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Elders in a tight spot over $66 million shareholder debt

Rural services company Elders is at the mercy of its recovering Australian parent after taking out a $66 million loan to replace bank debt.Elders, which provides services and merchandise across livestock, horticulture, wool and real estate, posted a $13.2

Duncan Bridgeman
Thu, 29 Apr 2010

Rural services company Elders is at the mercy of its recovering Australian parent after taking out a $66 million loan to replace bank debt.

Elders, which provides services and merchandise across livestock, horticulture, wool and real estate, posted a $13.28 million before tax loss for the 15 months to September, compared to a $5.3 million loss over the same period in 2008.

In financial statements recently released to the Companies Office, Elders said based on its cashflow forecasts it was dependent on the continued support of 50% shareholder Elders Limited.

The loss would have been worse were it not for a one off debt remission payment of $4.5 million, recorded in the financial statements as “other” income.

Operating revenue increased by $40 million to $125.87 million but cost of sales and expenses both increased significantly to offset the sales gains.

Bad and doubtful debts were up from $252,000 in 2008 to $1.41 million.

Total equity in the business has all been extinguished at just $80,000 as at September 2009, compared to $8.17 million at June 30, 2008.

Debt payable within 12 months

During the period Elders replaced $28 million of bank debt with a $66 million loan from ASX-listed Elders Limited, which owns 50% of the New Zealand company.

This loan is not secured and is payable at 12 months notice from September 2009.

Elders directors had a “reasonable expectation” that continued financial support would be forthcoming should it be called upon, a statement concerning the company’s going concern status said.

However, the statement noted that the ability of its parent company to maintain its support depended on its ability to achieve revenue forecasts, which was “uncertain.”

Across the Tasman, Elders recently underwent a major recapitalisation to reduce net debt from $A997 million to about $A200 million.

Despite signs of a turnaround in profitability, the company’s share price has been under constant pressure, hitting a 52-week low of $A1.23 yesterday.

Last year the firm raised $A550 million at the equivalent price of $A1.50.

Elders director Stuart Chapman could not be reached for comment yesterday afternoon.

Duncan Bridgeman
Thu, 29 Apr 2010
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Elders in a tight spot over $66 million shareholder debt
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