Thank you for standing by, and welcome to the Elders Limited FY23 results retail investor briefing. All participants are in a listen-only mode. There'll be a presentation followed by a question and answer session. If you would like to ask a question, you'll need to press the star key followed by the number one on your telephone keypad. I'd now like to hand the conference over to Mr. Mark Allison, Managing Director and CEO. Please go ahead.
Thank you very much, and welcome to all to the FY 2023 full year results for the retail investor session. So the way we'd like to approach it today, given that the pack has been out for a couple of days, we thought we'd cover off the lead-in slides, and then we'd open up the question time. If we need to refer to additional slides in the pack, we can do that in answering questions or in explaining any particular issues. From our viewpoint, this is the final year of the third Eight Point Plan, very difficult market conditions and the result that was pretty solid against the backdrop of those market conditions.
So we'll jump to the key investment drivers first, and really just want to quickly run through the next slide outlining onto the key investment drivers, yeah. Outlining the attractiveness of the business and the market to investors. So starting on the left-hand side, in terms of earnings per share growth, it's been quite a compelling value proposition for shareholders since the first Eight Point Plan from 2014. The commitment in this plan is 5%-10% growth in EPS and EBIT through the cycles at above 15% return on capital.
As you can see on this slide, the CAGR through this period, the three Eight Point P lans, have been 57% for earnings per share, with a return on capital significantly higher than the 15%, and a dividend payout of between 40%-60%, and this year, it's above the 60% level. Looking at the investment drivers again, the geographical product and channel diversification allows us to be resilient across market conditions. And when I go to the next slide, I will be able to demonstrate that through multiple different market conditions. In terms of the attractiveness of the market and the outlook, it's a very positive market outlook for food and agri. And with Elders sitting at a generalized 20% of the market, there's 80% of the market for us to grow into.
Moving to the transformational initiatives that we have around our Systems Modernization project, our rural product supply chain optimization project, and also Elders Wool, we see very strong growth for a transformation of the business to future ready it as we go through the next, the fourth Eight Point Plan. In terms of significant pipeline of new opportunities, one of the hallmarks of our growth over the last nine years has been a bolt-on acquisition strategy, where we're filling gaps in products and services and geographies around Australia. This year, we've just completed nine acquisitions, 16 potential targets in the pipeline, and a universe of candidates of some 1,800 rural service stores around Australia, of which 900 are independent.
At any one time, there's 20%-30% of those looking for succession plans who would be viable candidates for our acquisition. And then, finally, in terms of our financial discipline, very strong financial discipline all around ROC and portfolio, managing the products and services within Elders, and coming out of tough conditions with a leverage of 1.4 times against our range of 1.5-2 times.
So moving to the next slide, and just emphasizing the point of the resilience of the business model. You can see the three Eight Point Plan periods, and at each of these discrete Eight Point Plans, as emphasized, the first Eight Point Plan with a commitment of 5%-10% growth at a 15%+ ROC, you can see an EBIT growth there of a CAGR of 37.5%, ROC through the period of 25.7%. Second Eight Point Plan, EBIT CAGR of 22.8% and an ROC average of 20.9%. And the Eight Point Plan we've just completed, against a commitment of 5%-10% growth through the cycles, an EBIT CAGR of 17% and an ROC of 21.6 against the target of 15%.
I think the key insight from this slide is the bottom axis, where it shows the significant climatic impacts through El Niño and La Niña over this period, and of course, bushfires, pandemics, and geopolitical supply chain disruption, et cetera. So during that, the result that we've come in this year is the second highest profitability in the last 10 years against that backdrop. Looking at the next slide, which is the operational highlights. On the left-hand side, three injuries down from six last year, and a total recordable frequency of 10.1 also a reduction. Net Promoter Score, holding a very strong Net Promoter Score result.
On the right-hand side, holding at 43% of women in the workforce, a 20% women in senior positions, against the starting point, the first open plan of 4% of women in senior positions. The employee engagement at 77%, which is above the high-performing organizations in the database that Korn Ferry construct on this, and then with additional growth. And I guess the center point of that slide, for the fourth year in a row, the most trusted agribusiness brand among farmers. So moving to the next slide, and just to provide a little bit more detail around the lost time injuries and total recordables. You can see on the left-hand side the trend line on lost time injuries.
If you take that back to 2014, the start of the Eight Point P lans, we started with 34 lost time injuries through that year and now down to three. In terms of the trend line with total recordables, it's fairly obvious, but I think the highlight I'd pick there is that there has been great progress in our wholesale business. We tend to have our bolt-on businesses and acquisitions where we need to do additional work to bring them into line with the very high standards that Elders sets of having no one injured in the business.
Moving to the next slide on our sustainability performance, and you're aware of the climate targets that we set a few years ago, but strong progress on the right-hand side with the sustainability framework being launched. The establishment of Thomas Elder Sustainable Agriculture to support innovation in this area, both for farmers and for partner companies. The Big Bag Recovery program that we've joined, this is very similar to the drumMUSTER program, applying to crop protection chemical containers, and also our solar initiatives to upgrade and reduce emissions and the solar farm development at our Killara feedlot. So moving to the next slide in financial highlights. An EBIT of AUD 170.8 million, down on FY 2022, the all-time record, but the second highest result in 10 years.
In terms of return on capital, above the targeted 15% return on capital at 16%, and this is against a weighted average cost of capital of 8%, with the difference, obviously, driving shareholder value creation. Cash conversion, we promised, we commit to 90%, and we've just exceeded that commitment this year. And leverage ratio, as I mentioned, at 1.4 times, against a target of 1.5-2 times. So, in summary, before I hand over to a few of the introductory financial slides, a solid outcome, second best profit in 10 years, and a quality return on capital and cash generation. Thanks, Paul.
Thanks, Mark, and, welcome everybody today. I'll commence on slide 12 of the pack, which displays Elders' five-year financial performance from FY 2019. Over this period, sales have increased from AUD 1.626 billion in FY 2019 to AUD 3.321 billion in FY 2023. A five-year compound annual growth rate, or CAGR, of 19.6%. Gross margin has increased from AUD 352 million in FY 2019 to AUD 619 million in FY 2023, a five-year CAGR of 15.1%. Comparatively, costs have increased at a five-year CAGR of 12.6%. Consequently, cost to earn has reduced from 79% in FY 2019 to 72% in FY 2023.
Underlying EBIT has increased from AUD 74 million in FY 2019 to AUD 171 million in FY 2023, at a five-year CAGR of 23.4%. I'll now move to slide 13, which focuses on shareholder returns. Over the periods, underlying earnings per share increased from AUD 0.526 in FY 2019 to AUD 0.876 in FY 2023, a five-year CAGR of 13.6%, adjusting for the impact of company tax expense, which was only recognized from FY 2022. Dividends per share increased from AUD 0.18 in FY 2019 to AUD 0.46 in FY 2023, and the dividend payout ratio, I note, is currently elevated above Elders' policy of 40%-60% of underlying NPAT, but is considered maintainable given high cash conversion in FY 2023, which is forecast to continue into FY 2024.
Moving to Slide 14, which contrasts FY23 against the prior corresponding period. As noted yesterday and also by Mark today, FY22 was characterized by historically high livestock prices, high real estate turnover, and inflated crop protection and fertilizer prices resulting from supply chain disruption. These market forces supported Elders' performance in FY22. By comparison, FY23 has seen steeply declining sheep and cattle prices, which reduced livestock agency commission, along with declining fertilizer and crop protection prices, which has placed downward pressure on rural products' gross margins. Consequently, there are material differences between the operating environment across the two periods. Notwithstanding these market impacts, Elders has been able to deliver its second-highest result in the past 10 years, as Mark noted, with a number of highlights evident as well.
So looking at the chart here, and I'll just draw out a few notes around some of these metrics. So sales revenue, despite being down 4% year-on-year, would have been down a lot more as a result of reduced prices, particularly in crop protection. So we've been able to offset some of those impacts with volume growth within the business. Gross margin decreased from AUD 652.7 million to AUD 619 million in FY 2023, down 33.7%... but would have been down by more without the volume growth, particularly within AgChem, but also the acceleration of our backward integration strategy, which increased from 46% to 54%.
In terms of costs, costs increased from AUD 420.6 million to AUD 448.2 million, up 27.6%, but have been held steady from the second half of FY 2022, with a strong focus on cost discipline, particularly around discretionary spend. EBIT, as noted, fell from AUD 232.1 million to AUD 170.8 million, down AUD 61.3 million, due to the headwinds noted before from livestock, crop protection, and fertilizer. Return on capital decreased from 26.2% to 16% as a consequence of the pressure on the livestock agency business, but remains above Elders' target of 15%.
Net debt increased from AUD 161.4 million to AUD 259.7 million, up AUD 98.3 million, as a result of capital expenditure and acquisitions within the business, as well as the AUD 38 million investment in PGG Wrightson. As a consequence, leverage, excluding AASB 16, has increased from 0.7x to 1.4x, but remains below Elders' target range of 1.5x-2x. Operating cash flow was very strong this year, up from AUD 113.7 million in FY 2022 to AUD 169.2 million in FY 2023. Providing a cash conversion of 163.1%. I do note, when you average FY 2022 and FY 2023, cash conversion is 110%.
Earnings per share decreased as a consequence of the pressure on EBIT from the headwinds in the business. In regards to dividends, I know Elders has declared a dividend of AUD 0.23 per share, which is flat on half year, but down on FY 2022 as a consequence of the lower net profit after tax. Mark, I might throw back to you.
Okay. So, we'll pause at this point to open up the questions on the financial performance, and then, when we've worked through those questions, I'll finish off with the fourth Eight Point Plan and the market outlook. So can we open up now to any questions, please?
Thank you. If you would like to ask a question, please press star one on your telephone and wait for your name to be announced. If you'd like to cancel your request, please press star two. If you are on a speakerphone, please pick up the handset to ask your question. Once again, if you'd like to ask a question, please press star one on your telephone and wait for your name to be announced. As there are no questions at this time, I'll now hand over to Mr. Allison.
Okay, so, let's move to slide 27 in the pack, and we'll just talk about the Eight Point Plan evolution. As spoken about earlier in the presentation, the three Eight Point Plans to this point have overachieved on the commitment of 5%-10% growth through the cycles at 15% minimum ROC. So what we've done, if we turn to the next slide, is to develop a fourth Eight Point Plan. And when we look at the fourth Eight Point Plan, the ambitions remain the same in terms of the shareholder returns. The industry leadership sustainability outcomes remain the same, and the most trusted brand ambition remains the same. The business units remain the same, and the values, the One Elders values shared across the business remain the same.
So what we've done with the fourth Eight Point Plan is to bundle the eight points into key areas within the business. Starting with Run, which is the optimizing the existing business, with the three key points being: deepening our customer relationships, investing in our people, and maintaining unflinching financial discipline. So three critical areas for the business. I'll move to each of these in more detail, slide by slide. So move to the next slide on Run. And you can see those three key areas, and these are three core anchors of Elders over the last 10 years. We can come back to any questions of those as we go. Moving to the next group, and that is the strategic priorities of transforming.
The transforming component includes streamlining our rural product supply chain, and you can see on the left-hand side. So we have a target in integrating our rural product supply chain from our formulation facilities, all the way through our supply, procurement, wholesale, and retail. In this particular case, given the need for specific expertise, we commissioned L.E.K. to do some work with us, and we identified a target of AUD 10-18 million of EBIT benefit over multiple years, and AUD 50-80 million of capital reduction over multiple years. That will come from the Project Streamline. On the right-hand side, we have our Systems Modernization project, which is built in seven waves, starting with wave zero. We're now at wave two.
This is the peak spend for SysMod with benefits flowing through FY 2025. We also have another transformational project on top of these with Elders Wool, where we've committed AUD 25 million of capital, targeting an 80% return on capital by FY 2025, with regard to an automated wool handling facilities in Perth and in Melbourne. So moving to the next slide in the third group, which is Innovate and Grow. And we talk of our portfolio component first, firstly, and then we'll cover off the sustainability solutions component. So in terms of portfolio, referencing our backward integration, we're currently at 54% of the targeted backward integration within Elders' home brand against off-patent chemistry.
For FY 2024, we're looking to take that to 60%, which should be a range of AUD 5-10 million EBIT benefit in our control. Second area on business development, the FY 2023 year, we conducted 59 financial models, 20 non-binding indicative offers. These turn into 11 due diligence projects and 9 acquisitions completed at annualized EBIT of AUD 9.1 million. And so we're targeting AUD 8-10 million adjusted for livestock prices in the FY 2024 period. And there are 16 candidates currently in our pipeline. So some good progress and good opportunities as we go forward. Moving to the next slide on Innovate and Grow with our sustainable solutions.
These are the eight key priority areas within the Eight Point Plan, under sustainable solutions with a health and safety focus, sustainable farming, employee attraction and retention, climate change initiatives, animal welfare initiatives, corporate governance, community impact and investment initiatives, and our waste management initiatives. So, that's the look of the fourth Eight Point Plan. The Eight Point Plan is the developed in the same way. We're operating in the same market, and largely, we have the same management team and team across the board to implement that plan, as we have with the previous three Eight Point Plans. So finally, looking to market outlook on page 34. The information shown in this slide is the September ABARES outlook, and this will be updated in December.
Probably the key point of difference will be the decline of El Niño suggested through autumn and the strengthening outlook around summer crop. If we move to the final slide with the market outlook through the eyes of Elders, what we're seeing is an 18-month to 24-month livestock price recovery. So, we see cattle and sheep recovery coming at different rates and different paces, but that's our assumption. And we're talking about average season for winter crop. And as we say, there's, with 20%, a rough 20% market share, there's ample growth for us, regardless of the... if the crop is up 10% or down 10%.
So with that, once again, I'd open up for questions and welcome any questions to Paul or myself.
Thank you. Once again, if you would like to ask a question, please press star one on your telephone and wait for your name to be announced. As there are no questions at this time, I'll now hand back to Mr. Allison for any closing remarks.
Okay, thank you very much. Well, thank you for joining Paul and myself for the retail investor session today. I look forward to a very strong fourth Eight Point Plan. So thank you very much.
That does conclude our conference for today. Thank you for participating. You may now disconnect.