2009 2009 ANNUAL ANNUAL REPORT REPORT Company Directory Directors Mr Stephen Gerlach, AM, LLB Chairman Mr Mark C Allison, BAgrSc, BEcon, GDM, FAICD Mr Charles E Bright, BA MA(Oxon) Dr James C Fox, BE MEngSci PhD Mr Raymond G Grigg, FSAE-I FAICD Mr James H (Hutch) Ranck, BS Econ Mr Malcolm G Jackman, BSc BCom Mr Ian G MacDonald, SF Fin Mr Graham D Walters, AM FCA Mr Rob H Wylie, FCA Secretaries Ms Sonya C Furey, BEc(Acc), LLM, FCA Mr Ross E Mallett, JD BBus, FCIS, FCPA Registered Office Level 3, 27 Currie Street Adelaide, South Australia, 5000 Telephone: (08) 8425 4999 Facsimile: (08) 8410 1597 Email: [email protected] Website: www.elders.com.au Share Registry Computershare Investor Services Pty Ltd Level 5, 115 Grenfell Street Adelaide, South Australia, 5000 Telephone: 1300 55 61 61 Facsimile: +61 (0)8 8236 2305 Website: www.computershare.com.au Auditors Ernst & Young Bankers Australia & New Zealand Banking Group BNP Paribas Citigroup Commonwealth Bank of Australia HSBC Bank National Australia Bank Westpac Banking Corporation Stock Exchange Listings Elders Limited ordinary shares and subordinated convertible unsecured notes (Elders Hybrids) are listed on the Australian Securities Exchange under the ticker codes “ELD” and “ELDPA” Trustee for Elders Hybrids Permanent Trustee Company Limited 151 Rathdowne Street Carlton South, Victoria, 3053 with the concentration of resources and management effort around the Elders Brand and Network and the Australian primary production sector with a strong balance sheet and expanded shareholder base with the completion of structural reform, the introduction of new management and the identifi cation of opportunities and strategies to unlock improved performance and value for shareholders 20092009 ANNUAL ANNUAL REPORT REPORT 1 2 OUR BUSINESS Rural Services Forestry Futuris Automotive • 391 Australian and 22 • One of Australia’s largest • Design, manufacture and New Zealand points of presence hardwood plantation managers supply of automotive interior • Farm inputs – supply of (by estate size) systems (seating, steering, agricultural chemicals, fertilisers, • Manages over 165,000 hectares trims, carpets etc) animal health and general rural across Western Australia, • 35% minority stake in Air merchandise Victoria, South Australia and International Thermal Systems • Production advice Queensland (65% held by Unitas), a supplier • Farm outputs – marketing and • Provider of MIS plantation of automotive air-conditioning sale of livestock, wool and grain grown hardwood and cooling systems • Financial and real estate services, including Elders’ 40% interest in Rural Bank • Network related – supply chain assets to leverage the network distribution/accumulation capability Revenue*: $2,186 million Revenue*: $185 million Revenue*: $270 million Employees†: 2,393 Employees†: 10 6 Employees†: 566 *12 months to 30 June 2009 †Full time equivalent employees at 30 September 2009 2009 ANNUAL REPORT 3 2009 THE YEAR IN BRIEF REPORTING • Adoption of 30 September balance date with 15-month transition year to 30 September 2009 FINANCIAL RESULTS • Underlying loss after tax of $51.8 million versus underlying profi t of $84.2 million in 2008 • Non-recurring items totalling ($414.7) million: > Gain on divested assets $55.3 million > Results from discontinued operations ($153.8) million > Impairment of assets retained ($101.4) million > Restructuring, redundancy, refi nancing, relocation and major project costs ($115.3) million > Write-down of assets to be divested or discontinued ($99.5) million • Reported loss after tax of $466.4 million • Refi nancing and recapitalisation completed subsequent to year-end: > Cash of $550 million raised through equity raising > Net proceeds applied to debt reduction > Bank debt refi nanced with core debt term extended to 3 years • Pro forma gearing 30 September post recapitalisation of 32% • Dividend suspended (previously 9.5 cents per share fully franked) CORPORATE • Appointment of new Chief Executive Offi cer • Announcement and implementation of Agenda for Change program: > Company name changed from Futuris Corporation Limited to Elders Limited > Organisational and management restructure to single company structure built around Elders brand and network > Change in business model to “owner-operator focus” with divestment of non-core minority shareholdings in AAco, Webster, Amcom and other smaller interests • Adoption of Aligned Partnerships model for fi nancial services: > Joint venturing of insurance distribution > Sale of insurance underwriting > Rural Bank shareholding reduced from 50% to 40% RURAL SERVICES • Underlying EBIT of $8.8 million; down from $57.5 million • Completion of Phase 1 of Elders Business Transformation Project • Successful entry into deregulated export wheat market by Elders Toepfer Grain • Poised for recovery as markets stabilise and Elders Business Transformation Project gains emerge FINANCIAL SERVICES • Equity accounted income of $27.7 million from Rural Bank versus $20.5 million in 2008 • Income from banking and insurance distribution to be reported within Rural Services from 2010 4 FORESTRY • Underlying EBIT of $5.9 million, compared with $61.4 million in 2008: > Excludes EBIT of $4.2 million for 2009 from Timber processing operations divested subject to regulatory approval • 2009 MIS project sales of $23.7 million, market share increased in signifi cantly contracted MIS market • Plantation woodchip price maintained • Named Forest Manager of the Year by Forestry Stewardship Council • Contract signed for sale of timber processing assets for $100 million, subject to regulatory approval • Improvement expected in 2010 with MIS market recovery AUTOMOTIVE • Underlying EBIT of ($15.1) million, compared with 2008 underlying profi t of $26.2 million: > Underlying EBIT of $6.8 million from Futuris Automotive > Underlying EBIT of ($21.9) million from associates • Named winner of global automotive industry awards for product and supply chain management excellence • Chinese operations achieve critical mass and positive earnings • Improvement expected in 2010 as a result of 2009 restructuring and stabilisation of industry conditions ELDERS LIMITED Annual General Meeting This document has been prepared to provide shareholders ABN 34 004 336 636 with an overview of Elders Limited’s performance for the 2009 Reporting Period, Terms and Abbreviations fi nancial year and its outlook. This Report uses terms and abbreviations relevant to the The Annual Report is mailed to shareholders who elect to Company and its accounts. receive a copy and is available free of charge on request (see The terms “the Company”, “Elders Limited”, “Elders” and Shareholder Information printed in this Report). “the Group” are used in this report to refer to Elders Limited The Annual Report can be accessed via the Company’s and/or its subsidiaries. website at www.elders.com.au. In 2009 Elders secured ASIC approval to change its balance Notice of Meeting date to 30 September. The change from a 30 June balance The 2009 Annual General Meeting of Elders Limited will be date to a 30 September balance date has been effected through held on Friday, 18 December 2009, commencing at 10.00am in a 15 month transition period ending 30 September 2009. Hall A, Adelaide Convention Centre, North Terrace, Adelaide, This document reports on that period. Comparative fi gures South Australia. A formal Notice of Meeting has been mailed to provided are from the last audited annual accounts, the shareholders. Additional copies can be obtained from the 12 months ended 30 June 2008. Company’s registered offi ce or downloaded from its website at www.elders.com.au. Accordingly the terms “2009” or “2009 fi nancial year” refer to the 15 months ended 30 September 2009 unless otherwise stated. ‘Year-end’ refers to 30 September 2009 unless otherwise stated. References to 2008 or preceding years refer to the 12 months ended 30 June of that year. References to 2010 or 2009 subsequent years refer to the 12 months ended 30 September of that year. Negative numbers are designated by brackets, for ANNUAL example ($7.0) million unless otherwise indicated. REPORT 5 FROM THE CHAIRMAN This is the fi rst Annual Report issued by the Company since it adopted the name of its principal business, Elders, and changed its balance date to 30 September. The change to balance date has been effected through the 15 month transition year from 1 July 2008 to 30 September 2009 (“2009”) which is reported on in this document. Subsequent reports will address the 12 months to 30 September. The change in name and date are among the more prominent outcomes of the realignment and acceleration Stephen Gerlach of strategy to which the Directors committed the Company at the conclusion of the previous fi nancial year. More specifi cally, Directors identifi ed two avenues to be addressed for improved performance: fi rstly, the concentration of resources and effort around the Elders brand and network; and secondly, the reduction of debt to sustainable levels. This strategy has been pursued with vigour, through a wide ranging program that commenced with the recruitment and appointment of an experienced and capable new Chief Executive Offi cer, Mr Malcolm Jackman in September 2008. As at the date of this report, the objective of rebuilding the business around Elders has been substantially advanced and the objective of low sustainable debt levels has been achieved. There is no doubt that Elders has completed the year in a stronger position than which it began, and is much better equipped