Diversified rural services provider Elders has reported an underlying profit before tax of $223.5 million for its 2022 financial year, up 42 percent on the previous year, driven by improvements in most parts of the business.
The result comes as managing director Mark Allison, pictured above, announced his retirement, effective some time over the next 12 months.
His departure will book-end a successful resurrection of the Elders business, which was in a parlous position a decade ago when he took up the role as chair, executive chair and, since May 2014, as managing director and CEO.
His timing will also see the completion of Elders third of three successful Eight Point Plans.
“The timing is right, and will allow for a smooth transition and leadership refresh for Elders’ next phase of growth,” Mr Allison said.
The Board has started an executive search at both national and international level for Mr Allison’s replacement.
In other results announced today, Elders’ statutory profit after tax was $162.9m, with prior year comparison impacted by the recognition of income tax expense from 1 October last year. The final dividend of 28c per ordinary share takes total dividends declared for the year to 56c partially franked (30pc), compared to 42c partially franked in FY21. Earnings before tax grew by 39pc, with a return on capital of 26.2pc.
Standout results were seen in Elders Rural Products business, which outperformed expectations, delivering gross margin of $383.1m, up 35pc on the previous year. Growth was driven by strong seasonal conditions and the company’s focus on the backward integration strategy.
Growth through strategic acquisitions also continued in FY22, adding value and presence across the network.
In other divisions:
Agency services contribution grew due to strong livestock prices despite reduced volumes from limited domestic supply, with gross margin of $147m, up 4pc.
Real Estate Services gross margin was $61.6m, up 21pc on FY21, reflecting ongoing network expansion and continued very high demand for both residential and farmland assets despite a fourth quarter market easing.
Recognising the favourable seasonal and market conditions, chief executive officer and managing director Mark Allison said Elders’ performance this year reflected a continued commitment to improvement and growth in accordance with the company’s Eight Point Plan, which allowed it to leverage excellent seasonal and market conditions.
“The business has performed remarkably well, making tremendous progress on its strategic ambitions and contributing to a thriving agriculture sector,” he said.
Elders also announced a significant investment in Elders Wool Handling, which will modernise the wool supply chain.
High demand for agricultural commodities is expected to create favourable trading conditions in the first half of FY23, shareholders were told, however recent extreme rainfall events across the eastern states had created some uncertainty in affected cropping regions and concern about reaching full harvest potential for both summer and winter crops.
The Rural Products division outlook remained positive, with high demand particularly for agricultural chemicals, fertiliser and seed. However the agricultural industry will await assessment of the full impact of the extreme wet conditions and flood events to realign expectations for the FY23 season.
Cattle and sheep prices are expected to soften in the medium term, driven by falls in domestic re-stocker demand, with volumes also balancing out in the short term.
The wool market is expected to remain strong, driven by increased demand in China and Europe, pending production conditions improving following recent wet conditions and flood events in Eastern Australia.
Strong demand for broadacre properties is expected to continue in the short to medium term, supported by commodity demand and high livestock prices.
Elders said it had an encouraging pipeline of acquisition prospects in strategically relevant locations and was also pursuing new greenfield opportunities to expand its service offering to clients.
Sustainability was a key focus of the business for FY23 with particular emphasis on the areas of waste management, strategic response to climate change, and community investment.