Good morning, everyone. My name is Ian Wilton, and I am the chair of your company. As it is now past 10 A.M. Adelaide time, I would like to welcome you to the Elders Limited 2023 Annual General Meeting. I'm advised by the Company Secretary that we have the required quorum for the meeting to proceed. I therefore declare the 2023 Annual General Meeting of Elders Limited open. Welcome, and thank you for attending. We meet today in person and online. I'd like to begin by acknowledging the Kaurna people, traditional custodians of the land on which we gather today, and pay my respects to their elders, past and present. I extend that respect to Aboriginal and Torres Strait Islander peoples here today.
In the spirit of reconciliation, Elders Limited acknowledges the traditional custodians of the country throughout Australia and their connections to land, sea, and community. Before commencing the formal meeting, I would like to introduce my fellow directors and our company secretary. On my far right, the empty chair is Raelene Murphy. She unfortunately was taken ill last night and is actually in the Royal Adelaide Hospital as we speak. So we wish her a speedy recovery. I'm not quite sure what's wrong with her, and it's quite unexpected but we will try and find out a little more after the meeting. Raelene was appointed Chair of the Remuneration, People, and Culture Committee in September this year and is a member of each of the other board committees. Robyn Clubb.
Robyn is chair of the Audit, Risk, and Compliance Committee and a member of each other board committee. Mark Allison, our Managing Director and CEO. From my far left, John Lloyd. John was appointed to the board effective the first of December this year and stands for election at today's meeting. Peter Hastings, our Company Secretary. If appropriate, during the course of the meeting, I may call upon specific directors to address questions you have that relate to their specific skills. Marcus Lojszczyk of PwC, PricewaterhouseCoopers, the company's auditor, is also present to answer any questions you have relevant to the conduct of the audit and the preparation and content of the auditor's report. A number of senior Elders' senior executives are also with us today, including our Chief Financial Officer, Paul Rossiter. Paul, you might just like to stand up. Thank you.
I encourage all, shareholders to mingle with your directors and senior executives after the meeting, and to chat with them about the company's affairs. Voting and questions are now open. We are very pleased to be able to join with you in person and online to connect with as many shareholders as possible. Our meeting today involves seven items of business and six resolutions. I will read all resolutions as they are set out in the notice of meeting. They will also be displayed on the slides visible in the room here and in the webcast, along with tallies of the votes received before the meeting from proxies and direct voting. Votes lodged before the meeting via proxy and direct voting were also released to the ASX ahead of this meeting. All resolutions will be decided by poll.
The polls for all resolutions will close at the conclusion of questions. On each item of business, we will allow a short time for questions and matters relevant to shareholders as a whole. We will also, hold a question and answer session at the end of the meeting to ensure that we address as many questions as possible. We will answer pre-submitted questions on the Q&A session at the end of the meeting, unless the question clearly states an item of business to which it relates. It is my intention to vote all open votes available to me in favor of all items. I appoint Stacey Spence from Boardroom Pty Limited as Returning Officer.
The Returning Officer's duty are to arrange for the collection of all votes, having regard to the voting exclusions set out in the notice of meeting, and to advise me of the results of the polls. Final voting results will be released to the ASX following the conclusion of today's meeting. Voting will remain open until I declare the polls closed at the end of the meeting. Only shareholders, their attorneys, proxy holders, and authorized company representatives are entitled to vote. If you are joining us online, voting takes place on the Lumi platform, through which you have joined this meeting. To submit your votes online today, you must be logged in using your voting access code. If you are logged into the meeting as a guest, you are unable to vote. The voting icon is the three-bar graph icon that appears at the top of your screen.
Please refer to the slide displayed on your screen for visual instructions. To cast your vote, simply select one of the voting options. Your vote will be recorded automatically. You do not need to press, submit, or send to lodge your vote. To change your vote, simply select a different option to override your original selection. If you choose to vote early in the meeting and you subsequently experience technical difficulties, your vote will still be received and counted in the poll. Those of you voting in the room today will have been provided with a Lumi handset. If you experience any difficulty using the handset, please signal to one of the boardroom representatives in the room. They're here to assist you. Please don't hesitate to signal to them early in the meeting to ensure any concerns can be resolved as quickly as possible.
If anybody has a problem right now, perhaps you'd like to raise your hand. Otherwise, hopefully, they're all, they're all working. On the screen of your handset, you will see the list of resolutions. Select the resolutions you would like to vote on using the wheel to scroll and green square to select. Your selected resolution will then appear on the handset screen. Press the green square to bring up the voting options. Press one to vote for the item, two to vote against, or three to abstain. Use the green square to move to the next resolution or the red triangle to return to the full list. Votes cast today will be added to those already cast by shareholders who voted before the meeting. You may change your vote at any time up until I declare the polls closed.
Please note that if you have already voted and choose to vote again today, it is your final vote during the meeting that will be counted. This brings us to questions and answers. Your views as shareholders are important to us, and we are always eager to receive your feedback. However, I would like to remind you that this is a shareholders' meeting. Only shareholders, their attorneys, proxies, and authorized representatives are entitled to speak. We will pause for questions and comments after each item of business, and I will endeavor to ensure that all relevant questions are answered during the meeting. You may continue to, to ask or submit questions until I advise that the Q&A session at the end of the meeting is closed. Before the meeting, the board received one submission, for which an answer has been prepared. As noted earlier, Mr.
Marcus Lojszczyk from PwC is also in the room today to answer any questions you have relevant to the conduct of the audit or the auditor's report. If you have joined us online and would like to ask a written question, select the Messaging tab at the top of your screen. Type your question into the box and press the arrow symbol to send. A copy of your submitted questions, along with any responses from our meeting team, can be viewed by selecting My Messages. Written questions will be read out before they are answered. If you are joining online today and prefer to ask a question verbally, click the Request to Speak button at the bottom of the broadcast window. A new page will be displayed, prompting you to confirm your name and enter the topic of your question. Submit your details and select Join Queue to be connected.
If prompted, select Allow in the pop-up to grant access to your microphone. For those in the room today, we have a microphone located towards the front. If you wish to ask a question, please make your way to the microphone when we open for questions. Please show your voting handset or red shareholder card. When asking verbal questions, either online or in the room, please, please start by stating your name and whether you are a shareholder in your own right, or an attorney, proxy, or corporate representative of a shareholder. After the final item of business, we will pause briefly to endeavor to ensure all questions have been answered and comments read out. I'd like to remind you that shareholders are attending today's meeting to discuss matters of interest to shareholders as a group.
If you have questions specific to your own shareholding that are not relevant to the group, we're happy to take your questions after the meeting, either through Boardroom or our company secretary. I've been advised by the company secretary that the notice of meeting has been properly circulated. With your consent, I will take the notice as read. A copy of the minutes of last year's AGM, held on Thursday, the December 15th, 2022, is available for inspection by shareholders. If you wish to inspect the minutes, please contact our company secretary after the meeting. Before the financial report is tabled, Mark and I would like to make a few comments. As is the case with most years, 2023 was not without its challenges for the Australian agricultural sector.
Following an exceptional year in 2022, there were significant changes to market and seasonal conditions, posing significant challenges for producers and for Elders. Despite this, Elders reported strong earnings, the second highest underlying EBIT in the past 10 years, allowing us to declare dividends totaling AUD 0.46 per share. Our diverse geographic product and service portfolio has mitigated against weather and commodity price variability, resulting in overall solid earnings and showing the value of a strategy that prioritizes diversification in a sector prone to the effects of external fluctuations in commodities and climate. Led by a talented and passionate team of individuals with a shared vision for the success of the company, Elders is investing in initiatives that will benefit investors, clients, and the more than 2,700 employees who proudly wear the pink shirt.
This requires that Elders offers a best-in-class value proposition for our current and future employees across all levels of the organization, particularly in relation to promoting equity, diversity, and inclusion. As you may know, in FY 2021, we reviewed and began work to address our gender pay gap to ensure that employees with similar skills, knowledge, qualifications, experience, and performance are paid equally for the same or comparable work. In FY 2023, this process continued. To further improve, we are extending our analysis and reporting to quarterly reviews of pay decisions arising from recruitment, promotion, and out-of-cycle requests to ensure any systemic biases are identified and corrected. We continue to strive for our diversity targets.
By the September 30th, 2025, we intend to lift the representation of women in senior positions to 25% from the current 20%, and hopefully higher, and reach 40% of women in senior executive positions, which was just under 38% at FY 2023. Pleasingly, the representation of women in non-executive director roles remains above our target of 40% or above. It is our ambition to increase the overall diversity of Elders' workforce generally, and in FY 2023, we sponsored a range of diversity leadership programs and women in agriculture initiatives to help support greater industry representation. We're committed to creating a workplace that allows our people to thrive by attracting, developing, and retaining the best people in agriculture. We are championing youth and women in our workforce while investing in learning and development programs, remuneration and reward frameworks, and succession and retention models.
This year, we again conducted our annual employee effectiveness survey. This showed that Elders is either equal to or above the high-performing benchmark compared to other companies globally. Looking ahead, Elders is well-placed to take advantage of conditions in agriculture, pursue opportunities for growth and diversification. In our sector, climatic conditions and commodity prices will always fluctuate through the cycles. Our response remains to stay focused on the controllables and delivering value for stakeholders with a strategically diversified business model. Resilience is not a new concept for farmers or Elders. It is an attribute we are proud to possess, and it's why we are optimistic when assessing fluctuations in commodity markets, unexpected weather patterns, or changes to policy.
The business fundamentals of consistent growth are always present in our decision making, and Elders continues to deliver resilient results, remaining true to our goal of making great returns in good years and good returns in average years. This year, we made some key changes to the executive team and the board. More details can be found in the annual report, but I would like to welcome our newest members, Executive General Manager, Strategy, Sustainability, and Innovation, Anna Bennetts. Where's Anna? Over there. Executive General Manager, Wholesale, Pete Lowry. Pete's here. And Executive General Manager, Rural Products, Nick Fazekas. Nick's down the front here. I also welcome our newest Non-Executive Director, John Lloyd, who stands for election today. John will be a valuable addition, with extensive experience and deep insights in agribusiness.
I now turn to the concerns we have heard from shareholders and proxy advisors around the increase in remuneration and the type of benefits offered to our Managing Director and Chief Executive Officer, Mark Allison. We understand the concerns raised, but I would like to take a few moments to explain how we reached these decisions. In November last year, Mark announced his intention to retire from Elders. After conducting an extensive search for a successor, in May, the board decided to determine if Mark would contemplate continuing in his role as Managing Director and CEO. It was considered delivery of Elders' Systems Modernization and supply chain optimization projects may have been jeopardized by a change in leadership at this critical stage.
In addition, delays in the appointment of a successor would continue to create uncertainty in the market at a time when El Niño and broader economic conditions were beginning to impact our customer purchasing patterns and the business outlook. In the process of determining a successor for Mr. Allison, it was also clear that the candidate pool and market generally had moved in relation to remuneration expectations. The board felt it was appropriate to adjust Mark's remuneration arrangements and to put in place a package that has been assessed for market competitiveness to ensure that his services were retained beyond his planned retirement. The board believes this is in the best interest of the company and our shareholders. A number of you have asked about CEO succession or the CEO succession process. It is ongoing.
It will continue to focus on the further development of suitable internal candidates and the addition of new talent to the executive team to complement the existing skill base. This is in addition to the external search process. On behalf of all shareholders, I would like to thank Mark for his continuing commitment to the Elders business and his exceptional stewardship over what has been almost 10 years now. Thank you to my fellow directors here today and for your contribution, and those not here, to be frank, and thank you to our shareholders for your continuing support. With this, I will hand over to our CEO, Mark Allison.
So thank you, Ian. Good morning, and thank you for joining us in person and online for Elders' financial year 2023 annual general meeting. I'm pleased to address you this morning on the cusp of 2024, which will be Elders' 185th year serving Australian agribusiness.... This is an important milestone for Elders, an opportunity to reflect on the achievements of the last year and to look at how the company is prioritizing modernization investment to continue to best serve its customers, provide value for its shareholders, and remain an excellent place to work for its employees. Elders reported a resilient financial performance this year, achieving underlying earnings before interest and tax of AUD 170.8 million, the second-highest EBIT result in the last 10 years.
This was accomplished despite climatic and market headwinds, demonstrating the value of our geographically diverse multi-product and service portfolio to generate strong average earnings across the group. We remain committed to achieving excellent financial and operational performance via the strategic priorities outlined in our Eight-Point Plan. In 2023, in FY 2023, we continued to expand our market share through acquisitions and organic growth, welcoming 15 points of presence and over 90 employees for our network. This included four new greenfield sites, where we had geographical gaps in New South Wales and Queensland. We've also made significant progress on our transformational initiatives, such as Systems Modernization.
Wave one of the systems modernization project was completed in FY 2023 and is already creating efficiencies and improvements to ways of working, with the delivery of new human resource system, a new intranet, and a new website with increased capability to service customers. Wave one also included the implementation of the first modules of Microsoft Dynamics 365, encompassing indirect procurement and fixed assets. This transformational project is a non-negotiable to ensure Elders is equipped to best service its customers for years to come. This year, we reached significant milestones in our new Elders Wool business, opening our new Rockingham Centre in Western Australia and reaching practical completion on the world's first automated handling facility in Ravenhall, Victoria. This business will streamline the wool supply chain, introduce efficiencies to clients, and aims to be best in class in terms of sustainability and safety credentials.
We've not compromised our unflinching financial discipline to achieve growth in these areas, and have finished the year with an underlying return on capital of 16%, which exceeds our benchmark target of 15%. This year, Elders maintained its position as most trusted agribusiness brand among farmers in rural and regional Australia. Our customer-focused approach to business has helped us to achieve this, as well as our appreciation for the importance of community investment, which is critical to the viability and well-being of rural and regional towns and their industries. To reaffirm our commitment, we launched Elders Community Giving Project to continue to foster innovation and growth in rural and regional Australia. In addition to strong community engagement commitments, Elders also excelled in its sustainability outcomes. Our FY 2023 sustainability report is well worth your attention. It demonstrates the significant progress we're making across our ambitions.
It encompasses detail about the establishment of Thomas Elder Sustainable Agriculture, we call TESA, a new division dedicated to delivering greater impacts in the area of sustainable agriculture and innovation. TESA aims to promote greater on-farm adoption of research-based practices, to make for more productive and sustainable farms that are resilient to changing climate and able to seize potential opportunities with emerging markets. The report also details our waste management strategies to better address waste reduction in our business and our sector. None of these accomplishments are possible without our people, and Elders has a fundamental responsibility of ensuring their safety at their workplace. While any harm to our employees is unacceptable, and we strive for zero harm workplace, Elders managed to reduce its lost time injuries in FY 2023 by half, reporting three lost time injuries.
While conditions have been difficult this year, Elders' adherence to its guiding strategy and its principles have allowed us to report pleasing results with progress across the business. Now, in FY 2024, we have commenced our fourth Eight-Point Plan, which will take us through to the thirtieth of September, 2026, and guide us to deliver compelling shareholder returns and industry-leading sustainability outcomes, while remaining the most trusted agribusiness brand amongst farmers. Thank you to Elders' dedicated staff, including my leadership team, who are, of course, at the core of these achievements and will be fundamental to our future growth. Thank you also to our valued clients for trusting Elders. And thank you to our stakeholders, to our shareholder and industry colleagues, whose support, whose support has been invaluable this year.
With your backing, I'm confident the strong foundations of this business will take us forward, achieving our ambitions to FY 2024. I look forward to working with all of our stakeholders over the coming period to oversee continuous and methodical high returns and profitable, profitable growth for Elders. Thank you.
Thank you, Mark. Let us now turn to the first item of business. I table the financial report for the company, together with the directors' report and the independent audit report for the year ended 30 September 2023. I note there is no formal resolution for this item, but shareholders are welcome to ask questions. We will take online questions first, followed by questions in the room. If you are in the room and would like to ask a question, please make your way to the microphone now. Moderator, are there any online questions?
No, Chair, there are no questions.
Now I'll take questions from the floor.
Mr. Chairman, can you hear me?
I can. I don't know if-
I think it's on, yeah.
Okay. My name is Robert Kendrick, and I'm a shareholder. You've already referred to in your address, the announcement regarding succession, which was made on the fifth of June this year. Essentially, what it said was that the board, having searched the whole world over for a successor to Mark Allison, had failed to find one, and you had therefore asked him to stay on with an increased remuneration of approximately AUD 1.5 million in retention bonus shares and an increase in his basic salary. At the same time, but in a separate announcement, it was said that one of the independent non-executive directors was to resign with immediate effect, and another of the independent non-executives resigned with effect from the thirtieth of September. I have some questions about this. The first is regarding the increase in Mark's remuneration.
Is it right to reward a failure in succession planning, which is principally, of course, as you pointed out to me, the responsibility of the board, but also to some extent, the responsibility of the managing director, and also the failure to bring on internal candidates to succeed the managing director? Is it appropriate for that to be rewarded quite so handsomely? And in the same line, would the board of directors who remain consider taking a reduction in their salary to reflect what appears to be a failure of the principal job of the board, which is to appoint a Managing Director? And finally, on this subject, presumably, you employed an executive search company. Did they receive a fee for their failure to come up with a successor? Thank you.
Thank you, Robert. Well, there are a number of questions there. I might start with your characterization of the process as a failure. I don't necessarily see it that way. I think what we have been able to achieve is the continuation of a very successful CEO in the role. In terms of the process, you're right, we did use external search consultants. The board had determined, when Mark initially advised that he was going to retire, that we the internal candidates weren't quite ready to be considered. We had for quite some time before that, had in process a system of reviewing the internal candidates or potential internal candidates. People had been moved around roles to get different experience.
Some had been sent on courses at the likes of Harvard University, et cetera, et cetera. But at that, at the point that Mark notified of us, of his retirement, they weren't quite ready in the assessment of the board. The search process did, in fact, identify one very well-qualified candidate. Unfortunately, that person, and I won't go into the details, it's confidential, but he withdrew from the process at very short notice in May, and we were left with the issue of nobody else having... We thought we'd found our person. So we then determined to ask Mark if he'd stay on. It was at the stage we had already previously announced that we expected to advise the market of the new successor on the, by July.
It was apparent we weren't going to be able to achieve that, so the best option was Mark, quite frankly, particularly as the importance of the systems modernization project and the supply chain review, of which Mark is absolutely vital with, given his knowledge and background. So, and the fact that we paid Mark more is not a reflection of a failed process; it's a reflection of the market at the time. Had we taken on the other person we were looking at, we would have been paying considerably more in terms of the amount we would have to pay to get them out of their existing long-term incentive arrangements of their previous employer. So overall, I can understand your perception. I don't accept that it was a failure.
I think the board took the right decision to reappoint Mark in the absence of better candidates at that point, given the uncertainties in the market and the vital projects that are ongoing in the company.
The, um-
We paid a small fee, but not the sort of fee we would have paid had we appointed someone, because it's pay, really a success basis, but we had paid a preliminary fee to start the search process.
My final question was about the board remuneration, which you in fact increased by 3%, if my memory is correct.
Correct.
Now, I've been an INED, and I remember that when we made a mess up and allowed our treasurer to invest in CDOs during the global financial crisis, we actually took a cut of 25% in our pay. So, I mean, I accept that you are denying that this was a failure, but I would still expected some sort of acknowledgment from the board. Obviously, the two directors who left didn't necessarily agree.
I can't comment on why the other directors left. That's something you'd have to ask them about. It, it's not something the board has considered. I don't believe... I think the decision we made was a very correct decision to reappoint Mark, and again, I don't think the board failed. This is in the year when we recorded our second-highest profit for quite some time. The board's fees are judged against the market. We get advice on that from remuneration consultants, and the modest increase is less than inflation, so it... We haven't considered a reduction. Please, Ken.
Thank you, Chair. My name is Ken Wakeman. I'm a company monitor with the Australian Shareholders Association. I'm here today with my colleagues, Malcolm Keynes and Bob Ritchie, representing 49 retail shareholders. Just a few comments, really. Firstly, thank you for yourself and the CEO and the company secretary for meeting with us prior to the AGM. These meetings help us iron out some of our issues we have with the company, get us a feel for how the business is traveling, and helps us to form our voting intentions. Secondly, I'd like to make a comment about the initiative you had this year to have a retail shareholders briefing in addition to the analyst briefing. I thought this was really an excellent initiative.
It showed that the company is has some concern about its retail shareholders and interested in keeping them informed, and I'd like to see that continue. I don't know how many people actually knew that it was taking place. I must admit, I don't hang on every ASX announcement that comes out, and I think that's probably true of a number of retail shareholders. But I think if we can get more retail shareholders knowing about that meeting, it's very useful. And it happened at a good time of day, 5:30 P.M., and where people who work could actually attend and ask questions. Thirdly, about our voting intentions. We will be voting in favor of all motions except five and six. Thank you.
Thank you, Ken. We appreciate your support. In terms of the investor presentation to retail shareholders, we'll take that on board. It was really a trial this year to see how it went. We would like to have had more people attend. As discussed, we'll probably think about delaying that by a week next time, so when Mark has more time to do it, and we'll make it a little bit more user-friendly, perhaps. So less jargon as to user-friendly. If there are no further questions from the floor, we'll now move to the resolutions. Oh, I'm sorry. It's-
My name is Lloyd Sustenance, and I've been a shareholder for a day or two, you know, and I'm just wondering if you're doing anything to train up somebody to follow Mark, or do we go through the whole rigmarole again, starting from square one?
No, I can assure you we're doing a lot to make sure we've got somebody internal, and we'll also look externally. But, the focus is very much on developing our internal candidates, and there's some very good people in this room who have been recently well-recognized by an investor presentation that they all participated in.
And you talk about female promotion. It seems to be the flavor of the year, the last decade, and I just wonder whether females are being promoted because they're females or because they're the best for the job?
They're being promoted because they're the best for the job.
Well, that's good. Yeah. Anyway, thank you very much. But I, I admire the stamina of your shareholders. You know, they've stuck with you while your share price has gone down and down and down. And we parked in the car park down there, and I almost dropped dead walking all the way around to here. That really takes stamina.
Yeah. Yeah. Well, we appreciate the efforts all shareholders go to, to attend, whether it's in the room here or, or online. If there are no further questions, we'll move on. Now to the resolutions before the meeting. The first resolution relates to the Elders' 2023 remuneration report, which can be found on pages 56-73 of the annual report. The resolution is displayed on the screens in the room and in the webcast. It is the same resolution as the resolution in agenda item two of the notice of meeting. The resolution states that the remuneration report, which forms part of the directors' report for the twelve-month period ending 30 September 2023, be adopted. The Corporations Act provides that the vote on this resolution is advisory only and does not bind the company or its directors.
However, Elders and the Elders Board respect the views of our shareholders. Proxy and direct voting tallies of votes received before the meeting are displayed on the slides visible in the webcast. Any votes by key management personnel and their closely related parties will be disregarded, except for votes exercised as a proxy for other shareholders who are entitled to vote. Votes received prior to the meeting indicate it is likely we will receive a first strike against the 2023 remuneration report. First strike occurs when 25% or more of the votes cast are against the resolution. If this occurs at two consecutive AGMs, the Corporations Act requires us to put what is known as a spill resolution to the second AGM as to whether to hold a further general meeting to consider spilling the board.
As I mentioned earlier, we have heard and acknowledged the concerns raised by shareholders and proxy advisors in relation to succession planning and the increase in remuneration, and the type of benefits offered to our Managing Director and Chief Executive Officer, Mark Allison. We take on board your feedback and accept the voting outcomes on Elders' 2023 remuneration report. If a first strike is confirmed today, next year's notice of meetings will explain the process to be followed regarding the spill resolution. I'll pause briefly now to allow time for voting and questions. If you're in the room and would like to ask a question, please come to the microphone now. Moderator, are there any online questions?
No, Chair, there are no questions.
Any questions from the floor? As there are no questions from the floor, I will move to the next resolution. The second resolution relates to the election of John Lloyd as a director. The resolution is the same as the resolution in item three of the notice of meeting, and states that John Lloyd, having been appointed as a director by the board since the last annual general meeting, who retires in accordance with Rule 8.1.5A of the Constitution of the Company, and being eligible, is elected as a director of the company. John was appointed as a non-executive director effective December 1, 2023. His skills and experience are set out in the notice of meeting. John is considered by the board to be an independent director, and his appointment has the unanimous support of the board.
John has prepared a statement regarding his election, which I invite him to share with you now. John?
Thank you, Chair. Good morning. My name is John Lloyd, and I'm honored to be considered for election to the Elders Board of Directors. My background reaches into most aspects of agricultural inputs, outputs, and services, ranging from a young trainee livestock salesman many years ago, to senior executive and leadership positions in firms such as Wesfarmers, Incitec Pivot, Case New Holland, and just about every job in between. I've also led and continue to participate in significant R&D, innovation, and marketing enterprises in agriculture, including fisheries, horticulture, viticulture, red meat, grains, and tertiary education. Over the years, I've not only been a supplier to Elders Limited, but I've also been a competitor, a customer, a contractor, and a co-investor. The opportunities for investment in agriculture are rapidly being realized.
Companies such as Elders, with its strong focus on financial discipline, geographic and enterprise diversification, and creation of value for shareholders, lead the way in fostering investor confidence in one of Australia's core industries. I have long admired the story of what is one of, if not the, most trusted brands in regional and rural Australia, and look forward to, with your support, continuing my role on its board. Thank you.
Thank you, John. I think you can tell that John will be a very valuable addition to our board. I'll pause here again to allow time for votes and questions. Please come to the microphone now if you are in the room and would like to ask a question about the election of John Lloyd. Moderator, are there any online questions?
No, Chair, there are no questions.
Any questions from the floor? As there are no questions from the floor, I will move to the next resolution. I now move the third resolution, which relates to the approval of issue of securities under the Long Term Incentive Plan. The resolution is displayed on the screens in the room and in the webcast. The resolution is the same as the resolution in agenda item four of the notice of meeting. The resolution states that for the purposes of ASX Listing Rule 10.14, and for all other purposes, the grant of 283,999 performance rights to the Managing Director and Chief Executive Officer, Mr. Mark Allison, on the terms specified in the explanatory notes to the notice of meeting, be approved.
Your board believes that incentive arrangements for our MD and CEO are an essential component to achieving our long-term goals, and that the conditions of the grant are both balanced and challenging and aligned to shareholder interests. The terms of the proposed grant are set out in the Notice of Meeting. Votes cast on this item by or on behalf of Mark and any of his associates, or by a member of key management personnel and their closely related parties acting as proxy, will be disregarded. Exceptions to this are set out in the Notice of Meeting. I'll pause again now to allow time for voting and questions. If you're in the room and would like to ask a question on Item four, please come to the microphone now. Moderator, are there any online questions on Item four?
No, Chair, there are no questions.
Are there any questions from the floor? As there are no questions from the floor, I will move to the next resolution. The fourth resolution, which relates to the grant of service rights to our Managing Director and CEO, Mark Allison. The resolution is displayed on the screens in the room and in the webcast. The resolution is the same as the resolution in Agenda Item five in the Notice of Meeting. The resolution states that for the purposes of ASX Listing Rule 10.14, and for all other purposes, the grant of 180,000 service rights to the Managing Director and Chief Executive Officer, Mr. Mark Charles Allison, on the terms specified in the explanatory notes to the Notice of Meeting, be approved.
As I spoke about earlier in the meeting, your board believes that the grant of these service rights is in the best interest of the company to retain the services of our highly successful Managing Director and CEO over a period of strategic transformation. The terms of the proposed grant are set out in the Notice of Meeting. Votes cast on this item by or on behalf of Mark Allison and any of his associates, or by a member of key management personnel and their closely related parties acting as proxy, will be disregarded. Exceptions are set out in the Notice of Meeting. Once again, I will pause to allow time for voting and questions. Please come to the microphone now if you're in the room and would like to ask a question. Moderator, are there any online questions?
No, Chair, there are no questions.
Any questions from the floor? As there are no questions from the floor, I will move to the next resolution. I now move to the fifth resolution regarding the approval of issue of securities under the Long Term Incentive Plan as an exception to ASX Listing Rule 7.1. The resolution is displayed on the screens in the room and in the webcast. The resolution is the same as the resolution in Agenda Item six of the Notice of Meeting. The resolution states that for the purposes of ASX Listing Rule 7.2, Exception 13, and for all other purposes, the issue of securities under the Long Term Incentive Plan, as described in the explanatory notes to the Notice of Meeting, be approved. I believe the Notice of Meeting sufficiently details the rationale for this resolution, so I do not propose to repeat it.
However, I will note that the purpose of this resolution is to seek approval from shareholders so that securities issued under the Elders LTI plan are not counted towards the 15% annual placement capacity available under Listing Rule 7.1. This means that Elders can, if this resolution is passed, issue securities under the LTI, LTI plan for three years from the date of this meeting and preserve its annual placement capacity to make sure it is used in Elders' best interests, should the need ever arise. Votes cast by Long Term Incentive Plan participants and their associates, and key management personnel, and their closely related parties will be disregarded. Exceptions to this are set out in the Notice of Meeting. Once again, I'll pause briefly now to allow for voting and for questions.
Please come to the microphone now if you're in the room and would like to ask a question. Moderator, are there any online questions on Item six?
No, Chair, there are no questions.
Any questions from the floor? As there are no questions from the floor, I will move to the next resolution. The sixth and final resolution. This is a special resolution which requires 75% of votes cast to approve the resolution. The resolution is displayed on the screens in the room and in the webcast. It is, it is the same as the resolution in Agenda Item seven in the Notice of Meeting. The resolution states that the proportional takeover rule, in the form of Rule six of the Company's Constitution, as last approved by shareholders on the seventeenth of December, 2020, be renewed in the Constitution for a period of three years from the date of the meeting.
Rule 6 of the Constitution prohibits the company from registering a transfer of shares resulting from a proportional takeover scheme, unless and until shareholders in general meeting approve the offer. The rule is designed to assist shareholders to receive proper value for their shares if a proportional takeover offer is made. In accordance with the Corporations Act, this rule ceases to have effect at the end of the third anniversary of its adoption. As Rule 6 was last approved by shareholders in a general meeting on the December 17th, 2020, unless it is approved again today, Rule 6 will automatically cease to have an effect on the 17th of December this year. If approved today, the rule will continue to have effect until the December 14th, 2026. The notice of meeting sets out the information required by the Corporations Act in relation to this resolution.
The directors consider that shareholders should have the opportunity to vote on proposed proportional takeovers. Without Rule Six, a proportional takeover may enable control of the company to be acquired by a party holding less than a majority interest, and without shareholders having the opportunity to dispose of all their shares. This gives rise to a risk that shareholders may be left as part of a minority interest. Rule Six prevents this situation arising without shareholder approval. The proxy and direct voting details are again displayed on the slide shown in the webcast. The directors unanimously recommend that shareholders vote in favor of this resolution to ensure that any takeover proposal is a full bid, unless shareholders approve a proportional bid. I pause again now for the final time before we begin to answer questions on item seven, and any remaining questions not addressed earlier in the meeting.
If you have any questions on any topic relevant to shareholders as a whole, which have not already been answered, we will address those questions now. Those of you in the room wishing to ask a question, please come to the microphone now, but we'll begin with questions received before the meeting. Moderator, please read out the first question.
Chair, this question comes from Declan Wirenga. Declan asks: Given the precipitous decline of the value in Elders shares after Mr. Allison announced his retirement in FY 22, and the following sweetheart deal to retain his services by the board, has further consideration being given to finding Mr. Allison's replacement? Even the best in business cannot work forever. What is the board's plan to renew the business's leadership?
Well, thank you for your question, Declan. I think, a fair bit of it has already been addressed, but, just to reassure you, the board has had an active CEO succession process for some time, and this is continuing. We were very fortunate to be able to retain Mark's services at this time of significant structural change within the company. I assure you that the board remains committed to a process that delivers succession in an orderly fashion. We're continuing to focus on the development of internal candidates, and a number of investors commented favorably on the strength of the executive team following the Investor Day we held in November. We're also looking at the addition of new talent to the executive leadership team to complement the existing skill base. Moderator, are there any further questions online?
Yes, Chair. We have three questions from Mr. Edmund Campion Carew. Mr. Carew asks, "Could Mr. Allison comment on indicators such as Eastern Young Cattle and the demand Elders are seeing for beef cattle and lambs? How do you judge the domestic market, and separately, interest from overseas buyers, given regarding the latter, government restrictions and/or regulatory changes?
Okay, yeah. Thank you. Is this on? Does that got me? Yeah. Yeah. No, thanks for the question. I think, in line with those questions, there is another one around the, the impact of the, of weather on Elders' performance. And, I, I think I'll talk in that context, because I think it all wraps up together. In, in terms of the, the, the way, the business model has been structured at Elders for, for many years, for the three-year previous Eight-Point Plans, is that we have a view that if you have, a cost and capital position, as Ian mentioned earlier, that allows you to make, good money in bad seasons and great money in good seasons, that's the starting point. And that's what we did, at the beginning of the first Eight-Point Plan.
But the second part of the mix, in order to not be as vulnerable to weather or equities or global commodity prices, is to have multiple diversifications in the business model. And so when you look at the Elders business model, it's quite different to most others, and in agriculture, it's very, very different to companies like GrainCorp, who have one stream, or Nufarm, who have a couple of streams. So there are multiple products and services, and the products and services differ in ways as well in terms of the business model behind them, as broker models, as direct style models, et cetera. The other diversification is our channel diversification.
So we have retail channel, and we have wholesale channel, which allows us to, to buffer, to cover different areas, but also buffer direct impacts, with our wholesale model. Another diversification, the classic diversification of geography, where although El Niño is talked about, it's never across Australia at the same time. So having the geographical diversification, which is the, you know, one of the, the one most people talk about. But I think a diversification that's not well understood within Elders is also our, farming enterprise and production enterprise diversification.
So, so we go from the broad acre dry land, winter crop, enterprises, all rain-fed and can be subject to, dry conditions or wetter conditions, to our summer crop, enterprises, which are irrigated, generally irrigated, also some rain-fed or dry land, summer crop, but with an irrigated system and, and that goes right across rice, across the tree crops, et cetera, and, and horticultural, areas, that, that can, that mitigates the impact of, of change in climate. In terms of the, the, the other diversifications in business enterprise, you've got sugarcane that doesn't have any climate or has less climate impact. Dare I say it, as in North Queensland, there's a cyclone coming through, so there is, does have some climate impact.
But also tropical horticulture down the coast, covered horticulture, which isn't subject to those environmental impacts, and the temperate horticulture, which we know through wine and tropical vegetable temperate vegetable growing. The multiple diversifications and a cost and capital base, which means you don't get into trouble in bad seasons if it's a particularly bad season, is the key reason why over the three Eight-Point Plans, we commit to a 5%-10% growth in earnings per share and EBIT at above 15% return on capital. It's why through those, the previous nine years of Eight-Point Plans, when we've had that commitment, we've delivered a CAGR of above 20% and on a return on capital of above 20%.
So it's quite critical, and we tend at Elders to control what we can control. So although we watch the weather and we watch the EYCI cycles and we see all that, it's not actually the biggest driver of what we do in running the business. In terms of EYCI, so the Eastern Young Cattle Index, I think, historically, Elders had a dominant position with cattle. It was the most, it was a very critical part of the Elders portfolio. In 2023, the gross margin that came out of cattle, in terms of the agency business, was around 10%, so at or lower than our real estate business.
With our diversification and balancing the portfolio, which is a key part of all the Eight-Point Plans, we've been able to offset a lot of the uncontrollables like climate risk, commodity risk, cycle risk.
Yeah, thank you, Mark. I might just add to that. We're very aware that the Elders share price seems to be quite closely correlated to the EYCI or the Eastern Young Cattle Indicator. I think that means that we've got more education to do of the market, because clearly, we're far more diversified than that, as Mark has indicated. Any further questions, moderator, from online?
Yes, Chair. Mr. Carew has submitted another question. Given the adverse publicity Elders received in the 2023 financial year regarding a perception of improper disclosure, not to the market at large, what has the board taken to ensure no repeat, and what deficiencies, if any, in corporate governance were identified and acted upon?
Yeah. Well, thank you for the question, and I'm aware of what you're referring to, and it's something that the board takes very seriously. We did investigate what was alleged at the time and determined that there were no market-sensitive disclosures made. However, we have taken the view that we needed to reconfirm our policies in this regard, and going forward, we will make absolutely certain that before any of these meetings occur, if there's going to be any disclosure that's close to market sensitive, we'll release that to the ASX ahead of time. And in such meetings, we will also make sure that there's a party present, taking notes of what's actually being said. Any further questions?
Mr. Carew had a final question. I believe it's already been answered. However, I'll read it out: Could Mr. Allison please elaborate on how Elders results are not affected by the weather and give a couple of examples as to why this is the case?
Yeah, and that was the last question that I tied up in the answer for the first question.
Well, they are affected by the weather, but hopefully we somewhat mitigated it. Yeah. Yeah. Thank you. Anything further, moderator?
No further questions.
Thank you. One from the floor.
Mr. Chairman, my name is Robert Kendrick, and I'm a shareholder. I should have probably raised this under the remuneration report, but I thought there was an item later in the business on the short-term incentive, and that's what it relates to. Now, in previous years, there was an earnings threshold, an actual earnings threshold for the short-term incentive, which is paid to key management personnel, including management, Managing Director. Now, that was effective in 2023, which meant that they didn't get any short-term incentive at all, which obviously the board thought was a little unfair, so it's abolished that threshold. But it's left in place the threshold, in fact, modified slightly, and 95% of the budgeted EBIT. Now, my problem with that, which I'd like your comments on, is that effectively it is... Well, go back to the budgeting process.
Now, we know that the board approves the budget. However, management, in particular, key management personnel, are responsible for compiling the budget. So would it not be better to abolish the EBIT budget threshold altogether if that's the case? Because what you're actually doing is giving key management personnel an incentive to come up with a low budget so that they don't fall foul of the budgeted EBIT threshold.
I understand what you're asking, but I might point out that last year, the management were judged on budget. They didn't achieve budget, they didn't get an STI. So, I think to allay your fears about management setting a soft budget is somewhat unfair. The board does put a lot of rigor in interrogating management on the budget, and we have a process that we discuss it over about three different board meetings. The threshold that we've taken away is that the profit each year needed to be higher than the previous year as a gateway.
We consider that to be unfair because, in a time when commodity prices are down, weather events, et cetera, I mean, management this year worked extremely hard to achieve a very good result, but got no, no incentive payment. So we've changed that threshold. I think it's up to the board to determine whether or not the budget is fair, the target is fair, and I don't believe it's soft by any means. I think, they're gonna struggle this year to meet budget.
Thank you.
Any further questions? We have one more, which we all... Sorry to make you walk so often.
Well, that's all right.
So far.
I've been walking a long time. I'm used to it.
Yeah.
I go back a long way, and I'm an old man, and it's a bit lazy. And I notice a few more gray heads in this place; they're probably as lazy as I am. My shareholding goes back to the time when Mark was chairman, and he and the chief executive changed positions, and Elders shares were so cheap that they decided that, or well, that they'd combine 10 of them into one, and then that wasn't enough, so they combined another 10 into one. So what we did, we've chopped 100 Elders shares and turned them into one. You know, so people complaining about the price of Elders shares now, if they go back to when I first bought Elders, you know, they were way up in the air. They're sky high now.
Mm.
But I notice they've come down a bit in the last few months. But, you know, that's it. That's it for me. I'm just lazy. I can't be bothered buying and selling them. You know, your life springs in hope and internal, external and in-internal. But, you know, that's it. But I'm still alive, and I've still got hope.
Yeah. Well, we... I think we'd like a few more lazy shareholders because it's the, the institutions that are driven by, market indices and others that, cause the share price to fluctuate so much. Personally, I've been a shareholder for about 10 years as well, and I've... It's not because I'm lazy about it, it's because I think it's a good investment. But, are there any further questions?
My name is David Hall. I'm a shareholder. I heard a radio program on the weekend where a father and son in Victoria were interviewed regarding an offshore mining company taking over substantial parts of their land. They've refused all bids to sell. The father was interviewed, and he made claims that there'd be a lot of restrictions on access to the land. My question is this: Is Elders proactive on this issue that could change the face of a major industry of this country? You know, I appreciate the states control the mining laws. I realize that, but I just wonder if you could give us some idea of if you are proactive on this issue.
I'm not aware of the specifics of that.
Oh, yeah.
In that case.
There are others as well.
Yeah.
Yeah.
Is there something you want to comment on?
Yeah. I think the way we see our role... So, we're a member of Agribusiness Australia.
Mm-hmm.
I've recently stepped down as chair of Agribusiness Australia.
Right.
But Elders continues to be quite active within that organization. They've got an MOU with the National Farmers' Federation, so we work in parallel on these issues. So that that's the formal part of what we do. We don't take political positions, as you'd be aware. But what we do do is work actively for instance at the Bush Summit in the around all the Bush Summits that ran around Australia. We had multiple discussions. In this case, it was power lines, transmission lines-
Yes.
-going through properties, properties being resumed. And, so we add our weight in the debate-
Mm.
- informally in that way and formally through Agribusiness Australia.
Okay. Thank you.
Thank you. If there are no further questions, I'll allow a short time for you to finalize your votes, before I close the polls. While you do that, we'll just show a short video. If everyone's finished, I will now declare the polls closed. This concludes the formal business of the meeting. We thank you for your support and ongoing feedback. I will arrange for the results of all polls to be announced via the ASX, and a replay of the webcast of today's meeting will be available for viewing on the company's website later today. On behalf of your board, thank you for your attendance. I look forward to seeing you again next year. Please join us outside for refreshments and the opportunity to talk to your directors and senior executives. Thank you very much.