Born again agribusiness, Elders (ELD), is confident the years of struggle, losses and almost continual restructuring are behind it.
The annual meeting in Adelaide yesterday was told that the various initiatives undertaken so far to improve the performance of the company, are making progress.
”Whilst it is still early days and most of the initiatives will deliver value in future years, progress is being made,” chief executive Mark Allison told shareholders at the company’s annual general meeting on Thursday.
Under its three-year, eight-point strategic plan launched in July, Elders is seeking to achieve $60 million in earnings before interest and tax by fiscal 2017, and a 20% return on capital.
There’s a new headquarters to move into in Adelaide in the new year, and a 10-for-1 share consolidation in early January which was approved by shareholders at yesterday’s AGM.
This will remove much of the volatility in the current low share price (21.5c yesterday, up 2.4%) and position the rural company as a higher-quality stock.
The share consolidation will mean that Elders will shrink its capital base from 837 million shares on issue, so the equivalent shares will trade on the ASX at around $2.20 each rather than around 22c.
But shareholders wanting a dividend to follow up the higher price and smaller capital base, will have to wait.
There won’t be a dividend for at least another two to three years because Elders needs to payout or refinance the $145 million of hybrid securities listed on the ASX, which in practical terms have the characteristics of debt.
CEO Mark Allison said all options were open on what to do with the hybrids, but nothing final had been agreed to.
Before then the company has to get through the intensifying drought-like conditions in much of the north, and along the east coast.
Shareholders heard yesterday that Elders expects a dry spring and summer for most of Australia and was assuming an average winter cropping season.
The ongoing drought in northern Australia would continue to pressure Elders’ livestock clients, but strong feedlot and live export demand was expected to continue, providing an offset for the company.
Mr Allison says Elders is also considering options to develop a wholesale business model and aggressively expand its online platforms.
He said Elders’ agency operations in livestock, wool, grain and real estate – which are the largest part of the group’s business – had the greatest opportunity for improvement and growth.
Pay for livestock and wool employees was being re-aligned to reward high performers and to drive sales.
In real estate, Elders plans to lift the number of franchise offices by 25% (it may have missed the boat in the current boom).
Mr Allison told the meeting that the live export business was looking at significant growth opportunities with strong demand for cattle in Indonesia, Vietnam and China.
Mr Allison also said that the fall in the Australian dollar was positive for Elders across its businesses, and the company had made a solid start to trading in the opening months of its new financial year which started on October 1.
