The Elders Limited board has released an eight-point, three-year strategic plan that it believes will help the rural services company to acheive a target of sustainable Earnings Before Interest and Tax (EBIT) of $60 million and a 20pc return on capital by 2017.
In a statement to the ASX yesterday Elders chief executive officer Mark Allison said the new strategic plan marked a significant step in the company’s planned evolution to become an efficient user of capital and a provider of acceptable returns to all stakeholders.
“The Eight Point Plan is the culmination of the efforts of all our staff to identify what we exist for, what we excel at, and how we want to deliver the needs of our clients,” Mr Allison said in the ASX statement.
The plan comes three months after former Elders Limited chair Mr Allison was announced as the company’s new CEO, replacing Malcolm Jackman who left late last year.
Elders has endured a difficult run of years since the Global Financial Crisis on the back of high debts, successive and significant losses, refinancing measures, asset sales to reduce debts, a rejected merger attempt initiated by rival Ruralco, the loss of seven senior live export managers to Ruralco, and an unsuccessful attempt in 2012-13 to find a buyer for the Elders Rural Services operation.
However the company has recently shown signs that long-running restructuring and refocusing efforts may be achieving results after reporting a much smaller loss for the first six months to March 31 than the corresponding period 12 months earlier (-$10m for HY14 versus $-303m for HY13).
In mid-June, about one month after the announcement of its March 31 results, Elders share prices surged by almost 50pc from 13.5c to 20c in the space of a week, prompting the ASX to ask if Elders Limited could explain the sudden rise.
In its response Elders said it had no other explanation for the increase other than the results it posted for the six months to March 31, noting that “the second half outlook is positive subject to seasonal conditions and we expect ongoing improvement against last year’s results”.
In May Elders also announced that in the previous 12 months it had been able to cut its net debt by 25pc from $314.1m to $236.6m, while EBIT for the periiod improved to $12m and sales revenue held firm at $650m.
In Elders’ statement to the ASX yesterday Mr Allison said the company’s new strategic plan focuses on Elders’ unique strategic advantages and set out eight ‘tangible and achievable’ agribusiness objectives the company feels confident it can execute over the next three years.
“The Eight Point Plan is accompanied by an aspirational target of creating sustainable EBIT of $60m and return on capital of 20pc in and from FY2017,” Mr Allison said.
“Whilst a lot of hard work is yet to be done to get there, and whilst agriculture is always subject to climactic and market conditions, we are confident that the foundations for growth are now in place and will be enhanced by the Plan.
“Elders seeks to reclaim its place as the agribusiness delivering the greatest real value to all its stakeholders in both Australia and internationally. Understanding and delivering on the needs of our clients is key to that goal. We firmly believe that the business performance is responding to and will be further enhanced by implementation of the Eight Point Plan.”
Elders shares rose to 25.5c one week ago but have eased slightly over the past week, closing at 22c yesterday.
For further details of the plan click here