Thank you very much. Welcome to all for the Elders' full-year results presentation for the FY 2025 financial year. Thank you for joining Paul and myself for the session today. As an overview, the full-year results today are solid on a year-to-year basis, with EBIT up 12%, transformational projects on track, positive progress on leverage, and strong cash generation. Throughout the year, Elders demonstrated solid operational and financial resilience in the face of mixed seasonal conditions. Our diversified portfolio, through its national geographic footprint and multi-product and service offering, played a key role in mitigating the dry conditions across key agricultural regions and the increased competitive activity in our retail business. Stronger activity in livestock and real estate and high financial discipline also supported the solid result.
On the transformational projects front, we've also made good progress on wave two of our SysMod project, with all states rolled out and bedded down by the end of this calendar year. We are also well progressed in the final components of this project, with wave three and the completion phase, wave four, advancing in full on time. Focusing now on the areas out of our control, the FY 2025 season has been a problematic year from a seasonal viewpoint, with a drier than average and late start to the winter crop across southern Australia. With credit to our highly diversified business model, this is offset by our agency business, our real estate services business, our financial services, and our feed and processing services businesses. Rural products have seen some limitation with very dry conditions in southern Australia and Western Australia.
In this context, the performance of Elders, with its clear and consistent strategy, multiple diversifications, high financial discipline, hardworking and committed team, and enduring customer anchor as the most trusted brand in Australian agriculture on an unprompted basis, has remained resilient. This result is strong in safety, sustainability, and cash flow, with the full-year outcome approaching the midpoint of the EBIT guidance range provided earlier this year. Moving now to the Delta Agribusiness acquisition, which completed on November 3.
This acquisition is fully aligned with the Elders' acquisition rationale that delivered Titan and Ag, AIRR, and many other bolt-on acquisitions to Elders, with pre-synergies, EPS accretion, enhancement of our technical and ag tech expertise and offerings, strengthening of our geographical diversification, particularly in New South Wales and northwest Victoria, South Australia, and Western Australia, building on our crop protection and animal health regulatory package portfolio to drive our backward integration strategy, providing an additional platform for retail segmentation, allowing greater customer centricity, and providing further coverage for our real estate and financial service offerings. Moving on to the FY 2026 outlook, we are very optimistic on the broad outlook for Australian agriculture at a seasonal and commodity level, with the return to average conditions. In addition, we welcome Delta Agribusiness to our portfolio as a platform for significant growth.
The outlook and fundamentals for livestock remain sound, with prices for sheep and cattle forecast to be supported by strong international demand against a backdrop of tightening supply. The combination of a positive seasonal and commodity outlook also provides a great backdrop for continued growth in our real estate and financial services businesses. It is worth noting at this point that our first six weeks of trading for FY 2026 is tracking some 30% up on last year for the same time on an apples-to-apples basis. This is without the inclusion of Delta that has come in on November 3. Our approach for today is that I will provide an overview of the results, Paul will go to the detail of our financial performance, and I will then provide an update of our outlook and growth and transformational initiatives as we deliver the final year of our fourth Eight Point plan.
With this overview, we will now commence with the FY 2025 full results presentation. If we can move along to the next slide. The approach, as you see with the five committees, worth noting in the appendix that there's further detail and transparency on sensitivities, business model, etc. That's always worth looking at. Kicking off on the executive overview on the slide, committed to improving our safety performance. From a safety viewpoint, at the core backward-looking metric of lost-time injuries, there have been six lost-time injuries this year, which is an increase from last year. Quite a disappointing result, predominantly in the livestock area. We have been able to significantly reduce injuries across our manual handling and our raw products area. A disappointing result, we continue to aim for zero injuries to anyone.
I think it is worth noting that at the start of the Eight Point plan process, there were 34 lost-time injuries. We have made significant progress over the four Eight Point plans. The lost-time injury frequency and the total recordable injury frequency, and you can see the trend on the second slide, are significantly below our equivalent industry benchmark. Moving to the next slide, just a quick snapshot of the financial performance. You can see the underlying EBIT, some 12% up on last year, a return on capital 11.3%, holding stable, and maintained strong cash conversion and the dividend payout. Moving to the next slide. Paul will clearly go into the detail on the financials. Moving to the next slide, and this is over the Eight Point plan years. You can see significant return as committed in Eight Point plan one, two, and three.
At the beginning of, or just prior to, Eight Point plan, the fourth Eight Point plan, we took the decision to invest heavily in our transformational projects. There is some AUD 100 million of cost and capital being spent through this period in order to drive our systems modernisation project, our automated wool project, and also our crop protection formulation project. We knew that that would drag on our cost, capital, and resources and focus through that period. Critical transformational projects that were at the process of completing, with the formulation process complete, the automated wool project complete, and with SysMod running into wave three and four, which are the final two waves through next year. Moving to the next slide and some of the work we are doing across with our people and communities. It is worth noting, again, 186 years of Elders in Australia, regional rural Australia and agriculture.
Unprompted remain the most trusted brands throughout all of these areas and with significant activity across with multiple activities across the business. From a safety viewpoint, very clear focus on safety from an engagement enablement viewpoint. As you can see, quite high engagement enablement has been for many years, and also a very high focus on safety throughout our people. Moving to the next slide and just a quick look at the work we do from a sustainable, responsible future viewpoint. Many of you are aware of our alignment across many environment, people, and community projects and the work we've done with our sustainability report. You will note the very strong and aligned partnership with the Royal Flying Doctor Service. From our viewpoint, this is who we are. This is core to our DNA, and we will continue to invest and be highly engaged with our communities around Australia.
Moving to sustainability and our progress against the emissions targets with the next slide. You can see the trend towards the emission targets we've set. We'll continue to work through these. As many of you will also be aware, there's been a reviewed methodology on emissions calculations from livestock. We're working through that. I think the point to note is that we're well on track. If you take the time to read the sustainability report, I think you'll be very impressed with the progress we're making right across the board in this area. Moving to the next slide. This is really to emphasize one of the changes that we've made this year. Historically, we've been diversified by product and service, and we've talked about that in our business model. It's in the business model that appears in the appendix of this pack.
You will see right through the supply chain from crop protection through to wholesale with Elders Rural Service, Delta Agribusiness, and then real estate and feed and processing. There is a very solid diversification component that comes out of our business. If you look through all the key investment drivers, and I think Paul will comment to many of these, very strong EPS growth, diversification. The industry fundamentals are looking very good. I think it is one of the points that you will hear us make a few times that we are at the stage now where we have moved through our transformational projects and the big cost, capital, resource investment. We have got an outlook of positive commodity conditions and also seasonal conditions. We feel very, very optimistic about the next three to five years as we run through all of these.
Finally, just as a quick recap before we jump into the deep dive into the financials, the next slide. Just a recap on Delta Agribusiness that joined the group on November 3. Great business, well run, very complementary from a geographical viewpoint and fills many gaps that we did have. Very strong in its technical expertise, which also complements Elders significantly. We're looking at AUD 12 million of synergies at EBIT level over a three-year period in the original business case. Now, given that the ACCC have put on a 12-month delay, we're discussing around the Delta board on how we can fast track this with regard to backward integration, given the strong foundation of Four Seasons brands or products at the moment.
That's a very positive opportunity to fast track those synergies, targeting greater than 15% post-synergies from an ROC viewpoint and very much aligned to Elders across our approach to the business. As we've said a number of times, as divisions, all the divisions are standalone. With that, I'll pass over to Paul to go through the financials, and then I'll come back towards the end on strategy and outlook.
Yeah, thanks, Mark, and welcome everybody. I'll commence on slide 14 of the pack, which summarizes progress against key financial objectives.
Highlights include double-digit growth in our agency, real estate, and feed and processing businesses, below inflation cost growth when adjusted for acquisition and transformation, strong momentum in SysMod, as Mark referenced, with all states now live on wave two retail and wave three livestock to commence rollout in early 2026, product and geographic diversification, mitigating the impact of dry conditions in southern states, Delta Agribusiness acquisition to further enhance our geographic diversification from FY 2026 and strengthen our technical capability in agtech and precision agriculture, leverage to return to target in FY 2026 through a renewed focus on capital allocation and client profitability. I'll now turn to slide 15, which displays Elders' five-year financial performance. I note the following progress from FY 2024. Sales revenue increased AUD 70.4 million, or 2.2%, despite mixed seasonal conditions supported both by acquisition and organic growth.
Gross margin increased 7.4%, up AUD 47 million compared to the prior corresponding period or PCP. Comparatively, costs increased 6.2%, noting this includes the impact from acquisition and is therefore not comparable to inflation. Costs will be further discussed later in the presentation. Underlying EBIT increased AUD 15.5 million compared to PCP, but has declined over the five-year period with FY 2025 impacted by dry conditions. Moving to slide 16 now, which contrasts FY 2025 against PCP. In addition, this slide details the impact on key financial metrics from capital held on September 30 in preparation for the completion of the Delta Agribusiness acquisition, which occurred on November 3. Elders has delivered a resilient result with the following highlights evident. Sales revenue up AUD 70.4 million despite dry conditions in some key cropping regions, which thankfully ended in June.
Gross margin increased AUD 47 million to AUD 684.6 million, up 7% year on year, with growth achieved across most products. Underlying EBIT increased AUD 15.5 million to AUD 143.5 million, supported by a strong turnaround in agency services and continued growth in real estate. Return on capital was steady at 11.3%, notwithstanding the mixed seasonal conditions and systems modernisation CapEx weighing on this metric as the capital outlay precedes benefits. Improving this metric in FY 2026 is a key priority. Cash conversion was broadly in line with expectations, with a favorable outlook for FY 2026. Net debt increased AUD 20.5 million to AUD 457.3 million, excluding capital held for the Delta completion, broadly in line with sales growth and the impact of higher cattle prices. I'll discuss these key metrics further as we move through the pack. Moving to slide 17, which displays Elders' gross margin diversification, a key defense against seasonal variability.
As noted, gross margin increased AUD 47 million to AUD 684.6 million, with growth across most products more than offsetting the impact on crop protection from dry conditions. The key drivers of this result include agency gross margin up AUD 27.1 million, or 22%, following a strong recovery in livestock prices and increased cattle volumes. The outlook for agency services remains positive, driven by strong international demand for protein, as well as some destocking in drier regions, limiting supply and supporting prices. Real estate services gross margin increased AUD 22.5 million, or 27.2%, with property management, residential, broad acre, and commercial all improved on PCP, supported by both acquisition and organic growth. Feed and processing was another highlight, with gross margin up AUD 4.1 million, or 23.8%, due to productivity and efficiency benefits from the new feed mill commissioned in August 2024.
Financial services gross margin increased AUD 2.3 million, or 4.2%, supported by continued growth in our new broker model alongside improvement in the livestock warranty product. An increase in on-balance sheet lending was also achieved, partially because of the increased cattle prices. Collectively, the increase in gross margin across these products more than offset the reduced earnings from the exit of the Rural Bank Exclusivity Agreement in FY 2024. Wholesale products delivered a steady result, notwithstanding lower crop protection sales from those dry regions. Growth in the above products significantly outweighed the negative impact from crop protection, which will be discussed further on the following slide. Moving to slide 18, which analyses product performance. This slide demonstrates the importance of our product and geographic diversification.
The rainfall deficiency chart shows the extent of dry conditions, especially in South Australia and Western Victoria, which negatively impacted Elders' retail business, with sales, gross margin %, and client confidence all impacted. Fortunately, seasonal conditions improved from late June, which caused for optimism for a recovery in these regions in FY 2026. Turning now to slide 19 to discuss costs, which increased AUD 11.4 million, or 2.2%, when adjusted for acquisitions and the impact of transformation. Part of this increase resulted from the inclusion of Elders Wool in base costs from transformation in FY 2024, which added an additional AUD 3 million, or 0.6%, to base costs. Given this change in categorization, holding base costs below inflation was a pleasing outcome. Turning now to slide 20 to discuss return on capital, which was steady in FY 2024 despite mixed seasonal conditions.
When adjusted for the impact of acquisitions and transformational projects, return on capital is 12.7%. Lifting return on capital is a priority for FY 2026 through a renewed focus on capital allocation, client profitability, and delivery of SysMod benefits. In terms of capital allocation, Mark will speak to the potential divestment of the Killara Feedlot in the strategy and outlook section. Moving now to slide 21 and working capital, where we see an increase of AUD 68 million from FY 2024, mostly driven by higher cattle prices, which increased working capital in Feed and Processing and Financial Services. Retail inventory increased AUD 12 million from FY 2024, a pleasing result given the late start to winter crop in key cropping regions, which caused an uplift in carryover inventory. This carryover inventory is forecast to clear in the first half of FY 2026.
Onto slide 22 and cash flow, where we see an operating cash inflow of AUD 117.9 million, a pleasing result considering the late start to winter crop, which pushed some receivables to the fourth quarter. The outlook for operating cash flow and cash conversion in FY 2026 is positive, with a focus on client profitability to result in some receivables being transitioned to third-party lenders away from Elders' balance sheet. I note that the physical payment of company tax for Elders Limited will recommence in 2026. I'll now move to slide 23 to provide a detailed update on net debt and leverage. The waterfall charts display a normalised net debt and leverage position, adjusting for the benefit of capital held at balance date in preparation for the completion of Delta Agribusiness.
Breaking down the movement in net debt, we see an increase from AUD 436.8 million at the end of FY 2024 to AUD 457.3 million at balance date, acknowledging this includes the benefit of AUD 50 million of equity retained for flexibility in acquisitions, approximately 40% of which was deployed in FY 2025. I note that the majority of net debt pertains to client receivables, which are self-liquidating in nature. Excluding receivables funded through debtor securitisation, Elders' core debt is AUD 161.9 million. Turning to leverage, we see a reduction from 3.1 times at the end of FY 2024 to 2.9 times, normalised for Delta funds held. A return to our target range of 1.5-2 times is forecast in FY 2026 from a renewed focus on capital allocation and client profitability and increased referral of client loans to third-party lenders, given trade receivables comprise almost two-thirds of net debt.
I note that the return to target leverage is underpinned by, but not dependent on, the potential sale of Killara Feedlot. I'll now move to slide 24, where we see significant headroom across banking covenants, noting that these calculations do not require adjustment for the capital held for the completion of Delta Agribusiness. I also note that our bank leverage covenant excludes receivables funded through debtor securitisation, given their self-liquidating nature. I'll now move to slide 25, which provides a macro overview of key growth pillars over the coming years. This slide has been included to demonstrate significant growth opportunities and focus areas over the coming years and is not meant to be exhaustive. Regarding systems modernisation, Elders has now commenced the final wave of its SysMod program, which, once completed, will provide Elders' rural services with a modern technology platform in Microsoft Dynamics, which itself is evolving at pace.
Delivering a return of at least 15% on the program spent is both a high priority and significant growth pillar for the coming years. The acquisition of Delta Agribusiness represents a significant milestone for Elders, increasing points of presence and geographic diversification while enhancing Elders' technical expertise in agtech and precision agriculture. Accelerating synergies from backward integration in crop protection and animal health are key priorities for FY 2026, as Mark noted. The divisional structure is aimed at improving focus and accountability within significant business units. By way of example, real estate services gross margin has grown AUD 45.6 million, or 77%, since FY 2023. The market share remains less than 5% nationally. We believe the divisional model will help accelerate growth in this and other business units. Acquisition will remain a growth pillar alongside organic growth, provided acquisition prospects meet our financial and values criteria.
Finally, the new Elders' brokerage business is noted as a growth pillar, given success to date with our brokered loan book exceeding AUD 1.3 billion from a near-standing start in FY 2024. Gross margin from loan brokerage has increased from AUD 0.9 million in FY2023 to AUD 6.1 million in FY 2025, at a CAGR of 160%, with our network of brokers expanded further in recent months. This concludes the financial section of the presentation. I'll pass back to Mark now, who will provide an update on strategy and outlook.
Thanks, Paul. Really leading off from Paul's comments on the divisional structure, just going to slide 27 as we look at the fourth eight-point plan. Historically, we've expressed the eight-point plan in terms of the diversification of our products and services.
We are now looking at the eight-point plan in terms of the six divisions of Elders and how that diversification across the matrix of products and services adds further to our ability to work through difficult seasonal conditions. When you look at this, this is the final year of the fourth eight-point plan. We have had the ambition of 5%-10% growth in EBIT and EPS through the cycles over an eight-point plan. Clearly, as we are at above 15% return on capital, clearly, as we come into a tax-paying state in the next financial year, the EPS growth ambition will need to be adjusted accordingly. We have emphasized the impact that the transformational part of our agenda over these three years has had from cost, capital, and resource on the business.
We're setting us up now for a very solid platform with all the transformational projects coming to a close as we go forward for the next three to five years. Going on to the next slide, our view and our move to go to a divisional structure effective the beginning of FY 2026 was really around the fact that each of these areas of the businesses had largely been run as either standalones or with a particular focus and emphasis through the governing board or management team. As we've laid them out, we've laid them out in order of supply chain, starting with Elders' crop protection. They're experienced managers right across all of the divisions. Elders' crop protection with Nick Fisicus. This includes our Titan crop protection business and our formulation businesses in East Australia and West Australia with Agritel and Eureka.
It is a specialist crop protection business as per a new farm, Adama, etc., etc. We move the next step along the supply chain to our wholesale business with Peter Lowry. This has, I think you are all aware, the multiple touchpoints and membership base throughout Australia for the AIR business and with its highly efficient and effective warehouse networks throughout Australia. Next, as we go to retail, we have Elders' rural services, which has the complete offering of retail products, agency products, real estate, financial, etc., right across the board. That business at the moment, since it is split into divisions, I have been acting as the Divisional CEO for ERS. Very shortly, we will have an upgrade to that appointment, and we will announce that in the next few weeks.
The next business, again, Jared Hines running Delta Agribusiness, very experienced and competent manager and co-founder of the business and with an excellent executive team. Delta Agribusiness has a much greater focus on cropping, technical service with some additional services, products and services, but very well run and looking forward to a period of strong growth in profitability across the board. Elders' real estate. Tom Ross had previously run the product of real estate before he ran the Elders' network. We thought it was appropriate for him to take control of the separate dedicated division. The idea here is that Elders' real estate has grown significantly, and we talk about the growth profile in some slides coming up.
Tom is a highly experienced professional in this area across a number of areas as well, has been the guardian of the expansion of the property management component of Elders' real estate and also our entry into commercial real estate, which we kicked off big time in Tasmania. Lots of growth opportunity there, highly dedicated manager and executive team, and pretty exciting. Feed and processing that we talked about with Andrew Talbot, another highly experienced manager with a great team. He's grown the profitability of feed and processing fivefold since the first eight-point plan. I've done an excellent job. The record profitability of this division this year is based on a number of the investments we've made historically with feed mill, center pivot irrigation, shading, a bunch of investments that have enhanced welfare productivity. It's a very, very well-run business in the portfolio.
The consideration we've had with feed and processing is actually you look across that supply chain. Feed and processing is a different business to the others. Our thinking is that it's been highly successful. It's grown significantly. We've invested significant capital and got good returns, as we saw with record profitability this year. We've reflected on whether feed and processing would do much better and go to the next level under natural ownership. That is the reason we're considering a divestment of the feed and processing division. If the moons align and there's an appropriate shareholder value creating proposition put in front of us, we'll consider it strongly.
I'll just reiterate Paul's earlier comment that our pathway back on leverage and to a lesser extent, well, actually on leverage is the team metric we're thinking about, is not dependent on the divestment of feed and processing. If the exercise comes up with options that are not to enhance their shareholder value, then obviously we're very happy and it's a great business and a great team to be in the Elders group. Moving to the next slide, if we look at the modernising of the platform, we've talked about SysMod. We gave a commitment from a transparency viewpoint to disclose each of the cost capital components of each of the waves as the board approved business cases when it was formally approved. We've done that.
You can see, and if we include wave one, there is some AUD 100 million-AUD 110 million investment over this period. This is the period in that slide that we talked about upfront where from FY 2022, we have had considerable transformational investment. Now, with all of these investments, as we have seen with Kalaru on the capital investment there, there is a lag. The benefits of these investments are coming through now in FY 2026. As we close off SysMod at the end of calendar FY 2026, we will look forward to those investments coming through into the future. I think it is worth noting that this does really set Elders up with a contemporary platform where we can take advantage of multiple AI opportunities that historically we have not been able to.
Just looking to the next slide and running through each of the waves and the different components of the waves, that's really for information. As I mentioned, the plan is that we'll complete these. We're still running in full on time, which I know sounds amazing for an IT project, but we're still running in full on time. We're looking for the finish line as we run out next year. Okay. Now, moving to the next couple of slides. In the next two slides, we've wanted to showcase a couple of products and services just to put more of a spotlight on them. For this presentation, we picked financial services and real estate, which we had covered in the half year.
Really, to emphasize in terms of the balance of our portfolio of products and services, we've now clearly strengthened our position across the whole supply chain and raw products from Elders' crop protection to wholesale to retail all the way through and technical service. In our portfolio, we're looking at really strengthening and rebalancing our financial services, all low capital and real estate. The characteristics of both of these services, as we look at them, fit nicely in our portfolio management, the high return on capital. We have relatively low market share in both financial services and in real estate. The brand is important. Unprompted, most trusted brand in Australian regional rural Australian agriculture. The Elders brand is critical. There's excellent market outlook in both areas. Obviously, there are links to livestock and general commodity outlook, but a strong outlook.
It really does help us balance the portfolio. Just a quick look at financial services. You can see, in line with Paul's comments, solid growth replacing the Rural Bank's exclusivity agreement and growing in a capital-like manner. We can go to questions on that in detail. The next slide on real estate, very, very similar profile. I think the gems that are probably not as obvious for everyone, one is the property management business. We have some 20,000 properties that we are managing now across Australia, which is a very solid and reliable flow for us. Also our entry into the commercial real estate, but only in regional rural Australia. Very, very positive platforms. In terms of portfolio balance, quite nuanced. This is how we run Elders this year, many of you are very aware.
Then going to the forecast and outlook across all of the areas on the next slide. Without going through each one of them, and I'll put on each one of them on the next slide, you can see our thinking is that we've had a period of difficult market conditions and significant transformational investment. We've come through that period with lagged benefits from the transformational investment. Right now, we're confronted with the next three to five years. We're looking at the completion of the transformational projects, the commodity outlook, and the seasonal outlook being averaged positive. Our ability to really hone in division by division to grow, to drive the capital out, as Paul mentioned, from a leverage viewpoint, and to enhance the business for strong growth against the backdrop of average to good seasons.
It feels very positive for the first six weeks, as I mentioned, of this trading year, FY 2026. Apples with apples. With that, Delta included, we're up some 30% on the previous year. Very early days. I think it does fall into our thinking and how we've been talking about our outlook for FY 2026 going forward. With that, I think I'll open up for questions. We'll just leave that slide on the screen, and we'll open up for questions.
Thank you. If you wish to ask a question via the phones, you'll need to press the star key followed by the number one on your telephone keypad. If you wish to ask a question via the webcast, please type it into the ask a question box and click submit. Your first question comes from James Ferrier from Canaccord Genuity. Please go ahead.
Morning, Mark and Paul. Thanks for your time. First question I wanted to ask you about was just getting on your view on livestock volumes in the year ahead, just in the context of the volumes that were achieved in FY 2025 as a baseline, herd sizes as they stand right now. I mean, everyone can see the livestock prices, but what's your view on volumes in the year ahead?
Yeah, thanks for the question, James. And it is one where there is a little bit of uncertainty going forward, I think, particularly in sheep volumes. And just for those who don't know, we saw certainly higher cattle volumes in FY 2025, up about 13%. Sheep volumes were down about 8.1%. We do see that rebuild coming through South Australia and Western Victoria. That is likely to drag on sheep volumes into FY 2026.
Cattle's a little bit different just because of the geographical footprint. It is one to watch. What we do expect is that if volumes do taper off in sheep, we expect prices to offset because the international thematic for Australian protein remains very strong. We just see that price being flowing through the supply chain.
Yep, that makes sense. Thanks, Paul. Second question on slide 17. We can see there that crop protection gross profit declined 9% on PCP. What was the volume of product associated with that AUD 129 million of gross profit?
Yeah, I do not have a volume number to hand, James. I will see if I can cover that post. I will speak to the impact of dry conditions. We did note a roughly AUD 12 million impact from South Australia and Victoria at the half.
We saw that continue into the second half, mostly in Q3. We think the impact was roughly AUD 19 million volumes. Yeah, we're certainly up in Northern New South Wales, obviously down in South Australia and Victoria, but I don't have the net number to hand.
Y eah, but I think, James, the story is on margin compression, as you've seen with other businesses and some of the weak experience, particularly in the dry areas.
Yeah. Okay, understood. Thanks, Mark. And then last one from me, and probably one for Paul again, just some thoughts on D&A, CapEx, interest, and tax for the year ahead.
Yeah, look, depreciation will increase given the completion of wave two and the commencement of the continued amortization of SysMod CapEx. In terms of CapEx outlook, once again, in FY 2026, it is dominated by SysMod.
Some of wave four will fall into FY 2027, as you can see on the SysMod slide. It is a bit uncertain, but we think, I'd say, sort of AUD 20 million-AUD 25 million will fall from SysMod into FY 2026, and perhaps another AUD 5 million-AUD 10 million outside of that. In terms of tax, we will pay a small amount of tax, about AUD 1 million following the submission of the FY 2025 tax return. That will be in February 2026. We will effectively pay pay-as-you-go company tax thereafter. Your question may be referring to the statutory tax rate, which fell in FY 2025. That was pertaining to a tax credit related to a prior period for R&D. That is likely to be non-recurring.
That is great. Thanks, Paul.
Thank you. Your next question comes from Richard Barwick from CLSA. Please go ahead.
Good morning, guys. Can I just double-check?
When you're talking SysMod, and obviously, it looks like some benefits from an EBIT perspective are expected in FY 2026. Are you able to put some numbers around that? And then equally, what you would see as the non-underlying OpEx impact from SysMod in 2026?
Okay. So yeah, thanks for the question, Richard. In terms of benefits, the major tranche of benefits is through an uplift in retail margins. We see that coming from better control of discounting and better categorization of clients. Just for context, 1% uplift in retail gross margin percentage is about AUD 22 million. A 0.5% uplift there gets us fairly close to the benefits required. The other benefits we see coming from uplift in sales, and that comes from better client data over time, but probably longer data than the retail margin benefits.
In terms of non-underlying OpEx for FY 2026, if we work on roughly 60% CapEx, 40% non-underlying OpEx over that sort of AUD 20 million-AUD 25 million in FY 2026.
Okay. Thank you. My other question is to do with the, there's quite a sizable impairment of goodwill, obviously captured within this FY 2025 result. Can you just give us a little bit more background exactly what that related to, please?
Yeah. There's a couple of businesses that we impaired, both of which were reported on during FY 2025. One was Currin Co, where we lost a number of agents in Victoria. The other was Esperance Rural, where we had, I suppose, an unsuccessful transition post-earnout.
I think, Richard, it's one of the learnings is that, as you know, we've been highly successful with our acquisition, both an acquisition template in keeping the vendors in the business.
When we do our post-implementation reviews post-earnout, it's been 95% + positive. We've identified in the last 12 months, whether it's through tougher conditions or whatever the driver is, that the two years post-earnout is now an area that we need to really focus on in terms of potential loss of staff, as we saw with actually, it was longer than two years with Currin Co, where the vendor leaves the business, the earnout's completed. Historically, we've seen that as business as usual within ERS. We've now established a project a couple of months ago to identify how we ensure that we don't get a repetition of that situation because it had been a very high success rate of post-earnout of keeping the people.
I guess the obvious question is, what are the risks?
I mean, obviously, you've got something in place here to try and mitigate it, which would suggest you are a bit concerned that this could repeat with some because, I mean, you've made a lot of acquisitions in the last few years.
Yeah.
How do we think about that risk?
Yeah. I think the couple of points is that if there are something in the order of 100 bolt-on acquisitions, and we've had two or three like this, clearly, the Currin Co was a larger one. If you like a sense of Shakespearean irony, the Esperance Rural supply defection was to Delta. I'm sure you'll enjoy that. I think the materiality of it has dropped off because we aren't pursuing the same sort of strategy on bolt-on acquisitions that we've had, as you're aware, given that the raw product supply chain's pretty complete.
Also, given that the ACCC regime is hard to unscramble to do business, our sense is that that will not be where we will be getting our growth from. It will be more organic. I think the issue is that post-earnout, and we have time. We have two or three years each time. We have to have the business-as-usual hooks and retentions in place for these people because, as you know, in regional rural Australia, the personal relationship goes a long way.
Absolutely. Okay. All right. That is helpful. Thanks, both.
Thank you. Your next question comes from Ben Wedd from Macquarie. Please go ahead.
Hi, Mark and Paul. Thanks for the question. Maybe just turning to your question, your comments around capital allocation there and particularly with potentially moving some of the receivables into third-party lenders there.
I'd just be interested in sort of, I guess, any timeframes you can give around that and how that sort of looks from an operational standpoint.
Yeah. Thanks, Ben. Look, it is something, and I think the way that I'd explain it firstly is that we are taking a return-on-capital approach. So where we're not seeing, I suppose, a deep relationship with clients that warrants the use of Elders' balance sheet, then we'll look to obviously do that business with the client, but use third-party financiers. So we do see this as certainly something that has commenced already. It's a process that's commenced, and that will roll through FY 2026 and beyond. It won't be something that we seek to do hurriedly either. It'll be an incremental thing over a number of years with a significant start in FY 2026, particularly in the fin services and seasonal finance areas. Yep.
Got it. Thank you, Paul. Maybe just any comments you can sort of give us around Delta's sort of performance over the last 12 months as it might compare to Elders as well in some of those key categories like ag chem and other cropping areas.
Yeah. Thanks, Ben. I mean, just a couple of comments. I think the first thing to note is that Delta's financial year is June 30, and their footprint was very exposed to dry conditions that occurred in FY 2025. I think there are a couple of key distinctions between Delta and Elders, the other being Elders obviously had an offset in livestock agency that does not exist to the same extent in Delta. Yeah. The Delta result was impacted certainly more than Elders by the dry conditions. Trading since it started raining in July in Delta has been certainly above PCP.
So yeah, that business is operating very well.
Thank you. Thank you both.
Thank you. Thank you. Your next question comes from Evan Karatzas from UBS. Please go ahead.
Thanks, Paul. Maybe just to follow up on that one then. For the asset accounts for Delta, the EBITDA went from sort of the 53 million- 40 million. Can you just give a bit more information around if you expect that original FY 2024 earnings to be realized assuming, I guess, normal conditions? Anything you can say around the synergy benefit we should expect in 2026 for Delta as well? Thanks.
I think the key point for us is that what we experienced as the turnaround from these dry conditions was outside the Delta financial year. That is what we have experienced ourselves.
Just as a note, prior to going to the next phase on the acquisition a few months ago, Paul, myself, and the Chair at the time, Ian Wilton, sat down with the Delta management team to go through their FY 2025 results just to give ourselves comfort that our proposition and thesis on the acquisition remained on track. After the presentations, discussions, I think, Paul, it is fair to say that we felt very, very comfortable. In terms of your question on the synergies, I think it is a key point for us. We have already had meetings with the team, with Jared and Matt and Chris and the team around the synergies. We had planned for a 12-month, sorry, a three-year development of the or extraction of the AUD 12 million synergies.
Our belief is that given the timing, given the November 3rd timing and the proximity to the FY 2026 winter crop, that we do have time to do a lot of the work that we would not have been able to do if it had been in the same period the previous year. Our sense is that we can fast-track those synergies and bring them through. As you know, they are largely crop protection. They are largely providing different crop protection supply chains out of Titan into the Four Seasons brand. With Steve Hines, the person who runs that business within Delta, there is great alignment with Nick Fisicus, who runs the overall crop protection business. We have established the governance structure, the board structure, etc., around Delta and all the divisions. I feel pretty comfortable and optimistic that we will optimize the synergies in FY 2026.
Okay. Good one.
Thanks for that. Just final question. Just sort of with the debt position, can you provide a number to sort of normalize it if we remove the reduction in carryover inventory in SAVIC and removing or transitioning some of the select client loans from Elders' balance sheet to third parties just so we can sort of look for an adjusted or a like-for-like debt position, please?
Yeah. Look, just very high level and back of envelope, I would say the carryover inventory, I'd put a number of around AUD 30 million on that, which we expect to be resolved in the first half. In terms of I'd put another bucket in there, Evan. In terms of overdue debtors, we think there's a AUD 20 million-25 million opportunity there. You may have noted that we have had a AUD 10 million increase in 90-day plus receivables.
That is two clients, two large clients that we expect to be resolved in FY 2026. We feel that we're at a peak in terms of overdue receivables as well. In terms of client receivables or client loans, seasonal finance and loans, I'd put a number of sort of around a target of around AUD 50 million across financial services and seasonal finance.
Okay. That's not super helpful. Just a quick one. I'll just take it in. The one-queue comments you made, do we assume you're up 30%? Do we assume we're sort of back close to that? I think you previously mentioned a through cycle one-queue average EBIT was around AUD 37 million. Is that sort of where we're, I don't know, trending towards or run rating towards?
Yeah.
I think in terms of tailwinds in the business, Evan, I think certainly livestock prices are up relative to year on year. I'd say that tailwind will moderate the further we get through the financial year. Obviously, livestock prices increased throughout FY 2025. I think in terms of the Q1, it goes back a couple of years to when we gave that number, obviously noting that's no t audited. Yeah, it's a fair comment.
Okay. Good one. Thanks, guys.
Thank you. Your next question comes from Paul Jensz from PAC Partners . Please go ahead.
Thank you. Just one at the top, Mark, if I can. You talk about the 5% market share you have in the wider farm input space.
Can you see some additions to your business or the Elders' business, or is it a case of organic growth from where you are to get a larger part of that pie?
Yeah. Thanks, Paul. When you say the larger rural products, are you referring to finance?
Right across the board. You had a chart there with a Delta acquisition where you're a small part of a very big pie in farm inputs. You've got the new structure that you have. I'm just wondering, where to from here if you're just such a small part of the pie?
Okay. That broader pie includes fuel, all the finance, etc., etc. A whole heap of services that we're not in.
I think our focus with, well, I think it's the focus that Delta has had for a long time, will continue on, where it's a service-based, customer-centric approach across the board. Delta are very small in Queensland, and ERS is also not that strong in Queensland. There are geographical gaps, but it'll largely be sticking to the netting of what each of the divisions does best. In the case of Delta, although it's got some broader offers, the focus is around that very technical rural products-based customer-centricity.
That's across the broader Elders' business as well, if I look at the new structure that you have. It's really just sticking to the core business. You don't see another bolt-on there?
No, I don't think so.
I think our view is that any deviations, slight deviations from where we are now, we've talked about in the Elders real estate business, it's around strengthening our commercial real estate in regional rural Australia area, continuing to build on our property management business, which is a really solid, good business. I think in ERS, there's a lot of in the traditional pink-shirted DRS front end, there's a lot of efficiency because we've just put SysMod through ERS. They've got the front-end corner sale across all the branches across Australia. It is really around all the efficiencies that we promised out of and controls. Again, customer understanding that Paul talked to in terms of data that ERS has not been doing in the past.
In terms of Elders' crop protection, I think the focus will be a little more on integration because the formulation businesses run standalone to the traditional Titan business. We will slowly move around integration there on systems. In the feed and processing, really, we are looking at ways of expanding efficiency with acquiring extra land with some increased backgrounding, many of the efficiency programs that we have had previously. Across each division, and I guess it goes to the point of why having focused divisions makes so much sense because each of them have their own nuance, their own focus, and it allows the management teams to really drive the efficiency and profitability.
Okay.
Just a second question, if I can, is if I build the building blocks towards the, say, 2027, 2028 numbers that consensus have, it does not seem to be a lot of, I suppose, underlying organic growth. If you do the SysMod, the 250 staff that came across with the bolt-ons, Delta, and the small free kit you get from 2025, some of the earnings come into 2026. I am interested in that organic growth number because I do not think consensus has got a big number in there for it, and neither do I at the moment.
Yeah.
I'm not sure what the assumptions are on the models, but I do know from a, I mean, if backward integration is organic growth, and we certainly see it that way, the backward integration opportunity for ERS still has 10% or so to go of the available generic portfolio and just in crop protection. In Delta, there's probably 40% to go. I think from us doing things that we control, not relying on market conditions, there's a lot of, and then you've got also the benefits, the lag benefits of the transformational projects. Yeah, your observation's probably right, Paul.
The final one, I thought others would ask this question, Mark, but I'll do it. The press love talking about management transition, Mark. Your term comes up at the end of next year.
I'm interested in whether you could return fire with what the press like talking about with management change.
Yeah. No, I thought the comment in The Australian was relatively accurate. I said when we refreshed the board and I stayed, I decided to stay. I said the earliest that I'd leave would be at the end of this Eight Point plan. So that's September next year. And that's still the case. And it's not a term in a contract. It's an ongoing contract. So basically, my position's been that as a minimum, I'll stay to the end of the Eight Point plan.
Thank you, Mark. Thank you, Paul. See you later in the week.
Yep. Thank you.
Thank you. Your next question comes from John Campbell from Jefferies. Please go ahead.
Hi, guys. Thanks for the opportunity.
Firstly, just for clarity, what's the dollar value of adjustments that you've made to arrive at adjusted EBIT?
Okay. So you're in the investor presentation, John?
Yeah. Yeah.
Just the AUD 143 million, just for clarity, so I know what we're adjusting.
Okay.
I might just come back offline on that. We do have,
yep,
we've got a list in the annual report. But yeah, I'll come back offline.
Yeah. I can see where you've got that
in the account. I just wasn't 100% sure which is included in your adjustment calculations. I think we've got a call on this afternoon, Paul, so we can maybe touch base then.
Yeah. Sounds good.
Thanks for that.
Just, Mark, around, and you sort of touched on it, but I presume with the improving seasonal conditions in the southern regions that impacted in FY 2025, in terms of that competitive intensity in crop protection that you've been talking about, I presume you see FY 2026, though, that sort of level of intensity and price competition and the like abating over the course of 2026?
Yeah. I think there are probably two components that lead us to think that way. One of them is around the seasonal conditions, as you've just mentioned. The second one is the stabilization of cogs out of Chinese factories. The idea of lower-priced cost of goods coming into Australia and then driving market price down, that does not seem to be where it was.
Earlier, I think six months ago, we were concerned that tariffs on Chinese crop protection into North America may drive dumping of product in Australia and therefore further drive prices. If you're caught with high-cost inventory, you're obviously going to be screwed from a margin coupon. Our sense is that it's stabilized. Regardless, even a stabilized normal season environment, Australia has the lowest crop protection prices for all around the world. It's not uncommon for multinational companies to divert product from Australia to Europe because they can make so much more money out of the same active ingredient.
Okay. That all augurs pretty well for crop protection for 2026? It looks like,
Yeah. As I say, I think we're pretty optimistic, both commodity season and the break in the back of the transformational projects.
Yep. Yep. Okay. Thanks very much, guys. That's it.
Thank you.
Your next question comes from Mark Topy from Select Equities. Please go ahead.
Good morning. I just wanted to ask a question around the property side, the retail, the growth, and both in the gross margin and the sort of volumes and some expectation around that, and maybe some breakdown between what's organic and what's been achieved by acquisition because you've clearly got a very strong growth rate. Can you give us some sense of how that looks going forward now?
Yeah. Thanks, Mark. Just for clarity, that was for real estate services?
Yes. Yes.
Yep. In terms of growth, we see roughly the split between acquisition and organic, about 60% acquisition in FY 2025, 40% organic. I do note that one of the significant benefits from the acquisition of Knight Frank was to substantially grow our commercial real estate business.
It also introduced valuations business to the group as well. When we think about real estate growth, it is across residential properties under management, broad acre, commercial, and now valuation. There are a few strings to the bow there. I'd also just make a comment in regards to broad acre. It did grow, but very fractionally in FY 2025. That part of the book was held back by the dry conditions in South Australia and Victoria. We do expect sort of pent-up vendor demand as those regions improve.
Right. Just thinking about that Tasmanian market, I'm going to say, how much growth opportunity do you see in that market going forward?
Yeah. I think with Tasmania per se, I think it would be incremental growth.
I think the big benefit of that acquisition, which is the old Knight Frank business, is the commercial real estate knowledge networks, etc., in the mainland. We're already seeing that as very, very important. There are many contacts and insights that we did not have on commercial real estate that we have gained from that business that is really helpful in our approach to mainland expansion and commercial real estate.
Great. Just on the Delta side then, can you talk to their systems and system harmonization in terms of what is being done in Elders and whether any CapEx might be required if you would like to harmonize Delta in line with Elders?
Yeah. The SysMod project is predominantly Elders. Our approach at the end of wave four, when we switched off the S400 and we are completely on Microsoft Dynamics 365, sorry.
We might have got a discount. Definitely not. From that point forward, each of the acquisitions or each of the other divisions, whether that be air, Elders' crop protection, or Delta, will be business case-based. If there is a business case from the Delta board around aligning, enhancing systems, then it will be treated on a return on capital business case basis. We want to take it to business as usual because it is not just an ideological, everything has to be on the same system. This is all around return for shareholders. All the systems they are all operating on are fine.
They are all fine. Okay. I was going to say. In terms of I know you want to accelerate the Delta, but in terms of any risk areas, in terms of that integration, I noticed, for instance, they are using different property managers.
Do you perceive any sort of issues in migrating Delta across to Elders in that regard?
No. I mean, it's all going to stay the same. In terms of backup and stuff, which I think you're talking about, we've got a mandatory integration. We've got a might, and then there's a light touch component of it. Each of those are being developed with project teams between the businesses. Our view is that it's a well-run business. It's got good management. It's got strong board governance to set the direction and will be making the right decisions for the right reasons rather than any kind of ideological control-based decision. Of course, the mandatories around safety, financial transparency, regulatory compliance, and so they're mandatories, as you'd expect.
Thank you. Unfortunately, that does conclude our time for questions. I'll now hand back to Mr. Allison for closing remarks.
Okay. Thank you very much to everyone. I did note that we have a couple more in the queue. Apologies to those. Paul and I have a back-to-back with all Elders' staff. Two or three thousand people will be waiting on the line for five minutes. We have had to call it there. For those that we have not been able to talk to, we look forward to talking to you in our one-to-one sessions. Appreciate everyone coming in, and thank you very much.
That does conclude our conference for today. Thank you for participating. You may now disconnect.