Elders Limited (ELD) Earnings Call Transcript & Summary

Thank you for standing by and welcome to the Elders FY '21 Results Investor Briefing. [Operator Instructions] Your speakers today are Mr. Mark Allison, CEO; and Ms. Tania Foster, CFO. Thank you, Mr. Allison. Please go ahead.

Thank you very much and welcome to everyone to the Elders full year results presentation for FY '21. Thank you for joining Tania and myself for the session today. Tania is our relatively newly appointed CFO having joined Elders in May this year. She has very, very quickly come up to speed with the business and I think Tania and her team have done an excellent job in providing further transparency and clarity of our business drivers in the presentation pack that we'll run through today. From an Elders view, this is the first year of our third 8 Point Plan. The Elders' philosophy since the first 8 Point Plan has been to control what we can control and not dwell or waste resources on doing things that we can't control, to have a cost and capital base to allow us to make good returns in bad seasons and therefore, make great returns in good seasons. The full year results this year are an example of making great returns in good market conditions. We use our multiple diversifications by product, by service, by geography, by crop segment, by commercial model and by channel to market and our financial discipline to deliver consistent growth and high returns for our stakeholders. So in summary, we aim to control what we can control. When we look through the results today and go into the detail, you'll see that of the controllables for us, obviously, the market and commodity cycles are not in our control, and that accounts for some 30% of the uplift year-on-year, the market conditions and season. 22% of the uplift comes out of our acquisitions, particularly the bolt-on acquisition pipeline that we've been working through, and 48% of the uplift year-on-year comes from our organic self-help initiatives, including backward integration, margin management, and a bunch of other initiatives that we'll go through in more detail in the presentation. So controlling what we can control and not just relying on the season is a critical point for us and that's why we're confident that as we were last year when some commentary was around that this is -- it can't get any better than this while we are confident that we're controlling largely the upsides through the self-help initiatives and therefore, for this year, we say we've made great progress and there's even more to come as we run out the final 2 years of the 8 Point Plan. In terms of the 3 8 Point Plans, we've experienced periods of floods, droughts, bushfires in various geographies and markets and the COVID impact that everyone's experienced. And we've also experienced positive livestock prices [ with crop ] commodity prices and coming in for this year's summer cropping conditions. So there's a mix, but our point is to be able to deliver consistent high-return results throughout all of these cycles. The result today is strong in safety, sustainability, profit, strong in return on capital, strong in cash conversion and strong in the strategic delivery that we've committed. Our commitment to provide 5% to 10% growth in EBIT and earnings per share and a minimum of 15% return on capital in a sustainable manner through a safe and inclusive workplace remains paramount and we continue to show an over-delivery on this commitment. The approach today, as we run through the presentation, will be I'll provide an overview of the results. Tania will then go into the detail of our financial performance and I'll then provide an update on the focus of the third 8 Point Plan and also the outlook for the next 12 to 18 months. So with that, I'll move to the first slide of the presentation on Page 4 with the highlights for the year. If we go column by column, from a people viewpoint, our lost time injury frequency at [ 0.7% ], which equates to 3 people being injured, is not acceptable to have anyone being injured, but compares very favorably with the 33 people that were being injured at the beginning of our 8 Point Plan process and also the lost time injury frequency of 0.7 also reflects favorably on the ag industry benchmark of 9.7. In terms of employee engagement, very strong, and I'll talk to more detail on that. The 41% female diversity and an increase -- a net increase of some 256 people throughout the business and through regional and rural Australia. From a customer viewpoint, we maintained our position as #1 most trusted brand in agriculture and our closest rival in this Roy Morgan research is -- so we're 3x higher than our closest rival, which shows the very strong position and where we've come from, where we were not quite as trusted at the beginning of the 8 Point Plan process due to a number of other factors. The net promoter score at 53 is a 7 increase on the previous year and against an average of most like companies in the agricultural industry of 43. And we've also invested heavily with our For Australian Agriculture campaign. From a community viewpoint, $2.4 million of contribution and support throughout broad regional rural Australia as we've been doing for 182 years. So always core to our DNA and as we've been able to get ourselves back in a position to be able to support our local communities in a more financial way, we've done that. And then finally, from a shareholder viewpoint, a 38% increase in underlying earnings per share, a 91% increase in the dividends per share and the dividend payout ratio sitting at 43% within the range of 40% to 60% that we've set. We'll go to the next slide on financial summary and if we just start across the top, we see strong growth in sales, strong growth in gross margin, and a 38% increase in EBIT and a big -- as mentioned at the beginning, significant contribution across our backward integration strategy and our other initiatives and with growth, as you'll see, across most of the product areas. In fact, when we go to our key products, 6 of the 8 products and services have demonstrated increasing market share with the other 2 being flat. So as an impact, as we move through that slide, our cost to earn reduced. Cash conversion was at 36% at the half year and finished at 94%, and Tania will go into detail on our cash conversion and leverage having reduced -- leverage ratio having reduced 30%. So pretty solid progress in the financial area. Moving to safety, health and well-being, you can see the lost time injuries reducing 16% over the last 5 years and as I've mentioned, that's a 91% reduction since the start of the 8 Point Plan period. So significant progress, although our target has been ongoing to have zero injuries to anyone within the business. And also a significant reinvestment in safety throughout our branch network and in Killara as we've been able to invest more in these areas across the board. So then moving to the final slide of the first section on sustainability. Strong contribution on the sustainability front through our customers and we've launched our Carbon Farming advisory service, it's in the very early stages to assist our clients around Australia come to grips and understand with requirements and there are opportunities in this area. I mentioned the most trusted brand position. The 40,000 ag chemical containers diverted or recycled is our contribution and many of you would be aware that the overall industry waste reduction agreement, which drumMUSTER forms part of, I was as Chair of CropLife and Agsafe at the time, I was one of the original signatories to that program, which has done such good work across Australian agriculture in recycling chemical containers. From a people viewpoint, again, very high engagement and enablement scores and we'll talk to more detail on those. From an environmental viewpoint, we took the decision midway through the year to move our emissions target setting ahead from FY '22 to FY '21 and with that, we've announced the 3 targets, the 2025 target of 100% renewable energy in all Australian sites. The 2020 -- sorry, the 2030 target of a 50% reduction in Scope 1 and Scope 2 emissions intensity and particularly around our feedlot, that is subject to the technology and innovation development where there's a lot of joint projects at the moment through the industry as we move forward to that and then the 2050 target of net zero Scope 1 and Scope 2. And finally on the sustainability front, the publication of our first Modern Slavery Statement and also the alignment isn't very well detailed in our sustainability report of our alignment with the climate-related disclosures that we need to make. So with that, I'd like to hand over to Tania and she'll run through the financial details.

Great. Thanks, Mark. I'd like to take you through just some of the finer points of our financial performance. So starting with sales. You can see we've had strong sales growth, it's up 22% or $456 million. Just a couple of highlights from our sales. Fertilizer growth is up 31%, AgChem growth is up 23%, wholesale growth up 34%, livestock turnover increased by 15%, and our real estate turnover increased by 39%. So you can see a strong performance across all of our product lines. Our gross margin was up [ $91 million ] or 21%, so very similar off the back of strong sales. Our EBIT increased by $46 million or up 38%, which is well above our 8 Point Plan ambition of 5% to 10% growth through the cycle. We also delivered an EBIT to sales margin of 6.5%, which compared well with FY '20 at 5.8%. If you look at our earnings before interest and tax, up 38% -- sorry, just repeated myself there. Costs were up 15%. This is off the back of our 9 acquisitions during the year and the organic growth of the network adding over 256 and 23 new locations. Our underlying net profit after tax was up 40%, obviously consistent with our EBIT and our stat net profit after tax was up [ $26 million ] or 22% and last year we had more tax losses that we brought on balance sheet. Hence the difference between EBIT and stat net profit. Return on capital was a healthy 22.5%, up 3.6% and well above our 8 Point Plan aspirations of 15%. Pleasing to see our net debt also declined, leverage ratios improved, cash flow remained flat. Underlying earnings per share up 38%, again, consistent with EBIT growth, and our dividends per share increased $0.20 per share, achieving a 43% payout ratio franked at 20%. Moving over to the summary over the last 5 years, you can see consistent growth. So since the conclusion of our first 8 Point Plan in 2017, we've delivered over $1 billion in additional revenue growth and up 12.7% over the last 5 years as well as EBIT more than doubling from where we started in full year '17 of $71 million up to $167 million or a CAGR of 23.8%. You can see in '21, we've allocated the value of our growth between acquisition growth of 22%, organic, 48% and market factors 30%. On the bottom left-hand side, you see our cost growth, which is 15% or $46 million. Pleasing to see that our cost to earnings ratio falling from 72% to 69%. We've also got sales growth exceeding our cost growth, so 22% versus 15%. Bottom right-hand side, you see the CAGR over the last 5 years of 17.2% earnings per share. We haven't had a lot of change in our underlying share numbers over the last 12 months, except for the long-term incentive plans issue. Moving across to the trading performance across all of our products. The only exception in this is our Feed and Processing business. So on the left-hand side, you can see our underlying NPAT increasing from $107 million to $151 million. This is an increase of 43% -- $43 million or 40% year-on-year. We start with regional products, really good performance. They are up $48 million or 27%. This is off the back of increased sales activity, good summer and winter cropping, and our backward integration strategy starting to pay off. The second item there is Wholesale Products. As you can see, they're up $17.2 million or 38%. We had the benefit of the full year of the AIRR acquisition. In FY '20, we only had 10.5 months of AIRR. Really good sales performance, up 34% and a lot more of our product -- the AIRR product being sold into the Elders network, which is really positive. Agency Services was up $12.8 million or 10%. Really high livestock prices, cattle were up 31%, sheep prices average per head was up 9%. We obviously had a few -- a bit less in volume, so that was a partial offset and really good seasonal conditions across all the states. Our Real Estate Services business increased $12.5 million or up 32% off the back of strong residential turnover and farmland turnover, ongoing network expansion, and favorable market conditions. [indiscernible] property is not getting any cheaper at the moment. Our Financial Services business delivered $4.2 million growth or 11%, which is off the back of strong growth in our insurance product, which is called Elders Insurance and we also had a full year of our livestock funding product, which we introduced in FY '20. Our Feed and Processing business was down $2.9 million or 18.7%. Pricing pressures on feeder cattle impacted our margin in the Killara feedlot. This forms a natural hedge to our agency business. So if cattle prices are higher, we often see margins suffering on the Feed and Processing side. Our costs were up $46 million. We had more people. We increased our performance incentives due to outperformance this year. We had 9 acquisitions and our systems modernization program is starting to really take off. And then finally, interest tax and noncontrolling interest, as you know, we don't pay much tax at the moment, but our noncontrolling interest in B&W, of which we own 75%, we emanate through this line, which had an outperformance this year. Moving on just to share with you a bit more detail about our gross margin and highlight the diversification across our business model and categories. As you can see, our largest business is our Agency Services business, which grew 10%. This comprises of sheep, livestock, and wool. On the left-hand side, you see our AgChem business, which is #2, growing 35% over the year and represents 25% of our overall value. So you can see livestock and AgChem combined make up over 50% of our gross margin performance. Just to touch on rural products. You can see AgChem increasing [ 25% ] and it's been a positive year in favorable cropping seasons and our backward integration strategy starting to pay dividends. Our fertilizer product grew [ 24% ] to $38 million, some very high demand for fertilizer, makes up around 7% of our margins. Animal health increased 20%, [ up 32 ] and contributes 6%. And then other retail, which looks like it's growing not very much during the year, but isn't where we also book our incentives. So if we remove the incentive growth from that, we'd be 14% increase. And our wholesale business finished with an increase of 39% year-on-year as I mentioned earlier, off the back of full year of performance. The Agency Services business benefited from livestock prices during the year. Our volumes were slightly offsetting that benefit. Real estate had another standout year with up 32% or $12.5 million driven by demand for farm and residential property. We had a number of acquisitions in '21 as well. There were 4 small acquisitions filling out our geographical footprint. And then Financial Services was up 11% or $3.8 million due to strong insurance growth and Feed and Processing, just 2% of our business, and where we suffered from margin decline as I mentioned earlier. Moving along to financial performance by geography. I thought this is a good way of just sort of showing the strong performance across all the geographies and the exposure and how the mix of our states contribute to our overall performance. So you can see Western Australia in the top left corner and Victoria and Riverina in the bottom right corner, our 2 largest regions, comprising 26% and 30%, respectively. So nearly 50% of our earnings are from those states, but good contributions from the residual states. Western Australia was up 35% or $15 million, really strong demand for fertilizer and chemical products. In South Australia, we're up $6 million or 23%. Again, fertilizer and chemical products are the emerging theme and we also had the YP Ag acquisition, which was 5 locations in 2021. Tasmania was the smallest of our states, but still a respectable 13% growth year-on-year and it also benefited from the opening of the Smithton branch. Queensland and Northern Territory in the top right, were up 53%, benefiting from fertilizer chemical sales, margin improvements, high cattle prices and strong demand for residential and farm assets. So really across all product lines there and we do believe that there's more growth in Queensland. New South Wales, recovering from a couple of years of drought, a really healthy 35% growth, particularly if you consider that Killara feedlot is also included in this segment. We've got new management in place there and our B&W business is performing well this year. Victoria and Riverina, up $14 million, 28%. Strong cattle prices were a feature of the result here. So then just to run through our financial performance on costs. There's really 3 things to the $46 million or 15% increase in costs. It's the addition of people, it's our acquisitions, and investment in systems modernization. So let's start with people, up $20 million. We've added 116 FTE across all of our states throughout the year. We also supported that with an additional 23 people in corporate services, plus some increased incentives for outperformance. Secondly, our acquisitions were up $15 million. We had the whole cost of AIRR in our business this year as well as 9 acquisitions, adding 88 FTEs throughout the year. Our property and lease costs, you can see that's a large expense for us, about $33 million each year, really not a lot of difference year-on-year there. Depreciation and amortization, we increased our capital expenditure for safety and sustainability initiatives throughout the year, adding some extra costs. Motor vehicle, very little change at around $21 million year-on-year. Our systems modernization and IT costs, this is associated with the first wave of our systems modernization implementation. We'll share with you some more details later in the slide pack. Insurance, it's not getting any cheaper, it was up $1.5 million off the back of higher premiums and higher assets and our credit insurance program for our large exposures. Advertising and sponsorship was up $1.6 million. We had the For Australian Agriculture brand campaign and an extra $600,000 in sponsorships during the year. And our other operating expenses was just the residual [ pricing ], consulting, travel, entertainment. So nothing significantly increased in that category during the year. Moving on to capital, we've already spoken about our return on capital at 22.5%, up 3.6% and pleasing to see it's above the 3-year average of 19.9%. On the right-hand side, you can see our average working capital increased by $85 million and at balance date were up $67 million or 17%. So I take you through the bottom chart, which starting with trade and other receivables, you can see our trade and other receivables were up $133 million or plus 22% and this is really consistent with our sales growth year-on-year. Our debtor days has remained consistent, around 35 days, and our provisions to doubtful debts have remained low and represent just 1% of our total debts outstanding. The biggest increase in our trade and other receivables is rural product debtors and s consistent with sales growth and the industry norm of clients receiving deferred terms. Livestock [ prices ] were up $20 million and this is off the back of both strong sheep and cattle prices and the introduction of our livestock funding product added an extra $10 million. In our inventories, which also includes livestock, was up $77 million or 25%. Our rural product inventory comprises of $69 million of that $77 million increase and this is supported by our sales growth and outlook for 2022. Our stock turns were relatively flat year-on-year at 6.9x versus 7.3x last year. Stock obsolescence has remained low with less than 1% of our inventory being provisioned for. Key movements in our rural product inventory balance relating to Ag Chem products with increased demand and outlook as farmers are looking to lock in orders in anticipation of price rises. Fertilizer in our wholesale business also increasing their inventory in anticipation of FY '22. And finally, trade and other payables increased $143 million or 27%. This is also aligned with the increase in our inventory, which is consistent year-on-year. Our livestock [ purchases ] increased by $38 million. That's probably the biggest increase relating to the higher prices. We also have some deferred acquisition consideration and a payroll accrual of about $8 million as we move from monthly to fortnightly pay. So moving on to cash flow. At the conclusion of '21, we achieved an operating cash flow of $142 million. This is consistent with FY '20. So while our EBIT grew $46 million, we've seen [ what ] noncash adjustments for depreciation, amortization and those provisions, which are noncash. The difference between this year and last year is the growth in our debtors. So as you can see on the right-hand side, our cash conversion fell from 132% to 94%, and that is absolutely related to the increase in debtors to support our sales growth, which is consistently increasing with our sales. It's worth noting that our target on cash conversion is 80%. On the second chart down, you can see our working capital to sales ratio. This has remained relatively flat year-on-year and is consistent with our peer averages. And then finally, you see our net cash flow falling from positive $43 million to negative $2.7 million in FY '21. If you look at the left-hand side table, you can see our investing cash flows are much lower year-on-year. So last year, we had the AIRR acquisition, which was a significant cash outflow, whereas this year was only 9 smaller acquisitions. You can also see in our financing cash flows, which are $109 million out versus a positive $24 million last year. This again is associated with the debt we raised for the AIRR acquisition in FY '20, whereas this year we've had smaller number of acquisitions. We paid down debt of $29 million and we also increased our dividends from $23 million to $48 million. So those were the key drivers of our cash flow performance. Moving to net debt. You can see our debt is reducing, we're improving our leverage, interest cover and gearing ratios. We've reduced our net debt $20 million year-on-year and you can see on the right-hand side, we've included our ratios, including AASB 16 and beneath it, excluding AASB 16, which is how the bankers is like to look at our ratios year-on-year. So you can see our leverage ratio has fallen from 2.0 to 1.4, our interest cover 17.5 to 23.6 and our gearing ratio falling from 47% to 38%. We've got significant headroom in our borrowings. Our undrawn facilities at year-end were $293 million, out of $450 million, and we're well within our banking covenants as you can see on the bottom section of the line. Moving to dividend and capital management. So our earnings and dividends per share continued to grow. So underlying earnings per share was up 17.2% to $0.97 per share and consistent with our EBIT growth. On the right-hand side, you can see our dividends per share increasing 53.8% CAGR over the last 5 years. And you can see the uplift in our dividends per share from $0.22 to $0.42 in FY '21. So in FY '21, the second half dividend of $0.22 per share was franked to 20% or $0.044. Bottom left-hand chart, you can see our franking credit reducing to $11 million. This is part of the challenge of not being in a tax paying situation. We have a low franking credit balance and until we arrive at a tax paying situation, we probably won't be paying fully franked dividends until 2024 [ or par ]. Our dividend payout ratio was 43%, increasing on last year's 31% and within the Board policy range of 40% to 60%. Now this might not be the most exciting slide in the pack because I know not all of you like to talk about tax, but I know that tax has caused some confusion in the past. So I'm hopeful that this will sort of explain our tax situation. So as you know, Elders has been progressively recognizing our historical tax losses in our financial accounts into deferred tax assets. That recognition of the deferred tax asset and an income tax credit effectively negates the tax expense at the corporate tax rate of 30%, with the exception of a small amount of tax on our noncontrolled interest. In FY '21, we've recognized all tax losses on the balance sheet. So the first chart shows the $110 million in deferred tax assets that we are carrying forward relating to tax losses. We used $49 million in FY '21 to offset our tax expense. So based on the FY '21 performance, all tax losses will be utilized in around FY '24 when we estimate on start paying tax. From 2022 onwards, income tax will be recognized in our P&L without the benefit of the tax loss recognition to offset it. This is required by the accounting standard AASB 1012 -- sorry, 112. The second chart shows the tax impact on NPAT. So this is important. It's just showing what FY '21 looks like today, the $150 million. And then if we exclude the tax, you can see that our NPAT will fall to $45 million. So assuming FY '22, we make about the same amount of money, then that you will see a reduction in our NPAT as the headline number. The third chart shows the impact on EPS, which we'll be reporting an impact of around $0.28 per share year-on-year. So to summarize, we've got $110 million of deferred tax assets carried forward to fund our future income tax liability. Next year, we'll be reporting income tax expense in our P&L and our reported NPAT and EPS will fall by this amount. About half the analysts have factored this into their models, but some have not. Importantly, no taxes are payable till FY '24. So just run through a few final details of the business performance. So rural products, you've got -- which is retail and wholesale business, our gross margin is improving year-on-year and supported by our backward integration strategy. So you can see on the left-hand side, our sales is up $390 million or 24%. Strong performances across Ag Chem, fertilizer, the wholesale business, that has really been driving that result. Our gross margin is increasing by $65 million or 30%, but it's pleasing to see that our gross margin percentage is increasing from 13.4% to 14.1% off the back of our backward integration strategy. In the bottom left-hand chart, you can see Elder's own brand versus third-party sales. So what you can see here is we've been continuing to invest in our Titan and [ Ag Pastoral ] in animal health and what you can see is that our share of own brand is increasing from 24% of sales to 26% of sales. This doesn't mean our third-party suppliers are not important to us. They are very valuable relationships and you can see that whilst the overall share of our third-party suppliers declined by 2%, their actual sales increased by $250 million or 20% year-on-year. Our Agency Services business, you can see that cattle and sheep volumes were down as a consequence of restocking. So on the top left-hand corner, you can see cattle volumes over the last 5 years have been relatively flat at 1.3% and actually declined in the last year by 150,000 or 9%. Our sheep volumes also were reasonably flat over the last 5 years and declined 200,000 or 2% year-on-year. And obviously, the high cattle and sheep prices offsetting the volume decline. The bottom left-hand corner, you can see our wool bales increasing by 108,000 over the last year, up 41% as the wool market starts to make a recovery. And finally, in the bottom right-hand corner, AuctionsPlus volumes, the online trading platform, of which we own 50%, you can see that it's been steadily increasing over the last 5 years and up 36% in terms of [ millions ] put through that trading platform in the last year and user registrations have also increased by 48%, increasing the popularity of that channel. Real estate has seen a strong demand for farmland and residential property. It doesn't seem to matter where you are at the moment, it's expensive. So our farmland sales are up 12% over the last 5 years and in '21, increased by 26% to $1.6 billion. Our residential sales also showing a healthy 21% CAGR over the last 5 years and increased 68% to $1.46 billion in the last 12 months. Properties under management, 6.1% and were up 12.9% in FY '21. So you can see the strong performance across all of the components of the Real Estate Services business. We also added a number of small acquisitions during the year just to expand our network of high quality agents to close those geographic gaps. And in the bottom right-hand corner, you can see our gross margin by category increasing 12.3% over the last 5 years and you can also see that farmland and residential contributed roughly equal amounts to our gross margin. Financial Services, if you look at the top left-hand chart, you can see our rural bank loan and deposit book reasonably subdued over the last 12 months with a CAGR of 3.2% over the last year. Not a lot of demand from loans at the moment given farmers are generally cashed up and for deposits, obviously, the low rate environment means that people are looking for alternative places to invest money. Our StockCo book, which is a business we own 30% of, was up $15.9 million or 20% in the last 12 months off the back of really strong cattle prices. The bottom left-hand corner, you can see our livestock funding balance. This is a new product we launched last year to complement our StockCo book, and you can see it's growing nicely up $10 million year-on-year. And finally, our growth written premiums is our Elders Insurance business, which we own 20%. A nice CAGR of 8.3% over the last 5 years, but particularly strong over the last 12 months, up $118 million or 15%, with good market conditions and product growth driving that outcome. And finally, our Feed and Processing business, you can see in the first chart, our Killara feedlot, a CAGR of 4% over the last 5 years. However, in FY '21, higher cattle prices impacted the number of cattle sold and so leading to a reduction year-on-year. Elders Fine Foods sales was up 8% over the last 5 years. Sales grew $3.4 million or 23% in FY '21. However, there's some challenges with supply chain and subdued margins impacted margin there. So this concludes our business performance section. I'll hand it back over to Mark to take you through growing our business.

Okay. Thanks, Tania. So we'll move on to the 8 Point Plan and progress against the 8 Point Plan and first of all, focus on our '23 ambition, which is to have 5% to 10% growth in EBIT and EPS through the cycle. So above the 15%. So when you do the calculation from a FY '20 starting point, what we're trying to do is to get to between 140 and $160 million EBIT by '23 and at a minimum of 15% return on capital. So clearly, at $166 million this year and 22.5% return on capital, we've outstripped that 3-year target and we do believe that we have significant additional growth potential regardless of the seasons as I indicated in the introduction and as Tania also demonstrated with some of the self-help initiatives and the progress we've made in those. When we look at the second part of our ambition, the industry-leading sustainability outcomes. So we issued our second sustainability report today and as was mentioned, one of the highlights, but it's quite a comprehensive report and rated amongst the best in agriculture by a number of independent organizations. So one of the highlights is it's bringing the setting of our emissions targets ahead to 2021 with our 2025, 2030 and 2050 targets set in that report. And on the final ambition of being most trusted brand, we've been able to maintain that position and have come a long way back over the last 8 years in terms of trust in regional rural Australia and as mentioned, we're 3x ahead of the closest rival in terms of trust. Of the 5 strategic priorities around winning market share, capturing more gross margin, strengthening and expanding our service offerings, optimizing our feed and processing business, and the sustainability program. There, I'll deal with those page by page as we go forward and also the enablers, our systems modernization and attracting, developing our people in a safe and inclusive environment, and also the unflinching financial discipline. So moving to the next slide, as we look at the delivery of our -- the first year of our third 8 Point Plan. On the win market share side component, the first one. I'd just like highlight our bolt-on acquisition strategy, which I think many are very aware of and with the 9 acquisitions this year and I just -- we've spoken about for a number of years the discipline involved with our business development activity and bolt-on acquisitions. So I just want to run through some of the metrics for this year. So there were 55 financial models, which means that we most likely we had 80 or so targets to get to 55 financial models. We took it to the point of 16 non-binding indicative offers, and then we had 9 completions with an annualized EBIT around of $6.9 million. So at the same time, we had 11 post-implementation reviews to ensure that the business case and the discipline that we put in place in integration was complied with or exceeded, and they were all successful reviews. So I think the first point is around this acquisition component, the bolt-on acquisition component being a critical part of our growth and as you see towards the appendix of the pack, there are multiple blue-chip farming areas and agricultural areas around Australia that Elders isn't strongly represented through multiple products and services. So one of the questions and one of the commentary on it's as good as it gets from last year, which was $120 million, which was as good as it got until this year, which is $166 million -- well, one of the commentary is well the pipeline is running out for these bolt-ons and this just won't continue. So just to put some color around that. We're currently have 27 targets in our pipeline and that will go through the same sort of review process that we've done for the last few years and also to paint the picture of the universe of opportunity and if its [ reducing ]. So there's roughly 1,730 branches, rural service branches around Australia. Half of those, 850 or so are independent and of those 850, they may be a large independent, small independent. They're continually looking for succession plans for monetizing all their work and effort and that's where our pipeline comes from. So the prospect of the pipeline running dry in this market is highly unlikely and our ability to remain patient, methodical, and financially disciplined is very, very high. So I just wanted to make that point. On the other market share consideration, I mentioned that of the 8 areas that we had reliable market share information, 6 of those have shown an increasing market share over the last 12 and 2 of them are flat. Generally, we've continued to grow, we've continued to win new customers, and we've continued to expand as per our strategy. Looking at the capture more gross margin in rural products. We've already spent a bit of time on the backward integration strategy. And again, a reason to believe that given that 70% of our growth this year has come out of the bolt-on acquisition strategy and the organic activity, the self-help and backward integration, we're not halfway there in our backward integration at this point. So regardless of market conditions and so there's significant opportunity for continued profitability to be driven out of that area. The second point I'd like to make is around the AIRR acquisition. 2 years ago when we bought AIRR, we targeted $6.9 million to $9.3 million of synergies through the AIRR acquisition and we've now completed year 2, and we can report that after 2 years, that number is actually $14.1 million and that benefit continues to flow-through. When we look at strengthening and expanding our market. I have some slides that show the increase in branches, people and agronomists coming up. In terms of the Feed and Processing -- optimizing Feed and Processing, item 4, it's the upside for our agency business as Tania indicated and is the downside for our Feed and Processing business, but having said that, again, with the view of controlling what you can control, in that frame of increasing cattle prices and we've been backgrounding to reduce the cost as we bring along lines of cattle into the feedlot, the area that we could control was to drive efficiency in the farming operation at Killara. We've invested in center pivot irrigation systems against the less efficient flood irrigation systems. This has significantly increased our productivity and you may be aware, we're growing -- we grow our [ forage silage rations ] and forage crops corn as well at Killara. So that initiative, the lower cost in grain and the farming activity has offset the increase in cattle prices at Killara by roughly 25%. So obviously, only part of the way, but again, to the philosophy of controlling what you can control. When we go through the sustainability program, we've spoken about that and we'll -- and there are separate slides on systems modernization, people and safety, and the cost and capital efficiency. So moving to the next slide on ambition. A point I made a couple of times around the most trusted brand and our increase in trust from last year. Our objective was just to hold on to the #1 spot, but we've actually been able to increase in trust, which is a credit to all of our people throughout the business and as I've mentioned a couple of times, the closest competitor to us is we went 3x higher than the closest competitor. On the net promoter score, we also mentioned that we've increased there and on an average of like businesses, so it's very difficult to benchmark because of the insurance banking, rural products, fertilizer, et cetera, et cetera. So on the average of like businesses, it sits around 43 and we sit at 53. So to the next slide on our brand. We launched a significant campaign around the 4 pillars of Elders for experience, Elders for community, Elders for our people, and Elders for sustainability. And we've also, as you can see on the right-hand side, significantly increased our digital coverage and activities. Going to the next slide, on strengthening our service offerings. Just a very quick pass-through the points of presence. So 23 additional points of presence in the business, 256 -- net 256 more people and 30 more agronomists throughout regional rural Australia as we try to significantly complement the Thomas Elder Institute and Thomas Elder Consulting initiatives that we have in place. With the next slide, on strengthening our service offerings, I won't go into detail, but I will comment on those key areas: innovation, digital activity, our research partnerships, and our strategic partnerships. And it's worth noting that Elders has been a leader in this area. I mean we've been one of the strong partners of the introduction of the [indiscernible] in Australia and also [indiscernible] Australia, which have been highly successful platforms for AgTech development and growth in the Australian market. When we look at systems modernization, you can see the multiple wave approach that we've taken here and I think we spoke at the half year that our thinking was that to ensure that we were able to deliver our consistent growth through the cycles that we breakout systems modernization into 6 waves running from internal, financial and people foundation, supply chain and all the way through to continuous improvement in wave 6 and build them in a way where they're modular and if circumstances change, unexpected conditions occur, that we aren't locked in to expenditure and activity where it may not be appropriate at that time. I mean, it seems that that's unlikely, but we always like to take a very conservative and methodical approach. So as you can see, wave 1 which focuses on the internal, financial and people foundation, with amazing 2 selections there with Microsoft and Workday, respectively. The cost of wave 1 was $18.9 million, split roughly it's $14.5 million as CapEx and $4.4 million as OpEx. That's the FY '22 program and these 6 waves, we're thinking a 3 to 5-year program, and we'll do a [indiscernible] management of the project with Viv Da Ros, our CIO as he brings the program together. Our thinking on this, it's quite an important component of it, our thinking with the front-end savings occur particularly the people component, with our branches throughout regional rural Australia, people multitask as you'd expect and so thinking of the time and the effort and the rework that may currently be done, which is released by systems modernization will actually release those individuals to expand the customer-facing activity and interaction. So it's quite exciting. The project itself is not based on core cost reduction. It's based on customer centricity and providing a platform for future growth and development of the business. When we look at the next slide on the highly engaged and diverse workforce. You can see the stats there with 60% NEDs, 18% women in management positions and I'll just make a comment around that because when the 8 Point Plan process started, 7% -- there were 7% of women in management positions and now we're at 18% and we're below our self-imposed target, and we're doing more work in terms of pipeline development in this area, but I would compare that with the ag industry benchmark of women in management positions at 14%. And so we've got a long way to go, but we feel from 7% to 18%, it's not too bad, but we need to drive this pipeline of development. In terms of enablement and engagement, you see the very, very strong position that we've been able to achieve there and that comes and shows through every day with our teams at the front and the back of the business. So moving to the outlook. And we thought we'd start with the ABARES outlook first and with [ either view that you'll ] have available to you and you can see that there's a relatively strong view across most areas in agriculture in Australia. I think when we look at the target of $100 billion production by 2030, when we started at $60 billion 4 or 5 years ago, dropped to $47 billion during the drought and this year, we've hit $70 billion. There is significant growth across agriculture in Australia. And fortunately, Elders is very well positioned through the key growth areas. The point that worries a lot of people is around market access and having markets to sell to in the light of some of the reductions out of China. I think it's worth noting that our key markets, particularly in the big commodities being beef and grain have been Indonesia, North Asia, Japan and South Korea. And the ASEAN concept also opened up significantly as well as Middle Eastern markets and European markets. So I think from a market access viewpoint, we have the EU Free Trade Agreement being negotiated now, the U.K. agreement, the India Free Trade Agreement. So there are multiple areas. And certainly, I think Elders [ promises that it is not a limitation ] to our growth. I think it's also worth noting that the global markets that may be seen as a problem for Elders are actually driving the significant upside for Australian agriculture with failed and reduced crops in the northern hemisphere and Central Asia, which has driven up commodity prices. So I think that outlook looks pretty good. And then we go to the consequence and implications for Elders in terms of outlook and our view is as we run through our rural products, agency, real estate, basically as you run through all of our areas, the outlook -- our thinking is that there's another 18 months to 2 years of solid conditions. Our planning is always a package season because of the big component of self-help and control what we can control in our strategy, but the outlook looks pretty positive and our thinking is that we will continue to have a very strong market to play in and with a lot in control with our many initiatives internally. So with that, I would like to open up to questions for Tania and myself.

[Operator Instructions] Your first question comes from Michael Peet from Goldman Sachs.

Just first one, just, Mark, on opportunities for top line growth and just thinking about organic and acquisition and probably looking at Slide 41 tells us a bit about that, but I'm just trying to dig a bit deeper in terms of where you see the biggest opportunities either geographically or by product division category?

Yes. Thanks, Michael. A good question. I think the -- geographically, there are multiple areas. I mean as you're aware, we're relatively weak in New South Wales and Queensland and our thinking is that Queensland sugarcane has tropical horticulture, I think we've talked about it before. That's an area where we don't have a strong position and we need to get stronger. I think on the -- but there are other areas as you can see from that slide with multiple opportunities through multiple products, but I think one of the issues that we're working through as an executive committee is to -- given our weighting to rural products, so now with our backward integration, with our retail business and our wholesale business, we're looking for a bit more balance in our portfolio because this has been the success of our portfolio. So if we could find opportunities in the financial services area, the real estate area and -- or even in our core agency area, that would be a nice balance for the portfolio, but I think our broad market share at 18%, that there's still multiple opportunities.

And you mentioned those 9 completions, I think $6.9 million of EBIT. Just wondering what sort of multiples they were acquired at? And what's the sort of outlook for multiples? I guess all multiples are going up across the board, I guess, but just wondering if you're seeing any upward pressure on acquisition multiples?

Yes, so our template is 3x to 5x multiple of EBIT with normalized working capital and then the phase -- 50% payment on completion, 25% year 2, and [ then 25% ] reconciliation for the second payment in order for us to organize the transition if we're transitioning the vendor from the business. So I think it's fair to say that the multiples have moved to that top end of the range, but it's quite interesting dynamic because although it's competitive for the businesses, historically, 2 years ago, we had 2 additional competitors in Landmark and Ruralco bidding for these businesses and now as their combined business is Nutrien and they've hit the upper end of ACCC market share headroom, there's less competition in there and more from a couple of other players that are building their business. So our thinking is that we've got room to move if we need to go above [ 5x ] and we have in couple of situations, but that's still the template we're using.

Just a final one for me. Your own brand percentage is 26%. Have you got a target for that? And what sort of impact should we see or benefit on the gross margin going forward as you implement that strategy?

The 26% is across the board [ though ] you can home it in on an area -- a product category like crop protection. Our belief is that we can get to 70% of the addressable market at 2023. I think it's around 40% at the end of this year for the crop protection market -- of the addressable market. And with that, it's like for that increase, it's a 10% to 15% upside in margin, which falls directly to EBIT. Hence, the controllables comment that I've been repetitive on. In animal health, it's slightly different, but at 70%, we believe that allows us room to manage our work with our third-party supplier partners who have off-patent products as well as patented products.

Your next question comes from Alex Paton from Citi.

Congrats on the result. Just a couple of questions from me. There seems to have been pretty strong prices for crop inputs, particularly in the second half of the year. Could you maybe talk about how these have contributed to your second half results and how you're thinking about FY '22?

Yes, so I'm not sure if there's a lot of impact. I guess one of the big impacts is the -- where we have fixed margins like the fertilizer. If it's a fixed margin, you've seen the dilution of the margin because the absolute dollar is the same whereas the revenue has gone up with the increase in price and that's actually one of the reasons that the rural product margins increased 0.7% versus the 1.4% that we can narrow down to specific crop protection products. In terms of the FY '22, a major issue for us in terms of the increase in prices. I mean we've -- Liz Ryan runs our retail area and she's been working very closely with our wholesale business, the Titan business and the branch network to ensure that we aren't underselling the market. [indiscernible] prices look like they're doubling through the period. So generally, we're passing the [Audio Gap] Clearly, that's a bumpy ride because there are pre-commitments to farmers at current prices and then the replacement price may be 40%, 50%, 60% higher. So we're managing it very, very tightly. It is one of the threats to our business. Our supply chain is also extended by an extra month to 8 to 12 weeks now in terms of bringing product into Australia because of other supply chain issues that are being experienced globally. So it's an area that we believe we can manage and control, but it is one that we're watching like a hawk.

Got it. I guess on your customer base, have these consistent price increases impacted them pretty heavily in terms of grower margins or have the high commodity prices generally managed to offset these increased input costs for your customers?

I think largely, I mean, depending on the product or service, some areas we put caps on, some areas we, I mean, we're always on a pre-commitments, but there's -- it's a positive environment. So I guess it's not like deep dark drought situation.

Got it. And I guess, everything is looking pretty good in terms of crop inputs demand at the moment with the summer crop coming up?

Yes, it's quite positive. The summer crop is probably going to -- with water in dams and further rainfall recently through the summer cropping areas from the NIA North. It looks very, very positive. There's also -- obviously, they will be expanded [indiscernible] and rice and other summer crops being planned, it remains quite positive.

Your next question comes from Philip Pepe from Blue Ocean Equities.

Mark, Tania, yes, well done on a very, very strong result. Good CFO, obviously, keeping the ROIC up.

[indiscernible].

I'll give you all the credit for that, Mark gets none. Just on the outlook though, I mean phenomenal EBIT up 38%, even if I strip out what you've defined as market, it still gets 11.5% growth in terms of what you can control. You've still got a long way to go in terms of backward integration. You've outlined a number of 27 M&A targets. It's pretty difficult to see livestock prices coming off in the next 12 months, saying with property, and there's plenty of moisture in the ground to carry the crop for another 12 months or so and the ABARES data is positive. On that analysis, it seems to me like the underlying growth for the next couple of years is probably 10% to 15% EBIT with market moves may be up on the upside. Is that a fair analysis?

I think there's an opportunity for it to continue our under promise, over deliver paradigm, yes.

Fair enough. I mean you commented on recent rainfall. Obviously, the press likes to talk about the bad areas, but you're suggesting the extra rainfall is actually positive for the tail end of the winter crop and the summer crop ahead?

Yes, I mean, it's a good question, Phil, because a number of the -- a lot of harvesting, many farmers that I'm talking to have been able to get a lot of their crop off, but the rainfall now does go to yield and slowing [ harvest ]hasn't been done. So there's upsides and downsides. We don't think that, that's significantly widespread, but we do -- we are mindful that there is a need in some areas.

Your next question comes from James Ferrier from Wilsons.

First question, can you just confirm perhaps in sort of a dollar sense, the benefit that Elders achieved in FY '21 from the backward integration? I know you referenced a few margin figures, et cetera, but just the dollar number would be handy, if you've got it?

We'll have a look.

Yes, the sales for Titan were up 31%, and gross margin was up 44%. Our EBIT on Titan was up $11 million year-on-year.

Okay. Great.

So that's the Titan Ag product, and then there's the Pastoral Ag product, which is animal health product.

Yes and that sort of leads on to my second part of that first question there, Mark. The $14 million of synergies with AIRR, does that include the backward integration on the registrations that came out of that business?

It will pick up the Pastoral Ag products.

Yes, okay. That's great. Second question is sort of following on from an earlier one, just around the rise in input costs and the supply chain constraints. How are you preparing the business for the year ahead in terms of demand? And I ask that partly in the context of the supplier financing facility within the payables number increased from $8 million to $26 million. So do we read that as you've forward bought more product in anticipation of that demand being there and in the context of these freight delays probably increasing?

Yes, I think our view is to not encourage panic buying because panic buying normally without customer centricity means extended terms. So the loser in that case is us holding the stock and funding the grower, but our thinking on it is that there's another month or another 4 weeks that we're exposed to in our supply chain for our own products on the back of the integrated product, that's a hit that you'll see and you saw it at the half with our cash conversion at the half. So I think it's fair to say Tania, that we'd expect that in the next half as well, the same sort of implications for cash conversion?

Yes, absolutely, Mark, you can see like forward buying and farmers being concerned about supply and obviously, supply chain is increasing and we want to make sure we're not short. So that has the potential for us to be holding more inventory in the first half of next year.

Yes. And then on the -- in terms of product availability, going category by category, we're pretty comfortable around crop protection although it was the same risk profile that I panned earlier and we're watching it like a hawk. With fertilizer, we feel comfortable in Western Australia and in Eastern Australia, are in discussions with our major suppliers. Our sense is that our forecast will be on it and that the price and margin issue is another issue. But in terms of forecast as input to production function for farmers, that seems to be fine and it will help. We don't see too many concerns at all. And general merchandise, we're relatively comfortable as well.

Okay. Great. And the last question I had was stranded system modernization. So I mean, you've got a fantastic opportunity to really catapult the business forward in terms of the broader systems and the way customers can interface with Elders. Can I just clarify some of your language you've used today relative to what language you used back in May with the first half results, where you talked about 15% of

[indiscernible] with you, James.

Sorry, Mark. Yes. So you've talked about 15% back in May, 15% of the total spend likely in FY '22. And today, you're talking about $19 million as the first wave. So am I right in saying that in total, at this stage of the program, you're looking at a total spend of something like $120 million?

No. I think the information now that we've actually scoped it out significantly and run it way for way for way, as we've done it. I think key of that number because at any stage, we can delay or hasten. So our approach will be to keep the market fully informed on what we're doing with systems, but as we've done today. But I don't think an extrapolation is helpful, to be honest.

Yes, okay. That is helpful. So then, just to finish off that and clarify that last question. And you made this point earlier, Mark, in terms of the benefit to your networks, whatever you end up spending? I mean, this first wave, it's $19 million. You'd anticipate that it's not just sort of catch-up or some cost, what you're saying is that in the networks, you would expect the efficiency from a people perspective to free up time for them to engage more with customers and Elders is going to generate more sales and more gross margins. So this is actually a spend that will generate a return on capital?

Yes. The focus of it is exactly as you described with them. So it's not just a reduced hedge in head office or whatever. That is the focus to us to allow us to serve our clients and make it much more convenient, easier and more transparent for our people to see their clients.

Your next question comes from David Pobucky from Macquarie Group.

Congratulations on the strong results and the good color in the pack as well. Just a couple for me. The first one on AIRR, solid synergies number there of $14 million. Do you expect [Ag AIRR] terms to more incremental synergies from that business going forward?

Yes. I think definitely in the animal health registration for [indiscernible] component. So that's pretty solid in that area. That's largely through the Elders network, but that benefit because AIRR has its own home brand in animal health called Hunter River and independent one. But I think the other thing to watch with AIRR is its international growth of the business.

Yes. We're really positive about the AIRR growth this year. And I think we're just getting started, particularly with our own brand, [indiscernible] product. The network is really great with the AIRR products and we're seeing growth year-on-year in the network take up. So both of them hold good.

Yes. I think with the AIRR, it's a bit like building roads and shopping centers and hope people turn up. But we've got 2 more warehouses -- distribution warehouses plan, one in Queensland and one in Tasmania. And our sense is that that will provide a significant platform for both servicing the Elders brands, but also can drive independents who want to swing across. I quoted those numbers on independent like 850 independents that are looking for a well-priced efficient wholesaling company.

And just the second one, good EBIT margin of 6.5% versus PCP. I think you've touched on this a little bit. But is there a medium-term target that we should be thinking about at a group level? I mean, what are some of the key drivers of that expansion going forward? I think you touched on at your halfway through that backward integration strategy?

And just the second one, good EBIT margin of 6.5% versus PCP. I think you've touched on this a little bit. But is there a medium-term target that we should be thinking about at a group level? I mean, what are some of the key drivers of that expansion going forward? I think you touched on at your halfway through that backward integration strategy?

Your next question comes from Richard Barwick from CLSA.

I just wanted to just make sure we're understanding the split that you provided on Slide 10. We break down the proportion of gross margin uplift from acquisitions, organic and market. So the acquisitions, 22%, you've talked about the 9 acquisitions contributing about $6.9 million. Is the remainder there? Is that just the annualization of AIRR coming through? Is there anything else we need to be thinking about on the component?

Yes. Just before Tania runs through it, the $6.9 million is an annualized number. So it's not the mix.

Yes, we've got -- we report in our acquisitions like AIRR, which is 1.5 months of full year and then also the 9 acquisitions we've made during the year. And how we think about organic is our gross margin improvement in our rural product business and the upside of real estate and financial service. And then, in the market proportion, this is sort of our livestock price volume, wool and grain, Clara, China. And then what we consider in the retail business that's ex margins. So that's how we've sort of segmented the 3 areas of acquisition organic and market growth.

I guess what I'm trying to get to is how do we think about this or how do we convert this sort of number if we're thinking about what would be a more normal seasonal operating environment? So it's not -- I get it's not a case if we can't just take off the 30% contribution because that's just a comparison with last year. Is there any sort of -- anything you can tell us there as the way to think about it, just trying to convert this number back to, as you say, what's an average season?

The market is tricky because when you look at livestock prices and livestock volumes, they sort of move in -- they can counter to each other, right? So that as the prices have been high, the volumes have been lower as we've gone to a restocking period. So you can imagine in that market component of 30%, in the future, we might see prices come back a bit, maybe at some point, not anytime soon, but the sense, but it should be offset by volumes in the same as our Clara business. So when I look at that 30% market component, you would say half of that is sort of counter, like it will be offset by volumes and our Clara business will be an actual hedge to that. Does that make sense?

Yes, that does. I still don't know if it helps me get converted back to a normalized number. I'll have a bit more to think about it. I might come back. The other one, I wanted just to clarify also, I mean, you've identified we're saying 27 targets for acquisitions in the pipeline. I'm just trying to marry that up with the Slide 41 where you've got the map with the strategic opportunities. Do each of those dots, is that what you'd view as a potential acquisition? Because if I tell you them, I can count 43, give or take. And how do we reconcile that 43 with your 27 in the pipeline? Is this 43 just -- okay, this is a longer-term number. Right now, we've got 27 that we're currently actively pursuing?

Yes. So the strategic opportunity is just to give you an indication of the high likelihood and the gaps that we've got throughout Australia. So I wouldn't use that -- I would have put more numbers if I thought people were going to counter that. No. So the way to think about it is that, for instance, through Western Australia, that strip And let's say, Eastern -- Western Australia. It may be a real estate opportunity maybe in finance, but in essence, [ Espana's ] got a big bubble there. We've got a branch there. And yet our senses that we can be strong with satellite branches, there are other service opportunities that we can grow there. So that's the way to think about it. It's really just to guide us on our target areas.

Right. As opposed to specific targets?

Yes, exactly. So under this internally, we have maps with specific targets.

And just last one for me. The backwards integration, there's lots of questions you talk about it from lots of different angles. But I sort of struggle to think about the broad metrics in terms of perhaps a revenue and a GP or revenue and an EBIT opportunity. When you've been very clear that you're sort of not quite halfway through the process, how do we think about that on a go forward? If we've got another half and a bit to go, what does that look like in terms of revenue? What does it look like in terms of EBIT or GP depending on how you want to present it?

Yes. Well, the revenue is unhelpful because the revenue stays the same. It's just that we're supplying the product. So revenue is not helpful in the equation. But what's helpful is gross margin and gross margin will be EBIT. So it falls exactly through because there's no change in SG&A or anything like that. The addressable market -- yes. So if we're halfway through the addressable market, we're saying is -- just looking the exact numbers here -- at $250 million, $300 million. And we've got another, say, where I'm before, so another 20% to 30% gain, so at a 10% to 15% uplift in margin.

30% to go at a 10% to 15% margin. How does that square off with 50% of the way through the process?

So, there's the broad ways for you to work on. So by doing it ourselves rather than through a third-party, our uplift is 10% to 15% margin. The addressable market I gave you. So for your models, if you want to think in that way, the revenue doesn't change, the margin and the gross margin percentage, the gross margin, actual and the EBIT changes.

Your next question comes from Paul Jensz from PAC Partners.

2 quick ones. Just on market share. I think Mark, you mentioned 18% market share. I just want to make sure if that's a sort of a broad-based market share number or is that specifically for one area?

Yes. No, that's broad-based. And the market shares, differ obviously -- coming, as you know, differ by categories. So AgChem is based on verified numbers. So based on AgChem's about 18.5%, animal health 8.5%, fertilizer just under 14%, [ sheep ] at 8%, cattle about 11%, sheep just under 25%, wool just under 20%. So as you are aware, product-by-product and service, it varies. And really, we call out 18%, just to give a sense of the growth opportunity. But we're not at 99% of the market. So there's a significant additional growth opportunity.

And what sort of target have you got with yourself tenure and the Board? Where do you think you can get with market share?

Yes. No, we don't look at weather math. We don't look at commodity sizes. We don't target market share. What we're trying to do is just make money for our shareholders.

And then, the final one was just on -- sorry to revisit the system modernization program. But maybe just wrapping that up with the backward integration and a lot of the internal change, is there sort of an EBIT number that you are sort of looking to achieve over, say, a 3-year period?

You mean in terms of the system modernization benefits?

Yes. Just -- I suppose we're just trying to balance out the seasonal change that we think is going to happen when we come back to that average season that a number of the analysts are correctly sort of trying to get their head around. But to balance that out, have you got -- I mean, my feeling is, you've got a bigger internal number than the seasonal number coming back? I just wanted to hear you talk about a 10-year mark?

Sure. The system modernization program, we'll obviously view with the cost efficiencies over time and/or reinvestment choice in FTE numbers. But then importantly, like having a seamless systems and customer interaction over a long period of time and increasing the digital component does mean that you would hope that would deliver sales uptime. So we definitely have a very thorough business case that outlines each of the ways. And this one happens to be the foundational way. And over the next 5, 6 years -- sorry, the 3 to 5 years in 6 ways. And to obviously justify the investment in modernizing our platforms. I should add that IAS 400 is 30 years old, so not -- doing nothing is really not an option when it comes to the foundation.

Your next question comes from Evan Karatzas from UBS.

Just firstly on the working capital, just confirm that the increase is largely driven by higher sales and not an interest in debtor days or any sort of deterioration in receivables aging or recovery?

That's correct. We're absolutely flattish on days -- we think it included half a day, and we've got no degradation in our underlying doubtful debts. In fact, we've got the lowest percentage of total outstanding more than 90 days that we've had in some ways.

And then just finally, my second question. On the backwards integration strategy, obviously we've been quite successful in this first arrival with Titan. Can you just talk to if there's a willingness to further that backwards integration into other adjacencies? Or what's the thinking there in terms of potential opportunities for Elders to further backwards integrate?

Yes. I think it's a good question. So our primary focus has been crop protection, as you're aware. And that's with 80% or so of the products in trading off patent, it's quite a fertile ground for us to work and to start with. So that's the first focus. And we're running it through over this 3-year period. The second focus is animal health. Although animal health and veterinary products is quite a bit smaller than crop protection, the upside and backward integration -- sorry, the regulatory requirements are higher than crop protection. So the margins that we can capture through that and the rest is strong. So it could be 20%, 25% in animal health products. So that's the second one. In terms of other areas, in general merchandise, maybe direct procurement would target those. But the fertilizer, certainly from my experience having run a couple of fertilizer companies, is not an area that we would be interested in. In terms of specialty fertilizers, so these are following fertilizers either for horticulture or glass houses or that sort of intensive production. That is something that we're interested in and we've got a range [ because of ] the way we're progressing now. But there aren't that many other areas, that are [ B and JC ] in terms of margin that are on our agenda. So it's crop protection, animal health, especially fertilizers and maybe a couple of general merchandise areas. So this is the big chunk that we're targeting now.

Just quickly, formulating capacity in crop protection, is that an area of focus at all, given -- I mean, you obviously sort of outsourced that Titan formulating?

Yes. No, it is a factor. And the attractiveness of formulation facilities for us is not around the size of the margin because the margin component in formulation in the margin pool for Crop Protection is quite small, relatively small. So for us, the interest there is around flexibility of having -- of being able to have active ingredients that aren't formulated until we know which product they need to go into. So it just provides significantly greater flexibility geographically because of the freight and supply chain costs, but it's not the size of the prize, it won't move the dial in terms of impact like crop protection and animal health.

That does conclude our time for the questions. I'll just hand back to Mr. Allison for closing remarks.

Yes. Well, thank you, everyone. I look forward to -- Tania and I will look forward to speaking with many of you over the next few days. And thank you for coming into the call.

Thank you. That does conclude our conference for today. Thank you for participating. You may now disconnect.