Elders Limited

Thank you very much and welcome to all for the Elders' full year results presentation for the FY25 financial year. Thank you for joining Paul and myself for the session today. As an overview, the full year results today are solid on a year-to-year basis with EBIT up 12%, transformational projects on track, positive progress on leverage and strong cash generation. Throughout the year, Elders demonstrated solid operational and financial resilience in the face of mixed seasonal conditions. Our diversified portfolio through its national geographic footprint and multi-product and service offering played a key role in mitigating the dry conditions across key agricultural regions and the increased competitive activity in our retail business. Stronger activity in livestock and real estate and high financial discipline also supported the solid result. On the transformational project front, we've also made good progress on wave two of our SISMOD project with all states rolled out and bedded down by the end of this calendar year. We are also well-progressed in the final components of this project with wave three and the completion phase, wave four, advancing in full on time. Focusing now on the areas out of our control, the FY25 season has been a problematic year from a seasonal viewpoint. With a drier than average and late start to the winter crop across southern Australia, with credit to our highly diversified business model, this is offset by our agency business, our real estate services business, our financial services, and our feed and processing services businesses. Rural products have seen some limitation with very dry conditions in Southern Australia and Western Australia. In this context, the performance of Elders with its clear and consistent strategy, multiple diversifications, high financial discipline, hard-working and committed team, and enduring customer anchor as the most trusted brand in Australian agriculture on an unprompted basis has remained resilient. This is Elders strong in safety, sustainability and cash flow with a full year outcome approaching the midpoint of the EBIT guidance range provided earlier this year. Moving now to the Delta Agribusiness Acquisition, which completed on November 3rd. This acquisition is fully aligned with the Elders Acquisition Rationale that delivered Titan Ag, Air, and many other Bolton acquisitions to Elders. With pre-synergies, EPS accretion, enhancement of our technical and ag tech expertise and offerings, strengthening of our geographical diversification, particularly in New South Wales and Northwest Victoria, South Australia and Western Australia, building on our crop protection and animal health regulatory package portfolio to drive our backward integration strategy, providing an additional platform for retail segmentation, allowing greater customer centricity and providing further coverage for our real estate and financial service offerings. Moving on to the FY26 outlook, we are very optimistic on the broad outlook for Australian agriculture at a seasonal and commodity level with the return to average conditions. In addition, we welcome Delta Agribusiness to our portfolio as a platform for significant growth. The outlook and fundamentals for livestock remain sound with prices for sheep and cattle forecast to be supported by strong international demand against the backdrop of tightening supply. The combination of a positive seasonal and commodity outlook also provides a great backdrop for continued growth in our real estate and financial services businesses. It's worth noting at this point that our first six weeks of trading for FY26 is tracking some 30% up on last year for the same time on an apples-to-apples basis, so this is without the inclusion of Delta that's come in on November 3rd. Our approach for today is that I'll provide an overview of the results, Paul will go to the detail of their financial performance, and I'll then provide an update of their outlook and growth and transformational initiatives as we deliver the final year of our eight point plan, fourth eight point plan. With the same view, we'll now commence with the FY25 full results presentation.

So if we can move along to the next slide.

The approach as you see here with the five, it's worth noting in the appendix that there's further detail and transparency on sensitivities, business model. That's always worth looking at. So kicking off on the executive overview on the slide committed to improving our safety performance. So from a safety viewpoint, at the core backward-looking metric of lost time injuries, there have been six lost time injuries this year, which is an increase from last year. Quite a disappointing result, predominantly in the livestock area. And so we have been able to significantly reduce injuries across our manual handling our raw products area, but a disappointing result. We continue to aim for zero injuries to anyone. I think it is worth noting that the start of the 8.1 plan process, there were 34 lost time injuries. So we've made significant progress over the four 8.1 plans and the lost time injury frequency and the total recordable injury frequency, and you can see the trend of the second slide, are significantly below equivalent industry benchmarks. Moving to the next slide, just a quick snapshot of the financial performance. You can see the underlying EBIT, some 12% up on last year, a return on capital 11.3, holding stable, and maintained strong cash conversion and the dividend per share payout. Moving to the next slide, so Paul will clearly go into the detail on the financials. Moving to the next slide, and this is over the eight-point plan And you can see significant return as committed in April Plan 1, 2, and 3. At the beginning of, or just prior to April Plan, the fourth April Plan, we took the decision to invest heavily in our transformational projects. And there's some $100 million of cost and capital being spent through this period in order to drive our systems modernization project. our automated wool project and also our crop protection formulation project. So we knew that that would drag on our cost capital and resources and focus through that period, but critical transformational projects that were at the process of completing with the formulation process complete, the automated wool project complete, and with SISMOD running into wave three and four, which are the final two waves through next year. Moving to the next slide and some of the work we're doing across with our people and communities. It's worth noting again 186 years of elders in Australian regional rural Australia and agriculture. Unprompted remain the most trusted brand throughout all of these areas and with significant activity across with multiple activities across the business from a safety viewpoint. A very clear focus on safety from an engagement, enablement viewpoint. As you can see, quite high engagement enablement, as has been for many years, and also a very high focus on safety throughout our people. Moving to the next slide, and just a quick look at the work we do from a sustainable, responsible future viewpoint. Many of you are aware of our alignment across many environments. people and community projects and the work we've done with our sustainability report. And you'll note the very strong and aligned partnership with the Royal Flying Doctors. So from our viewpoint, this is who we are. This is core to our DNA and we'll continue to invest and be highly engaged with our communities around Australia. Moving to sustainability and our progress against the emissions targets for the next slide. And you can see the trend towards the emission targets we've set. We'll continue to work through these. As many of you will also be aware, there's been a reviewed methodology on emissions calculations from livestock. So we're working through that. But I think the point to note is that we're well on track. And if you take the time to read the sustainability report, I think you'll be very impressed with the progress we've made right across the board in this area. Moving to the next slide, and this is really to emphasise one of the changes that we've made this year. Historically, we've been diversified by product and service, and we've talked about that in our business model, and it's in the business model that appears in the appendix of this pack. But you'll see right through the supply chain, from crop protection, through to wholesale, we're there, Elders Rural Service, Delta Agribusiness, and then real estate and feed and processing, there's a very solid diversification component that comes out of their business. And if you look through all the key investment drivers, and I think Paul will comment to many of these, very strong EPS growth, diversification, the industry fundamentals are looking very good. And I think it's one of the points that you'll hear us make a few times that, We're at the stage now where we've moved through our transformational projects and the big cost of capital resource investment, and we've got an outlook of positive commodity conditions and also seasonal conditions. So we feel very, very optimistic about the next three to five years as we run through all of these. And finally, just as a quick recap before we jump into the deep dive into the financials, the next slide, just to recap on... Delta Agribusiness that joined the group on the 3rd of November. Great business, well-run, very complimentary from a geographical viewpoint, and fills many gaps that we did have. Very strong in its technical expertise, which also compliments Elda significantly. We're looking at $12 million of synergies at EBIT level over a three-year period in the original business case. Now, given that the ACCC have put on a 12-month delay, we're discussing around the Delta board on how we can fast-track this with regard to backward integration, given their strong foundation of four seasons. brands or products at the moment. So that's a very positive opportunity to fast track those synergies. Targeting greater than 15% post synergies from an ROC viewpoint and very much aligned to elders across our approach to the business. And as we've said a number of times, as divisions, all the divisions are standalone. So with that, I'll pass over to Paul to go through the financials, and then I'll come back towards the end on strategy and outlook.

Yeah, thanks, Mark, and welcome, everybody. I'll commence on slide 14 of the PAC, which summarises progress against key financial objectives. Highlights include double-digit growth in our agency, real estate, and feed and processing businesses. The low inflation cost growth when adjusted for acquisition and transformation. Strong momentum in Sysmod, as Mark referenced, with all states now live on Wave 2 retail and Wave 3 livestock to commence rollout in early 2026. Product and geographic diversification, mitigating the impact of dry conditions in southern states. Delta ag acquisition to further enhance our geographic diversification from FY26. and strengthen our technical capability in ag tech and precision agriculture. Leverage to return to target in FY26 through a renewed focus on capital allocation and client profitability. I'll now turn to slide 15, which displays Elders' five-year financial performance. I note the following progress from FY24. Sales revenue increased 70.4 million, or 2.2%, despite mixed seasonal conditions supported both by acquisition and organic growth. Gross margin increased 7.4%, up $47 million compared to the prior corresponding period or PCP. Comparatively, costs increased 6.2%, noting this includes the impact from acquisition and is therefore not comparable to inflation. Costs will be further discussed later in the presentation. Underlying EBIT increased 15.5 million compared to PCP, but has declined over the five-year period with FY25 impacted by dry conditions. Moving to slide 16 now, which contrasts FY25 against PCP. In addition, this slide details the impact on key financial metrics from capital held on September 30 in preparation for the completion of the Delta Ag acquisition. which occurred on November 3. Builders has delivered a resilient result with the following highlights evident. Sales revenue up 70.4 million, despite dry conditions in some key cropping regions, which thankfully ended in June. Gross margin increased 47 million to 684.6 million, up 7% year on year, with growth achieved across most products. Underlying EBIT increased 15.5 million to 143.5 million, supported by a strong turnaround in agency services and continued growth in real estate. Return on capital was steady at 11.3%, notwithstanding the mixed seasonal conditions and the system's modernisation capex weighing on this metric as the capital outlay precedes benefits. Improving this metric in FY26 is a key priority. Cash conversion was broadly in line with expectations with a favourable outlook for FY26. Net debt increased $20.5 million to $457.3 million, excluding capital held for the Delta completion, broadly in line with sales growth and the impact of higher cattle prices. I'll discuss these key metrics further as we move through the pack Moving to slide 17, which displays Elders gross margin diversification, a key defense against seasonal variability. As noted, gross margin increased 47 million to 684.6 million, with growth across most products more than offsetting the impact on crop protection from dry conditions. The key drivers of this result include agency gross margin up 27.1 million or 22%, following a strong recovery in livestock prices and increased cattle volumes. The outlook for agency services remains positive, driven by strong international demand for protein, as well as some destocking in drier regions, limiting supply and supporting prices. Real estate services gross margin increased 22.5 million, or 27.2%, with property management, residential, broadacre and commercial all improved on PCP, supported by both acquisition and organic growth. Feed and processing was another highlight with gross margin up 4.1 million or 23.8% due to productivity and efficiency benefits from the new feed mill commissioned in August 2024. Financial services gross margin increased 2.3 million or 4.2%, supported by continued growth in our new broker model, alongside improvement in the livestock warranty product. An increase in on-balance sheet lending was also achieved, partially because of the increased cattle prices. Collectively, the increase in gross margin across these products more than offset the reduced earnings from the exit of the Rural Bank Exclusivity Agreement in FY24. Wholesale products delivered a steady result, notwithstanding lower crop protection sales from those dry regions. Growth in the above products significantly outweighed the negative impact from crop protection, which will be discussed further on the following slide. Moving to slide 18, which analyzes product performance. This slide demonstrates the importance of our product and geographic diversification. The rainfall deficiency chart shows the extent of dry conditions, especially in South Australia and Western Victoria, which negatively impacted Elders retail business, with sales, gross margin percent and client confidence all impacted. Fortunately, seasonal conditions improved from late June, with cause for optimism for a recovery in these regions in FY26. Turning now to slide 19 to discuss costs, which increased 11.4 million or 2.2% when adjusted for acquisitions and the impact of transformation. Part of this increase resulted from the inclusion of elders wool in base costs from transformation in FY24, which added an additional 3 million or 0.6% to base costs. Given this change in categorisation, holding base costs below inflation was a pleasing outcome. Turning now to slide 20 to discuss return on capital, which was steady in FY24, despite mixed seasonal conditions. When adjusted for the impact of acquisitions and transformational projects, return on capital is 12.7%. Lifting return on capital is a priority for FY26 through a renewed focus on capital allocation client profitability and delivery of SISMOC benefits. In terms of capital allocation, Mark will speak to the potential divestment of the Kalara feedlot in the strategy and outlook section. Moving now to slide 21 and working capital, where we see an increase of 68 million from FY24, mostly driven by higher cattle prices, which increased working capital in feed and processing. and financial services. Resale inventory increased 12 million from FY24, a pleasing result given the late start to winter crop in key cropping regions which caused an uplift in carryover inventory. This carryover inventory is forecast to clear in the first half of FY26. On to slide 22 and cash flow where we see an operating cash inflow of 117.9 million a pleasing result considering the late start to winter crop, which pushed some receivables to the fourth quarter. The outlook for operating cash flow and cash conversion in FY26 is positive, with a focus on client profitability to result in some receivables being transitioned to third-party lenders away from Elders' balance sheet. I note that the physical payment of company tax for Elders Limited will recommence in 2026. We'll now move to slide 23 to provide a detailed update on net debt and leverage. The waterfall charts display a normalised net debt and leverage position, adjusting for the benefit of capital held at balance date in preparation for the completion of Delta Ag. Breaking down the movement in net debt, we see an increase from $436.8 million at the end of FY24 to $457.3 million at balance date. Acknowledging this includes the benefit of $50 million of equity retained for flexibility and acquisitions, approximately 40% of which was deployed in FY25. I note that the majority of net debt pertains to client receivables, which is self-liquidating in nature. Excluding receivables funded through debtor securitization, Elders Core debt is $161.9 million. Turning to leverage, we see a reduction from 3.1 times at the end of FY24 to 2.9 times normalised for Delta funds held. A return to our target range of 1.5 to 2 times is forecast in FY26 from a renewed focus on capital allocation and client profitability and increased referral of client loans to third party lenders given trade receivables comprise almost two thirds of net debt. I note that the return to target leverage is underpinned by, but not dependent on, the potential sale of Collara feedlot. I'll now move to slide 24, where we see significant headroom across banking covenants, noting that these calculations do not require adjustment for the capital held for the completion of Delta Ag. I also note that our bank leverage covenant excludes receivables funded through debtor securitisation, given their self-liquidating nature. I'll now move to slide 25, which provides a macro overview of key growth pillars over the coming years. This slide has been included to demonstrate significant growth opportunities and focus areas over the coming years and is not meant to be exhaustive. Regarding systems modernisation, Elders has now commenced the final wave of its SysMod program, which once completed, will provide Elders Rural Services with a modern technology platform in Microsoft Dynamics, which itself is evolving at pace. Delivering a return of at least 15% on the program spent is both a high priority and significant growth pillar for the coming years. The acquisition of Delta Ag represents a significant milestone for Elders, increasing points of presence and geographic diversification, while enhancing Elders' technical expertise in ag tech and precision agriculture. Accelerating synergies from backward integration in crop protection and animal health are key priorities for FY26, as Mark noted. The divisional structure is aimed at improving focus and accountability within significant business units. By way of example, real estate services gross margin has grown 45.6 million or 77% since FY23. The market share remains less than 5% nationally. in this and other business units. Acquisition will remain a growth pillar alongside organic growth, provided acquisition prospects meet our financial and values criteria. Finally, the new Elders Brokerage business is noted as a growth pillar, given success to date with our brokered loan book exceeding $1.3 billion from a near standing start in FY24. Gross margin from loan brokerage has increased from 0.9 million in FY23 to 6.1 million in FY25, at a CAGR of 160%, with our network of brokers expanded further in recent months. This concludes the financial section of the presentation. I'll pass back to Mark now, who will provide an update on strategy and outlook. Thanks, Paul.

And really leading off from Paul's comments on the divisional structure, just going to slide 27, as we look at the fourth eight-point plan. And historically, we've expressed the eight-point plan in terms of the diversification of our products and services. And we're now looking at the eight-point plan in terms of the six divisions of elders and how that diversification across the matrix of products and services, and it's further to our ability to work through difficult seasonal conditions. So when you look at the, this is the final year of the fourth eight-point plan, we've had the ambition of 5% to 10% growth in EBIT and EPS through the cycles over an eight-point plan. Clearly, as we, at above 15% return on capital, clearly as we come into a taxpaying state in the next year, financial year. The EPS growth ambition will need to be adjusted accordingly. And we've emphasised the impact that the transformational part of our agenda over this three years has had from cost capital and resource on the business. But we're setting us up now for a very solid platform with all the transformational projects coming to a close. as we go forward for the next three to five years. Going on to the next slide, our view and our move to go to a divisional structure effective at the beginning of FY26 was really around the fact that each of these areas of the businesses had largely been run as either stand-alones or with a particular focus and emphasis through the governing board or management team. So as we've laid them out, we've laid them out in order of supply chain, starting with Elders Crop Protection. They're experienced managers right across all of the divisions. So Elders Crop Protection with Nick Vesekis. This includes Titan Crop Protection business and formulation businesses in Eastern Australia and Western Australia. with Agritol and Eureka, and it's a specialist crop protection business as per a new farm, Atoma, et cetera, et cetera. Then we move the next step along the supply chain to a wholesale business with Petalari, and this has, I think you're all aware of AIR, the multiple touch points and membership base throughout Australia for the AIR business, and it's a highly efficient and effective warehouse network throughout Australia. Next, as we go to retail, we have Elders Rural Services, which has a complete offering of retail products, agency products, real estate, financial, et cetera, right across the board. And that business at the moment, since the split in divisions, I've been acting as the divisional CEO for ERS. And very shortly, we'll have an upgrade to that appointment and we'll announce that in the next few weeks. The next business, again, Gerard Hines running Delta Agribusiness, very experienced and competent manager and co-founder of the business and with an excellent executive team. So Delta Agribusiness has a much greater focus on cropping technical service with some additional services, products and services, but very well run and looking forward to a period of strong growth in profitability across the board. Elders real estate, so Tom Rosso had previously run the product of real estate before he ran the Elders network. And so we thought it was appropriate for him to take control of the separate dedicated division. The idea here is that Elders Real Estate has grown significantly and we talk about the growth profile in some slides coming up. Tom is a highly experienced professional in this area across a number of areas as well, has been the guardian of the expansion of the property management component of Elders Real Estate and also our entry into commercial real estate, which we kicked off big time in Tasmania. So lots of growth opportunity there, highly dedicated manager and executive team and pretty exciting. And then feed and processing that we talked about with Andrew Talbot, another highly experienced manager with a great team. He's grown the profitability of feed and processing five-fold since the first eight-point plan. I've done an excellent job. The record profitability of this division this year is based on a number of the investments we've made historically with feed mills, centre pivot irrigation, shading, a bunch of investments that have enhanced welfare productivity. And it's a very, very well-run business in the portfolio. The consideration we've had with feed and processing is, as you look across that supply chain, feed and processing is a different business to the others. And our thinking is that it's been highly successful. It's grown significantly. We've invested significant capital and got good returns, as we saw with record profitability this year. But we've reflected on whether feed and processing would do much better and go to the next level under natural ownership. And so that's the reason we're considering a divestment of the feed and processing division. And if the moons align and there's an appropriate shareholder value creating proposition put in front of us, we'll consider it strongly. And I just reiterated Paul's earlier comment that our pathway back on leverage and to a lesser extent, well, actually on leverage is the key metric we're thinking about, is not dependent on the divestment of feed and processing. So if the exercise comes up with options that are not to enhance our shareholder value, then obviously we're very happy and it's a great business and a great team to be in the eldest group. So moving to the next slide, if we look at the modernising of the platform, we've talked about Sysmod. We gave a commitment from a transparency viewpoint to disclose each of the cost capital components of each of the waves as the board approved business cases, so when it was formally approved, and we've done that. But you can see, and if we include wave one, there's some $100 million to $110 million investment over this period. And this is the period in that slide that we talked about up front, where from FY22, where we have had considerable transformational investment. Now with all of these investments, as we've seen with Clara on the capital investment there, there is a lag. And so the benefits of these investments are coming through now in FY26. And as we close off this night at the end of FY22, calendar FY26, we'll look forward to those investments coming through into the future. And I think it's worth noting that this does really set us up with a contemporary platform where we can take advantage of multiple opportunities that historically we haven't been able to. So just looking to the next slide and running through each of the waves and the different components of the waves, that's really for for information, but as I mentioned, the plan is that we'll complete these. We're still running in full on time, which I know sounds amazing for an IT project, but we're still running in full on time, and we're looking for the finish line as we run out next year. Okay, now moving to the next couple of slides, and the next two slides, we've wanted to showcase a couple of products and services. just to put more of a spotlight on them. And for this presentation, we picked financial services and real estate, which we had covered in the half year. But really, to emphasise, in terms of the balance of our portfolio of products and services, we've now clearly, we've strengthened that position across the whole supply chain in rural products, from elders crop protection to wholesale to retail all the way through, and technical service. And in our portfolio, we're looking at really strengthening and rebalancing our financial services, all like capital and real estate. So the characteristics of both of these services, as we look at them, and it fits nicely in our portfolio management, the high return on capital, we have relatively low market share in both financial services and in real estate. The brand is important. So, unprompted, most trusted brand in Australia and regional rural Australia and agriculture. So, the Elders brand is critical. There's excellent market outlook in both areas. And obviously, there are links to livestock and general commodity outlook, but a strong outlook. And it really does help us balance the portfolio. So, just a quick look at financial services. And you can see, in line with Paul's comments, solid growth, replacing the rural gains go exclusivity agreement and growing in a capital like manner. So, and we can go to questions on that in detail. The next slide on real estate, very, very similar profile. And I think the gems that are probably not as obvious for everyone, one is the product, sorry, the property management business. We have some 20,000 properties that we're managing now across Australia. which is a very solid and reliable flow for us, and also our entry into the commercial real estate, but only in regional rural Australia. So very, very positive platforms. And in terms of portfolio balance, quite nuanced, and this is how we run elders this year, many of you are very aware. So then going to the forecast and outlook across all of the areas on the next slide, Without going through each one of them, and I'll show each one of them on the next slide, you can see our thinking is that we've had a period of difficult market conditions and significant transformational investment. We've come through that period with lagged benefits from the transformational investment, Right now, we're confronted with the next three to five years. We're looking at completion of the transformational projects, the commodity outlook and the seasonal outlook being average to positive, and our ability to really hone in division by division to grow, to drive the capital out, as Paul mentioned, from a leverage viewpoint, and to enhance the business for strong growth. against the backdrop of average to good seasons. So it feels very positive. For the first six weeks, as I've mentioned, of this trading year, FY26, apples with apples. So with that, Delta included, we're up some 30% on the previous year. So very early days. But I think it does fall into our thinking and how we've been talking about our outlook for FY26 going forward. So with that, I think I'll open up for questions. So we'll just leave that slide on the screen and we'll open up for questions.

Thank you. If you wish to ask a question via the phones, you'll need to press the star key followed by the number one on your telephone keypad. And if you wish to ask a question via the webcast, please type it into the ask a question box and click submit. Your first question comes from James Ferrier from Canaccord Genuity. Please go ahead.

Morning, Mark and Paul. Thanks for your time. First question I wanted to ask you about was just getting on your view on livestock volumes in the year ahead, just in the context of the volumes that were achieved in FY25 as a baseline, the herd sizes as they stand right now. I mean, everyone can see the livestock prices, but what's your view on volumes in the year ahead?

Yeah, thanks for the question, James. you know, it is one where there is, you know, a little bit of uncertainty going forward. I think particularly in sheep volumes, and just for those who don't know, we saw certainly higher cattle volumes in FY25, up about 13%, sheep volumes were down about 8.1%. So we do see, you know, that rebuild coming through SA and Western Vic, and that's likely to you know, to drag on sheep volumes into FY26, you know, cattle's a little bit different, you know, just because of the geographical footprint. But it is one to watch. But what we do expect is that, you know, if volumes do taper off in sheep, we expect prices to offset because, you know, the international thematic for Australian protein remains very strong. And so we just see that price being flowing through this the supply chain.

Yep, that's that makes sense. Thanks for second question on slide 17. We can see there that crop protection gross profit declined 9%. On PCP, what was the volume of product associated with that 129 million gross profit?

I don't have a volume number to hand, James. I'll see if I can cover that post. But I will speak to the impact of dry conditions. So we did note a roughly $12 million impact from SA and Vic Riv at the half. We saw that continue into the second half, mostly in Q3. We think the impact was roughly you know, 19 million volumes. Yeah, we're certainly up in Northern New South Wales, obviously down in SA and Vic, but I don't have the net on the two years.

I think, James, the story is on margin compression as, you know, as you've seen with other businesses and the similar that we experience, particularly in the dry areas.

Yeah, OK, understood. Thanks marketing. Last one from me and probably one for Paul again. Just just some thoughts on DNA. CapEx interest in tax for the year ahead.

Yeah, look depreciation will increase, you know, given the completion of wave two and the commencement of the continued amortization of sysmod CapEx. In terms of CAPEX outlook, once again in FY26, it is dominated by SysMod. Some of Wave 4 will fall into FY27, as you can see on the SysMod slide. So it's a bit uncertain, but we think, you know, I'd say sort of 20 to 25 million will fall from SysMod into FY26 and perhaps another 5 to 10 outside of that. In terms of of tax, so we will pay a small amount of tax, about $1 million, following submission of the FY25 tax return, so that'll be in February 2026, and then we'll pay, essentially pay-as-you-go company tax thereafter. I think your question may be referring to the statutory tax rate which fell in FY25. That was pertaining to a tax credit related to prior period for R&D. So that's likely to be non-recurring. That's great. Thanks, Paul.

Thank you. Your next question comes from Richard Barwick from CLSA. Please go ahead.

Good morning, guys. Can I just double check, when you're talking SysMod and obviously it looks like some benefits from an EBIT perspective are expected in FY26, are you able to put some numbers around that and then equally what you would see as the non-underlying OPEX impact from SysMod in 26?

Okay, so yeah, thanks. Thanks for the question, Richard. So in terms of benefits, the major tranche of benefits is through an uplift in retail margins. And we see that coming from better control of discounting and better categorisation of clients. And, you know, just for context, you know, 1% uplift in retail gross margin percent is about $22 million, so a half a percent uplift there gets us fairly close to the benefits required. The other benefits we see coming from uplift in sales, and that comes from better client data over time, but probably longer dated than the retail margin benefits. In terms of non-underlying OPEX for FY26, so if we work on you know, roughly 60% CAPEX, 40% non-underlying OPEX over that sort of 20 to 25 million in FY26.

Okay, thank you. And my other question is to do with the, there's quite a sizable impairment of goodwill obviously captured within this FY25 result. Can you just Give us a little bit more background exactly what that related to, please.

Yeah, so there's a couple of businesses that we impaired, you know, both which were reported on, you know, during FY25. So one was Care & Co, where we lost a number of agents in Victoria. The other was Esperance Rural, whatever. Yeah, we had... I suppose, an unsuccessful transition post-turnout.

I think, Richard, it's one of the learnings is that, as you know, we've been highly successful with our acquisition, bolt-on acquisition template in keeping the vendors in the business. And when we do our post-implementation reviews post-turnout, it's been 95% plus positive. And we've identified in the last 12 months whether it's through tougher conditions or whatever the driver is, that the two years post-turnout is now an area that we need to really focus on in terms of potential loss of staff, as we saw with – actually, it was longer than two years with Terranco, where the vendor leaves the business, the earner has completed. Historically, we've seen that in business as usual within ERS. And we've now established a project a couple of months ago to identify how we ensure that we don't get a repetition of that situation, because it had been a very high success rate of post turnout of keeping the people.

And I guess the obvious question is, what are the risks? I mean, obviously, you've got something in place here to try and mitigate it, which would suggest you are a bit concerned that this could repeat with some Because, I mean, you've made a lot of acquisitions in the last few years. Yeah. Yeah, how do we think about that risk?

Yeah, well, I think the couple of points is that if there are something in the order of 100 Bolton acquisitions and we've had two or three like this, clearly the current car was a larger one. If you like a sense of Shakespearean irony, the Esperance rural supply defection was to Delta. I'm sure you'll enjoy that. But I think the materiality of it has dropped off because we aren't pursuing the same sort of strategy on bolt-on acquisitions as we've had, as you're aware, given that the rural product supply chain is pretty complete and also given that the ACCC regime is hard to unscramble to do business. Our sense is that that won't be where we'll be getting our growth from. It'll be more organic. But I think the issue is that post-turnout, and we have time, we have two or three years each time, we have to have the business as usual hooks and retentions in place for these people. Because as you know, in regional Australia, the personal relationship goes a long way.

Absolutely. Okay. All right. That's helpful. Thanks both.

Thank you. Your next question comes from Ben Wed from Macquarie. Please go ahead.

Hi, Mark and Paul. Thanks for the question. Maybe just turning to your question, your comments around capital allocation there and particularly with the potentially moving some of the receivables into third-party lenders there. Just be interested in sort of, I guess, any timeframes you can give around that and how that sort of looks from an operational standpoint.

Yeah, thanks, Ben. Look, it is something, and I think the way that I'd explain it, firstly, is that we are taking a return-on-capital approach. So, you know, where we're not seeing, I suppose, a deep relationship with clients, that warrants the use of Elders Balance Sheet, then we'll look to obviously do that business with the client, but use third-party financiers. So we do see this as certainly something that has commenced already. It's a process that's commenced, and that will roll through FY26 and beyond, but it won't be something that we seek to do hurriedly either. So it'll be an incremental thing over a number of years with a significant start in FY26, particularly in, you know, the fin services and seasonal finance areas.

Yeah, got it. Thank you, Paul. And then maybe just any comments you can sort of give us around Delta's sort of performance over the last 12 months as it might compare to elders as well in some of those key categories like ag chem and other cropping areas.

Yeah, thanks, Ben. So, I mean, just a couple of comments. I think the first thing to note is that Delta's financial year is June 30, and their rent was very exposed to dry conditions that occurred in FY25. So I think there are a couple of key distinctions between Delta and Elders. The other being, you know, elders obviously had an offset in livestock agency that doesn't exist to the same extent in Delta. Yeah, so the Delta result was impacted, you know, certainly more than elders, you know, by the drier conditions. Trading since it started raining in July in Delta has been above, certainly above PCP. So, yeah, that business is operating very well.

Yeah, thank you both. Thank you.

Thank you. Your next question comes from Evan Karatsis from UBS. Please go ahead.

Thanks, Paul. Maybe just to follow up on that one then. So for the ASIC accounts for Delta, so the EBITDA went from sort of the 53 to the 40 mil. Can you sort of just give a bit more information around if you expect that original FR24 earnings to be realized assuming, I guess, normal conditions. And then you can say around the synergy benefit we should expect in 26 for Delta as well.

Thanks. Yeah, I think the key point for us is that what we experienced as the turnaround from this dry conditions was outside the Delta financial year. And so that's what we've experienced ourselves. Just as a note, prior to to going to the next phase on the acquisition a few months ago. We, so Paul, myself, and the chair of the time, Ian Wilton, sat down with the Delta management team to go through their FY25 results, just to give ourselves comfort that our proposition of basis on the acquisition remained on track. And, you know, after the presentations, discussions, I think Paul said that we felt very, very comfortable. In terms of your question on the synergies, I think it's a key point for us. We've already had meetings with the team, with Gerard and Matt and Chris and the team, around the synergies. We had planned for 12-month, sorry, a three-year plan development of the extraction of the $12 million synergies. Our belief is that given the timing, given the November 3rd timing and the proximity to the FY26 winter crop, that we do have time to do a lot of the work that we wouldn't have been able to do if it had been in the same period the previous year. So our sense is that we can fast track those synergies. and bring them through. And as you know, they're largely crop protection. They're largely providing different crop protection supply chains out of Titan into the Four Seasons brand. And with Steve Hines, the person who runs that business within Delta, there's great alignment with Nick Vasekas, who runs the overall crop protection business. So we've established the governance structure, the board structure, et cetera, around Delta and all the divisions. And again, I feel pretty comfortable and optimistic that we will optimize the synergies in FY26.

Thanks for that. Just a final question. With the debt position, can you provide a number to sort of normalize it if you removed the reduction in carryover inventory in SAV? and removing or transitioning some of the select client loans from the Elders Balance Sheet to third parties, just so we can sort of look for an adjusted or a life-to-life debt position, please.

Yeah, look, just very high level and back of envelope, I would say the carryover inventory, I'd put a number of around $30 million on that, which we expect to be resolved in the first half. In terms of, I'll put another bucket in there, Evan. In terms of overdue debtors, we think there's a $20 to $25 million opportunity there. You may have noted that we have had a $10 million increase in 90-day plus receivables. That is two clients, two large clients that we expect to be resolved in FY26. So we feel that we're at a peak in terms of overdue receivables as well. And then you've got, in terms of, you know, client receivables or client loans, seasonal finance and loans, you know, I'd put a number of sort of around, a target of around 50 million across, you know, financial services and seasonal finance.

Yeah. Okay, that's super helpful. Just a quick one, I'll just sink it in. The 1Q comments you made, do we assume you're up 30%? Do we assume we're sort of back close to that? I think you probably mentioned like a through cycle 1Q average EBIT was around 37 mil. Is that sort of where we're, I don't know, trending towards or run rating towards?

Yeah, and I think in terms of tailwinds in the business, Evan, So I think the certainly lifestyle prices are up relative to year on year. Yeah, I'd say that, you know, that tailwind will moderate the further we get through the financial year. Obviously, lifestyle prices increased, you know, throughout FY25. But I think in terms of, you know, the Q1, it goes back a couple of years to when we gave that number, obviously noting that's not audited. But yeah, it's a fair comment.

Okay, cool. Thanks, guys.

Thank you. Your next question comes from Paul Jens from Pack Partners. Please go ahead.

Thank you. Just one at the top, Mark, if I can. You talk about the 5% market share you have in the wider farm input space. Can you see some additions to your business or the elders business, or is it a case of organic growth from where you are to get a larger part of that pie?

Yeah, thanks, Paul. So when you say the larger rural products, are you referring to finance?

Right across the board, you had a chart there with the Delta acquisition where you're a small part of a very big pie in farm inputs. And you've got the new structure that you have. And I'm just wondering where to from here if you're just such a small part of the pie?

Okay, yeah, so that broader pie includes fuel, like all the finance, et cetera, et cetera. So a whole heap of services that we're not in. So I think our focus with... Well, I think it's the focus that Delta has had for a long time will continue on, where it's a service-based, customer-centric approach across the board. Delta are very small in Queensland, but ERS is also not that strong in Queensland. So there are geographical gaps, but it'll largely be sticking to the knitting of what each of the divisions does best. And in the case of Delta, although it's got some broader offers, the focus is around, you know, that very technical rural products-based customer centricity.

And that's across the broader Elders business as well? If I look at the new structure that you have, it's really just sticking to the core business? You don't see another bolt on there?

No, I don't think so. I think our view is that the... Any deviations, slight deviations from where we are now, we've talked about in the Elders real estate business, it's around strengthening our commercial real estate in regional rural Australia area, continuing to build on our property management business, which is a really solid, good business. I think in ERS, there's a lot of... In the traditional pink-shirted ERS front end, there's a lot of efficiency because we've just put Sysmod through ERS. They've got the... across all the branches across Australia. So it's really around all the efficiencies that we promised out and controls. And again, customer understanding that Paul talked to in terms of data that the ARS hasn't been doing in the past. In terms of elders crop protection, I think the focus will be a little more on integration because the formulation businesses run standalone to the traditional Titan business. So we'll slowly move around integration there on systems. And then the feed and processing, really we're looking at ways of expanding efficiency with acquiring extra land with some increased backgrounding. Many of the efficiencies programs that we've had previously. So across each division, and I guess it goes to the point of why having focused divisions makes so much sense, because each of them have their own nuance, their own focus, and it allows the management teams to really drive the efficiency and profitability.

Okay. And then the second question, if I can, is if I build the building blocks towards the, say, 2027, 28 numbers that consensus have, There doesn't seem to be a lot of, I suppose, underlying organic growth. If you do the Sysmod, the 250 staff that came across with the Boltons, Delta, and the small free kit you get from 25, some of the earnings come into 26. So I'm interested in that organic growth number because I don't think ConsenSys has got a big number in there for it, and neither do I at the moment.

Yeah, well, I'm not sure what the assumptions are on the models, but I do know from a, I mean, if backward integration is organic growth, and we certainly see it that way, the backward integration opportunity, or ERF, still has 10 or so percent to go. of the available generic portfolio and the back, just in crop protection. And in Delta, there's probably 40% to go. So I think from us doing things that we control, not relying on market conditions, there's a lot. And then you've got also the benefits, the lag benefits of the transformational projects. But yeah, your observation is probably right, Paul.

And the final one, I thought others would ask this question, Mark, but I'll do it. The press, I love talking about management transition, Mark, and your term comes up at the end of next year. I'm interested in whether you could return fire with what the press like talking about with management change.

Yeah, no, I thought the comment The Australian was relatively accurate. I said when we refreshed the board and I stayed, I decided to stay, I said the earliest that I'd leave would be at the end of this APON plan. So that's September next year. And that's still the case. And it's not a term in the contract. It's an ongoing contract. So basically my position has been that as a minimum, I'll stay to the end of the APON plan.

Thank you, Mark. Thank you, Paul. See you later in the week.

Thank you.

Thank you. Your next question comes from John Campbell from Jefferies. Please go ahead.

Hi, guys. Thanks for the opportunity. Just, Paul, firstly, just clarity. What's the dollar value of adjustments that you've made to arrive at adjusted EBIT?

So you're in the investor presentation, John?

Yeah.

Yeah, just the $143 million, just for clarity. So I know what we're adjusting.

Okay. I might just come back offline on that. So we do have, yeah, we've got a list in the annual report, but yeah, I'll come back offline.

Yeah, I can see where you've got that in the account. So I just wasn't 100% sure which is included. in your adjustment calculations but I think we've got a call on this afternoon Paul so we can maybe touch base then. Thanks for that and just Mark around and you sort of touched on it but I presume with the improving seasonal conditions in the southern regions that impacted in FY25 in terms of that competitive intensity in crop protection that you've been talking about. I presume you see FY26, so that sort of level of intensity and price competition and the like abating over the course of 26?

Yeah, I think there are probably two components that leads us to think that way. One of them is around the seasonal conditions, as you've just mentioned. And the second one is the stabilisation of cogs out of Chinese factories. So the idea of lower priced cost of goods coming into Australia and then driving market price down, that doesn't seem to be where it was. Earlier, I think six months ago, we were concerned that tariffs on Chinese crop protection into North America may drive dumping of product in Australia and therefore further drive prices down. If you caught that high cost inventory, you're obviously going to be screwed from a margin viewpoint. But our sense is that it's stabilised. And, you know, regardless, even a stabilised normal season environment, Australia has the lowest crop protection prices for all around the world. And it's not uncommon for multinational companies to divert product from Australia to Europe because they can make so much more money out of the same active ingredient.

Hmm. Okay, so that all augers pretty well for crop protection for 26.

It looks like, yeah, as I said, I think we're pretty optimistic, both commodity, season, and they're breaking the back of the transformational projects.

Yeah, yeah, okay. Thanks very much, guys. That's it.

Thank you. Your next question comes from Mark Topey from Select Equities. Please go ahead.

Good morning. I just wanted to ask a question around the property side of retail, the growth and both in the gross margin and the sort of volumes and some expectation around it and maybe some breakdown between what's organic and what's been achieved by acquisition because you clearly got a very strong growth rate. Can you give us some sense of how that looks going forward now?

Yeah, thanks, Mark. So just for clarity, so that was for real estate services.

Yes.

So look, in terms of growth, we see roughly the split between acquisition and organic, about 60% acquisition in F25, 40% organic. I do note that one of the significant benefits from the acquisition of Nye Frank was to substantially grow our commercial real estate business. It also introduced a valuations business to the group as well. So, you know, when we think about, you know, real estate growth, it is across, you know, residential properties under management, Broadacre, commercial, and now valuations. So there's a few strings to the bow there. I'd also just make a comment in regards to Broadacre. It did grow, but very fractionally in F25, you know, that part of the book was held back by the dry conditions in South Australia and Victoria. We do expect, you know, sort of pent-up vendor demand, you know, as those regions improve.

Right. Just thinking about that Tasmania market, I'm going to say, how much growth opportunity do you see in that market going forward?

Yeah, I think with Tasmania per se, I think it would be incremental growth. But I think the big benefit of that acquisition, which is the Old Knight Frank business, is the commercial real estate knowledge, networks, et cetera, in the mainland. And we're already seeing that as very, very important. So there are many contacts and insights that we didn't have on commercial real estate that we've gained from that business that is really helpful in our business. our approach to mainland expansion and commercial real estate.

Great. And just on the Delta side then, can you just talk to the systems and system harmonisation in terms of what's being done in Elders and whether any capex might be required if you like to harmonise Delta in line with Elders?

Yeah, so the SISMA project is predominantly Elders. And our approach at the end of wave four, when we switched off the S-400 and we're completely on Microsoft Dynamics 365, we might have got a discount. Definitely not. So from that point forward, each of the acquisitions or each of the other divisions, whether that be AIR, Elders Crop Protection or Delta, will be business case-based. So if there's a business case from the Delta board around aligning, enhancing systems, then it will be treated on a return on capital business case basis. And we want to take it to business as usual because it's not just an ideological everything has to be on the same system. This is all around return for shareholders. And all the systems they're all operating on are fine.

They're all fine. Okay. I was going to say. I note you want to accelerate the Delta, but in terms of any risk areas, in terms of that integration, I notice for instance they're using different property managers. Do you perceive any sort of issues in migrating Delta across to Elders in that regard?

No, well, I mean, it's all going to stay the same. So in terms of back office stuff, which I think you're talking about. So we've got a mandatory integration. We've got a might, and then there's a light touch component of it. Each of those are being developed with project teams between the businesses. So our view is that it's a well-run business. It's got good management. It's got a strong board governance. to set the direction and will be making the right decision for the right reasons rather than any kind of ideological control-based decision. Of course, the mandatories around safety, financial, transparency, regulatory compliance, they're mandatories, as you'd expect.

Thank you. Unfortunately, that does conclude our time for questions. I'll now hand back to Mr Allison for closing remarks.

OK, well, thank you very much to everyone. I did note that we have a couple more in the queue, so apologies to those. Paul and I have a back-to-back with all elder staff, so 2,000 or 3,000 people will be waiting on the line for five minutes, so we've had to call it there. So for those that we haven't been able to talk to, we look forward to talking to you in our one-to-one sessions. But I appreciate everyone coming in, and thank you very much.