Elders (ELD) shares sold off yesterday despite the company confirming that its turnaround remains on track.
The 6.6% fall in the shares yesterday was much larger than the overall weakness for the wider market (a fall of 0.9%) which was hit by a combination of a reaction to the attacks in Paris, the weakness in commodity prices and big falls at the end of last week.
Elders’ net profit for the year ended September 30 jumped to $38.3 million from $3 million in 2013-14. That was on a 6% rise in total revenue for the year to $1.514 billion.
Underlying net profit was up almost $10 million to $32.6m, but was reduced by write-off costs associated with the company’s recent head office move from its 70-year-old premises in Adelaide, plus finance restructuring costs.
There was an $18.2 million improvement in underlying earnings before interest and tax (EBIT) to $45.8 million, thanks mostly to the strong livestock agency performance, and higher retail earnings, and increases in feed and processing efficiencies at the Killara feedlot in northern NSW.
CEO Mark Allison (in the top job for the past 18 months) said yesterday the latest set of financial results mean the “turnaround” phase is over and he will now be looking to grow the company.
ELD 1Y – Elders goes for growth after successful turnaround
The sharp improvement came thanks to the boom in cattle prices and higher volumes in cattle and wool. That saw Elders’ core agency services business deliver a big jump in profits up $16.3 million compared with last year. Elders’ retail division saw a $3.7 million improvement year on year.
Mr Allison said the growing drought conditions weren’t having much overall impact on the Elders operations which he said were protected by its broad geographic diversification around Australia, and also by diversification by business type.
"At a local level certainly its very tough for those affected. From a business viewpoint the level of diversification that we’ve got from a product and geography perspective means the overall impact is limited,” he told the media.
The latest results show net debt at Elders has been trimmed to $136.2 million from $137.6 million a year ago. Debt levels had soared to $1.4 billion in 2008 before the company, under previous management, was forced to sell off huge parts of the company and seek a deal with its banks on revamping its debt burden.
In January, Elders undertook a 10-for-1 share consolidation to shrink its capital base. Elders closed at $4.35, which on a pre-consolidation basis is the equivalent of 43.5 cents. The shares were at 21.5¢ when the consolidation happened at the start of the year.
