Another life for struggling rural group, Elders (ELD) with news its banks have given it new finance facilities totaling up to $414 million, but at the cost of finding $25 million in new cost cuts.
So offices will be closed and 10% of its workforce will be cut in yet another example where innocent employees lose out when the board and management of a company stuff things up.
Bad investments in the past – forestry and tax driven investment schemes, car parts and a loss of focus on what is now its core (and remaining business) rural services. The losses have been in the hundreds of millions of dollars and shareholders have seen the value of their shares collapse.
The shares thought edged up one cent to 10.5c on yesterday’s news of the refinancing and cost cuts. That was a move of 10%, which sounds enormous, but given the company’s chequered history, that could be lost in an hour’s trading today.
ELD 2Y – Elders to cut workforce by 10 per cent
And Elders has been one long stuff up, even if the current board and management, led by CEO, Malcolm Jackman, has done more to right the company than previous managers and directors.
As a result of the new round of cuts, Elders says it now expects net losses for 2012-13 to be between $32 million and $39 million and CEO Jackman said in yesterday’s market update that the company’s restructure of Elders was well under way, providing "a clear focus for the future".
"In the coming weeks, we will have wound down the vast majority of the forestry business, made final payments to managed investment scheme (MIS) investors and killed the forestry cash burn," Mr Jackman said.
As previously announced the sale of its Futuris Automotive business to Clearlake Capital Group has been finalised, and proceeds from the sale have been used to reduce Elders’ term debt levels, with wind-down of forestry assets nearly complete.
That raised $56 million which will be used to reduce the company’s gross debt to approximately $330 million and net debt to $272 million.
The company also said that it had also agreed with QBE to cut its equity holding in Elders Insurance, a brokerage joint venture with the insurer, from 25 per cent to 10 per cent. The money from the stake cut will be used to cut debt and as working capital.
Justifying the latest job cuts, the company said yesterday that "Given the substantial operating cost out initiatives undertaken by Elders over previous years, the reorganisation and new business model will involve reduction of about 10pc of employee numbers."
That will see a small number of rural and regional branch offices closed or consolidated into larger nearby branches "to ensure sustainability of the network operations in the long-term".
Mr Jackman said the various pillars of the overall business restructuring plan have provided Elders with a sound and sustainable footing. "This is the outcome that the entire Elders team has been striving for against numerous obstacles for some time," Mr Jackman said.
Elders said the new finance facilities will last until December 31, 2014 – or some 16 and a half months. Elders said the syndicated finance facilities will include a mixture of term debt facilities worth up to $144 million, working capital and contingent facilities of up to $87 million and a debtor securitisation facility of up to $183 million.
