY21
NSW, WA &
QLD floods
NSW &
QLD floods
improvement4
3.
Cost to earn improvement
Townsville
floods
FY18
Widespread drought
FY14 baseline year
prior to the first 8PP
in FY15
Black Summer
bushfires
Livestock turnover
FY19
FY22
FY23
Covid-19 Pandemic
Ukraine
Interest rate & Inflation increases
Delayed Winter
Crop
4
Australia’s
most trusted
agribusiness brand
Elders Historical Performance
Strong historical EBIT and EPS growth
3,000
1600%
Price
Cumulative Return %
1400%
$6.56
$1,026m
Market Price
Market Cap
23.2%
5.5X
10Year CAGR
P/E1
2,500
1200%
CAGR
23%³
2,000
1,500
800%
Return %
Price
1000%
4.9x
600%
1,000
EV:EBITDA²
400%
INVESTMENT HIGHLIGHTS
500
200%
-
2013
0%
2014
2015
2016
2017
2018
2019
2020
2021
2022
R
Diversified agri business
R
Attractive market opportunities
and company outlook
R
Supply chain consolidation
R
SysMod benefits from FY24
R
Long-term shareholder returns
R
Resilient balance sheet
2023
As of 26 May 2023
1.
P/E – Rolling 12 months Adjusted Underlying EPS as of 31 March 2023 ($6.56 / 119.8cps)
2.
EV:EBITDA – Rolling 12 months EBITDA as of 31 March 2023 excluding the impact of AASB 16. (EV:1,351 / EBITDA: $278.4)
3.
10-Year CAGR (24/05/2013 – 26/05/2023)
5
HY23 Financial Performance: Summary
FY23 EBIT guidance between $180m - $200m
Underlying EBIT ($m)
Sales Revenue ($m)
+22.6%
+24.9%
3,445
232
2,549
167
200¹
180¹
2,093
121
1,626
74
733
900
1,101
FY19
FY20
FY21
1,515
133
1,657
53
34
FY22
HY23
FY19
FY20
83
74
FY21
FY22
FY23
Underlying Earnings per Share (cents)³
Costs ($m) vs Cost to Earn (%)²
+7.4%
+12.5%
97
421
97
363
70
317
278
223
79%
72%
69%
64%
71%
139
168
194
223
151
FY19
FY20
FY21
FY22
HY23
53
58
24
31
FY19
FY20
1.
FY23 guidance (Bottom: $180m; Top: $200m)
2.
Cost to earn is calculated on a rolling 12 months
3.
FY19 – FY21 did not include tax expense in underlying NPAT; Adjusted Underlying NPAT HY23: 76.3cps
**CAGR calculated on HY performance
43
FY21
32
FY22
HY23
2H
HY
66
HY23 Product Performance
Mixed results across the product portfolio compared to strong market conditions in HY22
Rural Products Gross Margin by Category ($m)
Change in product margin ($m)
HY22
NPAT
91.2
179
HY22
Fertiliser
HY23
Wholesale Products
117
Retail
Products
4.8
Wholesale
Products
(5.1)
Agency
Services
140.7
(4.4)
Financial
Services
3.2
AgChem
89
145.5
Animal Health
68
(18.2)
Real Estate
Services
37.8
32.7
82.2
64.0
33.3
28.9
23.3
26.5
Other Retail
HY19
HY20
HY21
-6.9%
HY22
HY23
Insurance Gross
Written Premiums
($m)3
Sheep Price ($)2
Cattle Price ($)2
-42.4
(-46%)
Real Estate
Turnover ($m)
-21.6%
-21.8%
Farmland
Feed & Processing
Services
(0.9)
9.1
1,952
8.2
(29.4)
(193.6)
176
1,817
1,586
Costs
177
177
138
139
435
(223.0)
603
+13.8%
161
1,215
360
1,851
475
1,470
379
975
Interest, Tax,¹
NCI & Other
HY23
7.6
48.8
(41.6)
(34.0)
91.2
48.8
1,135
865
FY19 FY20 FY21 FY22 HY23
1.
2.
3.
2,368
Residential
NCI – Non controlling interests; Other – includes $1.7m non-recurring expense
Cattle and Sheep prices are internal averages, not externally verifiable
Principal positions are held by Elders Insurance Underwriting Agency (Elders 20% equity investment)
FY19 FY20 FY21 FY22 HY23
HY19 HY20 HY21 HY22 HY23
HY19 HY20 HY21 HY22 HY23
7
Ready
HY23 Gross Margin Diversification
A diversified business model provides earnings resilience
+2.1%
79.2
80.9
Total Gross Margin ($m)
-22.1%
Positive contribution from
backward integration and network
sales growth, partially offset by
temporary gross margin
compression
326
306
HY22
HY23
82.2
64.0
HY22
HY23
-13.5%
-13.2%
37.8
-23.5%
+32.9%
+18.0%
+13.7%
33.3
32.7
28.9
25.1
21.8
19.2
23.6
26.5
23.3
20.0
-9.9%
16.4
9.1
AgChem
Fertiliser
Animal Health
Other Retail
Retail Products
26.5%
6.3%
7.1%
7.7%
Wholesale
Products
Agency
Services
10.7%
20.9%
8.2
Real Estate
Services
Financial
Services
Feed &
Processing
Services
9.5%
8.7%
2.6%
Pie charts represent percentage of total HY23 gross margin
8
HY23 Geographical Diversification
Geographical diversification mitigates the impact of events like the East coast floods
Western Australia
31
22.4%
10
HY23
HY22
South Australia
HY23
New South Wales
17.2%
25
22.1%
28
24
HY22
HY23
19
HY22
HY23
Tasmania
4
9.1%
16
25
HY22
Queensland &
Northern Territory
3.1%
3
Victoria & Riverina
26.1%
46
29
HY22
HY23
HY22
HY23
Excludes Wholesale Products, International and Corporate Overheads
Values refer to Underlying EBIT ($m)
9
HY23 Dividend and Earnings Per Share
Growth drivers delivering compelling returns through the cycles
Underlying Earnings per Share (cents)
Adjusted Underlying Earnings per Share (cents)¹ ²
2H
Adjusted underlying EPS
HY
FY
97
+16.0%
HY
97
134
97
70
54
39
97
70
53
53
39
44
32
28
24
31
FY19
FY20
43
FY21
58
FY22
HY23
24
31
FY19
FY20
43
FY21
58
32
FY22
HY23
Dividend Payout Ratio (%)
Dividends per Share (cents)
71%
FY
+26.4%
HY
56
42
47%
48%
HY21
HY22
37%
29%
18
23
22
20
1.
2.
9
9
FY19
FY20
FY21
28
FY22
HY23
HY19
HY20
HY23
Adjusted for underlying tax expense recognized from 1 October 2021. HY23 Adjusted underlying earnings per share is 76 cents per share, up 31% on HY22.
Adjusted Underlying EPS CAGR is based on H1 numbers
FY19 and FY 20 dividends were fully franked, FY21 was partially franked at 20%, FY22 and HY23 dividends were partiall y franked at 30%
CAGR calculated on HY performance
10
We Are Committed To Attracting & Retaining The Best People
More people, highly skilled, engaged and diverse
WE HAVE MORE PEOPLE…
…WHO ARE HIGHLY ENGAGED…
Engagement1
FTEs
8.5% CAGR
2,294
2,451
…AND DIVERSE
Female non-executive
directors
Women in senior
executive positions
+1.0%
2,585
2,701
78%
79%
78%
79%
33%
60%
FY21
HY22
FY22
HY23
Growth:
6.8%
5.5%
4.5%
183
FY21
HY22
FY22
Agronomists
Enablement1
6.3% CAGR
+3.0%
201
200
219
79%
79%
82%
HY23
Women in leadership
positions
82%
Female
workforce
19%
43%
1.
FY21
HY22
FY22
HY23
Growth:
10.1%
(0.5)%
9.5%
2022 Korn Ferry Elders Employee Effectiveness Survey
FY21
HY22
FY22
HY23
11
Compelling shareholder returns
Industry leading sustainability outcomes
Most trusted Agribusiness brand
5-10% EBIT and EPS growth through the cycles at
minimum 15% ROC
across health and safety, community, environment and
governance
in rural and regional Australia
RURAL
PRODUCTS
AGENCY
SERVICES
1 Deepen customer relationships
2 Balanced growth of products,
for mutually beneficial outcomes
services, geographies and
FEED AND
PROCESSING
TECHNICAL
SERVICES
FINANCIAL
SERVICES
REAL ESTATE
SERVICES
3 Enhance margin through value
4 Lead sustainability and productivity to
chain efficiencies and integration
channels
benefit our customers, communities, industry,
people and shareholders
5 People – Invest in our teams to ensure
6 Streamline supply chain to
7 Systems Modernisation – Invest in and deploy
we have the right people in the right
fully optimise all parts of our
leading technology solutions that improve
discipline and commitment to
places who are set up for success
integrated value chain
customer experience, drive efficiencies, and
cost and capital efficiency
8 Maintain unflinching financial
better accommodate change
CUSTOMER FOCUSED
INNOVATION
TEAM WORK
INTEGRITY
ACCOUNTABILITY
Sustainability
OUR PRIORITIES
OUR PRINCIPLES
OUR PROGRESS
▪ We provide our customers and clients
with the goods and services they need
•
Increasing the amount of solar power we
generate onsite
▪ Formed a dedicated Strategy,
Sustainability and innovation function
▪ We support our people and the
industries and communities in which we
operate
•
Deeper understanding of our waste outputs
and developing a strategy to reduce waste to
landfill
▪ Solar farm development at Killara Feedlot
near completion
▪ We do our part to look after the
environment and animals in our care
•
Further climate change scenario analysis and
enhanced disclosure aligned with the TCFD
Recommendations
▪ We operate ethically and to the highest
standard
•
Continue to develop our approach to ethical
sourcing
▪ Solar installations completed on several
branches
▪ Packaging waste policy launched and
waste strategy development underway
▪ Independent on-site audits of suppliers to
Titan AG continue
13
Growth Pillars
Multi-Faceted strategy to drive growth through the cycles to FY26
Geographic
Expansion
Backward
Integration
Market Share
Gross Margin Capture
▪ Strong pipeline of bolt on acquisitions
to expand our geographic reach
▪ Considered pathway to explore
New Channels to Market
▪ Increasing share of the addressable
▪ Investment in systems modernisation will
▪ Recent strategic investment provides
market in both crop protection
unlock efficiencies through enhanced
entry into chemical formulation supply
and animal health own brand products
analytics and technology
chains
through brand awareness and client
share growth opportunities exists
engagement
offerings to attract member growth in our
wholesale business
Transformational
Investment
Cost and Capital Efficiency
greenfield locations where market
▪ Investment in client and service
Transformational
Projects
▪ Continued investment in our new
product pipeline across the portfolio
▪ Multi year supply chain optimisation
project to deliver significant value
▪ Historical examples include Titan AG
and AIRR
through improved planning, sourcing
and reduction in safety stock
▪ Expansion of service offering to include
wool handling
14
Investing
Now for
Future Growth
Transformational projects to
drive benefits through FY26
and beyond from cost and
capital efficiencies
Estimated Benefits to Flow
Benefits
▪
Investment in sourcing capability will
unlock significant value across our
portfolio
▪
Streamlined processes across our
vertically integrated channels to market
▪
Gross margin benefits through
enhanced reporting and processes
▪
Wave 1 to be completed during FY23
with successful implementation of
key financial and people foundations
▪
Design workshops for Wave 2
underway, to implement best practice
business processes
▪
EBIT level benefits anticipated to be
recognised from FY24 onwards
▪
EBIT benefits through economies of
scale via a partially automated
handling facility
▪
Provide a modern, efficient and
scalable investment
▪
Greater control over the quality,
standard and compliance of Elders
wool handling operations
▪
FY23
FY24
FY25
FY26+
RURAL PRODUCTS SUPPLY CHAIN OPTIMISATION
Improved planning, sourcing and supply chain models with fit for purpose
sales and operational platforms designed to deliver improved gross margin and
a reduction in safety stock across Rural Products
Differentiated service offering to our
existing and new client base through
enhanced additional logistics and
warehouse capability
SYSTEMS MODERNISATION
Generational investment in modernisation of our
platforms to deliver more efficient business
processes and an enhanced client experience
WOOL SUPPLY CHAIN OPTIMISATION
World first automated wool handling model will provide a
modern, efficient and scalable investment
Notes:
Systems Modernisation and wool supply chain expected to deliver returns in excess of 15% ROC
Rural Products supply chain optimisation estimated to deliver EBIT of $10-$18m and capital release of $5-$8m (source external consultant September 2022)
15
Share your feedback
Discover