DESPITE challenging trading and seasonal conditions, Elders has reported $74.6 million in underlying earnings before interest and tax, and a return on capital of 24.2 per cent at its recent annual general meeting in Adelaide.
Elders chief executive officer Mark Allison announced the company had increased dividends to 18 cents a share for the full year, up from 15c/share in the 2017 financial year.
“We have achieved the 5-10pc growth per annum we set out to do,” he said.
But Mr Allison said the impact of higher retail debtors, due to late season activity and a delay of receipts at year’s end, resulted in an operating cash outflow of $12m, compared with an inflow of $81m the previous year.
“Pleasingly, debtor receipts banked in early October were $30m higher than the previous year,” he said.
“Some seasonal stock has also been carried over into the new financial year.”
Elders’ average net debt also rose by $24m to $161m at the end of September, in line with business growth and investment activity.
“Debt levels fluctuate with sales activities and the dates upon which receivables are sold into our receivables funding program,” Mr Allison said.
“For these reasons, we are of the view that average debt and cash levels are a far better guide to the health of our business than period end levels.”
The retail side of the business posted a $14.5m margin improvement, due to the acquisition of NSW-based horticulture operation Ace Ohlsson and organic growth in southern Australia.
Agency was down $3.4m, with declining cattle prices having an impact, while real estate improved by $1.7m to $33.6m. Elders’ Financial Services rose from $35.1m in FY17 to $38.3m this year.
Mr Allison said feed and processing margins increased across all business units, with Killara feedlot continuing to perform.
But costs increased by $13.8m to $280.4m to drive Elders’ Eight Point Plan initiatives, including acquisition and organic footprint growth.
Mr Allison said these acquisitions included Kerr & Co Livestock in western Vic, Titan Ag in the retail sector and a 20pc stake in Clear Grain Exchange.
“The Eight Point Plan continues to guide our sustainable growth and our business units are constantly reviewed to ensure they are generating a consistent return on capital,” he said.
This portfolio review process prompted the company to divest its Indonesian feedlot and processing assets, because of high cattle costs and changing Indonesian government policies.
“We remain steadfast in our target to achieve 5-10pc growth year-on-year, with half from acquisition and half from organic growth,” Mr Allison said.