A tough reign for Jackman at fading Elders

Malcolm Jackman’s five-year tenure at the helm of the much-diminished rural services group Elders ended abruptly today. No doubt he has mixed feelings, but at one level there will inevitably be a sense of relief.

Elders didn’t explain why Jackman was departing immediately. He had been expected to remain CEO until Elders had dealt with its recapitalisation and the final dregs of a traumatic five-year restructuring program.

It did say there had been informal discussions about his retirement early in 2014 and that the decision to bring forward the retirement was reached after “further discussions” in the past week.

Elders’ chairman Mark Allison plans to chair a senior executive committee that will manage the business until a new CEO has been found, which he expects to occur in the first quarter of 2014.

Whatever the plural of ‘annus horribilis’ is, Jackman has had five of them. Having come off an extraordinarily successful term as chief executive of Coates Hire before that group was bought out for $2.9 billion, by Carlyle Group and Kerry Stokes’  National Hire, he joined Elders just as the financial crisis was about to envelop it.

Elders had fallen under the control of Futuris Corporation’s Les Wozniczka. It was stuffed full of a diverse range of assets of dubious quality – forestry, financial services, automotive parts, aquaculture and property, among others – and about $1.2 billion of debt.

The Elders share price had begun to dive even before he took on the role in late September 2008. Having traded at more than $24 a share in 2007 pre-crisis, the share price had halved by the time Jackman accepted the job. As the crisis deepened a year later, its shares were valued at about $2.30. Today they trade at 11.5 cents.

It’s been five thankless years of struggling to keep the venerable pastoral house alive – selling off assets, absorbing massive losses and write-downs – to keep the bankers from stepping in.

Last financial year, Elders lost more than $500 million, including impairments of $442.2 million, as it finally cleared the decks of the legacy assets outside its re-established core of rural services.

In a demonstration of Murphy’s Law, for most of the five years that Jackman spent trying to carve Elders back to its core and its debt back to less destabilising levels, conditions in the agricultural sector have been challenging. Drought, a high dollar and weak commodity prices have affected the rural services business.

More recently, Elders has been hit by the discovery of ‘discrepancies’ in the carrying value of live cattle on its balance sheet, which are now being investigated with the help of forensic accountants and lawyers.

Over the past five years, Elders’ banks have been monitoring its condition intensely, but Jackman has been able to convince them not to act. Indeed, he was able to convince them to extend their facilities out to December next year.  The group’s core bank debt is now down to about $150 million, which is still about three times its decimated market capitalisation.

The fact that Elders has any market value at all is near-remarkable.

The five years at Elders won’t add any lustre to Jackman’s corporate CV. But Elders’ survival and return to its 174-year-old roots, albeit in vastly diminished and still-fragile condition, has been a significant achievement given the magnitude and nature of the odds that were stacked against him.