Elders has released its results for the 12 months to 30 September 2022, reporting an underlying profit before tax of $223.5 million – up 42% on FY21, based on $232.1 million underlying earnings before interest and tax (EBIT) – up 39% on FY21.
Elders’ return on capital (ROC) of 26.2% was up 3.7% on FY21, and significantly exceeded the company’s 15% hurdle set in its Eight Point Plan strategy.
The final dividend of 28 cents per ordinary share takes total dividends declared for the year to 56 cents partially franked (30%), compared to 42 cents partially franked (20%) in FY21.
Financial performance improved across all geographic and product areas in FY22, with standout results from the Rural Products business which outperformed expectations, with gross margin of $383.1 million, up 35% on FY21.
Recognising the favourable seasonal and market conditions, Elders' chief executive officer and managing director, Mark Allison said, "Elders’ performance this year reflects a continued commitment to improvement and growth in accordance with our Eight Point Plan, which allowed us to leverage excellent seasonal and market conditions.
"The business has performed remarkably well, making tremendous progress on its strategic ambitions and contributing to a thriving agriculture sector."
This growth was driven by the continued focus on the backward integration strategy, whilst capturing the benefits of strong seasonal conditions.
Growth through strategic acquisitions continued in FY22, adding value and presence across the network. Agency services contribution grew due to strong livestock prices, despite reduced volumes from limited domestic supply, with gross margin of $147.0 million, up 4% on FY21.
Real Estate Services gross margin was $61.6 million, up 21% on FY21, reflecting ongoing network expansion and continued very high demand for both residential and farmland assets despite a fourth quarter market easing.
Elders entered the second year of its third Eight Point Plan in FY22, targeting 5% to 10% growth in EBIT and EPS through the agricultural cycles while maintaining strong financial discipline to generate a compelling ROC of at least 15%.
In FY22 EBIT grew by a very strong 39%, with a return on capital of 26.2%.
Mr Allison said Elders commenced 'Wave 1' of its staged system modernisation program in FY22, focusing on core financial and people management platforms.
“This key milestone will underpin subsequent investment in customer-facing systems and platforms aimed at growing and maintaining strong relationships with customers, community, and its people whilst delivering cost efficiencies across the business.”
Elders also announced a significant investment in Elders Wool Handling which will modernise the wool supply chain.
During FY22 Elders achieved all-time high results in a Korn Ferry employee effectiveness study which ranks the engagement and enablement of the Elders' workforce.
"I am encouraged by these results, assured that we are doing the right things in our business to support our employees, and motivated to ensure that Elders continues to be an employer of choice in our sector," Mr Allison said.
Elders recorded six Lost Time Injuries (LTIs) in FY22 and has continued to strive for a zero injury workplace, investing $3.3 million in network safety initiatives in FY22.
High demand for agricultural commodities is expected to create favourable trading conditions in the first half of FY23, however recent extreme rainfall events across the eastern states have created some uncertainty in affected cropping regions and concern about reaching full harvest potential for both summer and winter crops.
Mr Allison said the Rural Products outlook remains positive, with high demand particularly for agricultural chemicals, fertiliser and seed. However, the agricultural industry will await assessment of the full impact of the extreme wet conditions and flood events to realign expectations for the FY23 season.
Cattle and sheep prices are expected to soften in the medium term, driven by falls in domestic re-stocker demand, with volumes also balancing out in the short term. The wool market is expected to remain strong, driven by increased demand in China and Europe, pending production conditions improving following the recent rain and flooding in Eastern Australia.
Strong demand for broadacre properties is expected to continue in the short to medium term, supported by commodity demand and high livestock prices. Mr Allison said Elders has an encouraging pipeline of acquisition prospects in strategically relevant locations and is also pursuing new greenfield opportunities to expand its service offering to clients.
“Sustainability is a key focus of the business for FY23 with particular emphasis on the areas of waste management, our strategic response to climate change, and our community investment,” he said.
"I am pleased to report on the excellent progress we have made over the last year on our sustainability strategy. At Elders, sustainability means looking after our people, communities and the environment to ensure that we are here to continue serving clients across rural and regional Australia for the long term – as we have for over 180 years.
“With our focus on safety, sustainability, innovation and financial discipline, we have generated excellent results for our shareholders in 2022 and deepened our position as the most trusted agribusiness in rural Australia,” Mr Allison said.
“Opportunities remain to grow and improve our business and further enhance our value proposition to rural Australia, through the implementation of our Eight Point Plan."
