* An earlier version of this article incorrectly stated that Elders shares started the day at 53.5c and ended the day at 56.5c – this article has been updated to provide the correct share price figures – $5.35c and $5.65.
Strong cattle and sheep prices and an expanded business network helped Elders Limited to almost double its net profit in the 2017 financial year, the publicly-listed agribusiness announced this morning.
Elders registered a FY17 statutory net profit of $116 million, up from $64.4 million in FY16.
On the back of the strong results Elders has also announced it will pay shareholders a dividend for the first time since 2008.
Shareholders will receive a fully franked final dividend of 7.5 cents per share, plus fully franked special dividend of 7.5 cents per share.
It has also indicated it is planning further targeted expansion through more strategic acquisitions.
Other details of this morning’s announcement include:
- Underlying profit after tax of $57.7m, up $16.5m from the previous corresponding period
- Underlying EBIT of $70.4m, up $14.3m from the pcp
- Underlying return on capital of 26.8pc
Elders shares started the day at $5.35c and have climbed to $5.65 today in the wake of the FY17 results announcement.
Contributing to the results were improved agency returns and retail margins on the back of strong cattle and sheep prices, and cost efficiencies created by Elders’ exit of the live export business.
Elders chief executive officer Mark Allison said balanced growth was achieved across the portfolio, with the retail business posting a $7.8 million increase in margin due to normalised summer cropping conditions and geographical expansion.
Elders enhanced its Retail capability with the acquisition of Ace Ohlsson, a New South Wales based horticultural operation.
“Cattle and sheep prices remained strong, which combined with the benefit from footprint expansion, resulted in an $11 million margin improvement.”
“Margins for the Real Estate business improved by $2.7 million with low interest rates and high livestock prices continuing to generate demand for large cattle farming and broadacre cropping properties.”
Elders’ real estate presence in the south west of Western Australia was strengthened by the acquisition of Southern Districts Estate Agency during the year.
“The 30 percent purchase of the StockCo livestock financing business and an additional 10pc of Elders Insurance (taking Elders’ total ownership of Elders Insurance to 20pc) boosted margins for Financial Services to $35.1 million, up $8.9 million.”
“Elders’ Feed and Processing Services improved 17pc on last year through increased utilisation at Killara Feedlot and continued success in paddock procurement strategies, with an increase of $1 million in underlying profit.
“The 30 percent purchase of the StockCo livestock financing business and an additional 10pc of Elders Insurance (taking Elders’ total ownership of Elders Insurance to 20pc) boosted margins for Financial Services to $35.1 million, up $8.9 million,” Elders chief executive officer Mark Allison said in a statement released today.
“Elders’ Feed and Processing Services improved 17pc on last year through increased utilisation at Killara Feedlot and continued success in paddock procurement strategies, with an increase of $1 million in underlying profit.”
Elders said the improvement in underlying profit and return on capital exceeded its targets for FY17 outlined in its Eight Point Plan.
As we move out of the first three years of the Eight Point Plan and reset to lead into the next growth phase, it is evident that the business is committed to our strategic priorities and a resolve to realise our objective of continuous, solid, high quality growth which underpinned the company’s achievements in FY17,” Mr Allison said.
“It is pleasing that we have been able to declare a final and special dividend, which are Elders’ first shareholder dividends since 2008.”
Operating cash inflow of $81.6 million for the year was up $32.9 million on the prior corresponding period, underpinned by strong cash conversion of operating profits and variability of livestock activity leading up to balance date.
Both investing and financing cash outflows were higher than last year through increased acquisition activity and a focus on simplifying the Company’s capital structure.
Elders completed realisation and cancellation of its Hybrid securities in the first half of this financial year, simplifying the capital structure.
The company’s underlying return on capital continued to be above the 20pc benchmark at 26.8pc through continued strong agency earnings and increased retail margins.
Mr Allison said the Eight Point Plan is essential in articulating Elders’ vision and ensuring the operations adhere to the strategic roadmap.
“Exiting from the non-core Live Export business (while maintaining our important involvement in the trade through the sourcing of livestock) is not only driving cost efficiencies but has allowed us to invest in areas, such as technical and digital services, which are much more aligned with our growth agenda.”
“I’m pleased with the dedication and hard work of our teams across our Australian, Chinese and Indonesian businesses, and thank our clients and shareholders for their support.”
“Looking ahead to 2020, Elders is focused on growth and development, improving our service offering for clients and delivering value to our shareholders.”
In its outlook for FY18, the statement said an expected easing in cattle prices is expected to be offset for the company by its footprint expansion and market share gains.
Elders says its retail division will continue to pursue geographical and crop segment growth opportunities, and it has also targeted footprint and agent growth in livestock services.
Elders has over 440 points of presence in Australia and overseas including full service branches, real estate and insurance franchises, and its strategic growth plans include the addition of 20 new branches by 2020.