Elders delivers $116m profit and dividends

Elders delivers promised dividends and a $116m statutory profit


Farm Online News
The much-improved wool market and continuing  demand for sheepmeat and beef cattle have helped drive profits for Elders' agency business and real estate turnover.

The much-improved wool market and continuing demand for sheepmeat and beef cattle have helped drive profits for Elders' agency business and real estate turnover.

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Elders has announced a double dividend worth 15 cents a share and posted a 44 per cent jump in full-year profit

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After nine years in the share dividend wilderness, a reinvigorated Elders will pay a double dividend to long-suffering shareholders and has posted a 44 per cent jump in full-year statutory net profit to $116 million.

The 178-year-old farm services company has also scheduled an active branch opening program, targeting coastal Queensland, parts of NSW, and expanded sites at existing West Australian branches.

Elders, which went close sinking under the weight of debts and its previous conglomerate business baggage during the global financial crisis, will pay a 7.5 cents a share, plus a special dividend of 7.5c.

Its share price jumped above $5.63 soon after Monday morning’s announcement – up from $5.19 at the close of trading last week.

A surging wool market and strong sheep market prices and trading activity have been particularly helpful for the company.

Sheep represent 45pc of the company’s agency business activities and were the primary driver of margins, which also benefited from “strategic” business acquisitions.  

Overall livestock price strength combined with the footprint expansion to lift agency profit margins by $11m.

For the trading year to September 30, Elders achieved $1.6 billion in sales revenues and posted an underlying net profit after tax of $57.7m – up from $16.5m in 2015-16.

Strong agency earnings, plus a $7.8m improvement in retail product profit margins and a $8.9m profit margin lift from financial services activities, have been key factors in Elders return on capital hitting a solid 26.8pc.

That’s comfortably above its 20pc target, which it has now promised to maintain, or exceed for the next three years.

“It is evident the business is committed to our strategic priorities and a resolve to realise our objective of continuous, solid, high quality growth which underpinned the company’s achievements in 2016-17,” said managing director, Mark Allison.

The results and dividends reflected “a milestone in the company’s progress under the direction of its Eight Point Plan” which was drawn up in 2013-14 as it sold off its non-agribusiness assets and returned to being purely a farm sector player.

Elders managing director, Mark Allison.

Elders managing director, Mark Allison.

Mr Allison said the additional 7.5c special dividend recognised the company’s obligation toshareholders who had not reaped a return from their shares since 2008.

It also helped fill the gap after no first-half interim dividend was paid earlier this year.

“We have the desire to continue paying six monthly dividends from now on,” he said.

He said balanced growth had been achieved across the portfolio, with the retail business benefiting from a return to better summer rainfall and cropping conditions and geographical expansion.

Elders also enhanced its retail capability with the acquisition of the Ace Ohlsson horticultural services and merchandising business in NSW.

Horticulture and sugarcane growing areas in Queensland and the NSW North Coast have been earmarked for further acquisitions or new greenfield branch growth.

Elders intends to acquire or open at least 20 new branches by 2020, adding its full complement of livestock services to any merchandise operations it may acquire.

Other parts of northern and central NSW were being targeted, with one current acquisition prospect likely to involve significant sheep and wool earnings.  

“There are a number of blue chip agricultural areas in some States where Elders has a limited presence and we want to fill those strategic gaps as quickly as we can,” Mr Allison said.

The plan did not necessarily involve buying existing rival businesses.

A successful strategy of late has been to lure good staff from existing businesses to join the Elders team, as happened on NSW’s Liverpool Plains, the eastern Darling Downs and in Tasmania.

“In Bundaberg, where we don’t have a branch presence, it may be best to establish a greenfield site and bring in the staff we need,” Mr Allison said.

“In Esperance and Merredin in WA we’re looking at expanding our branch businesses.”

The turnaround in Elders’ financial performance was enabling it to bolster its technical and customer-facing staff ranks in branches, and spend money on site maintenance and extensions.

“Helping lift the productivity and profitability of our customers is a priority for us, so we need to have the right staff in place,” he said.

“We now employ about 145 agronomists, which compares with less than 100 in the bad old days.”

Profit margins for Elders’ real estate business improved by $2.7m last financial year, helped by low interest rates and high livestock prices continuing to generate demand for large cattle farming and broadacre cropping properties, including more corporate buying and selling activity.

Elders also acquired the Southern Districts Estate Agency group in WA during the year.

Mr Allison said the company’s purchase of a 30pc stake in the StockCo livestock financing business and lifting its ownership in the Elders Insurance business to 20pc had boosted financial services margins to $35.1m.

Feed and processing pervices based on the Killara Feedlot in NSW improved 17pc on last year thanks to improved space utilisation at Killara and the success of its in-paddock procurement strategies.

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