Elders warning on debt as loss deepens to $505m
Directors of rural merchandiser Elders have warned of "material uncertainties" over the group's future if it is unable to divest assets and reduce debt.
The warning came as it disclosed a loss of $505.2 million for the year to September, all but wiping out its remaining reserves.
Over the past five years Elders has lost $1.59 billion in total, which has left the company with shareholder equity of just $46.2 million, little changed from its sharemarket worth of $50.1 million at the end of September, when it ruled off its books. At the same time, its gearing ratio stood at 552 per cent, given its borrowing level of $295.1 million.
"While the total loss for abnormal and non-recurring items is the largest yet, it also marks the near completion of what has been a five-year process of rationalisation and restructuring of assets, operations, finances and carrying values," chairman Mark Allison said in the latest annual report.
Over the past year this included selling its car interests and the near-completion of the forestry divestment program.
Also, the carrying value of intangibles for the Elders Rural Services businesses had been "impaired to modest levels".
Now that the group was again purely a rural services operator, the focus was on recapitalising the balance sheet, shareholders were told.
Borrowing conditions imposed on the group meant it must "realise certain investments and assets, for which the directors have instituted an orderly divestment process, or to otherwise obtain additional or replacement debt or equity funding", the annual report said.
Several "material uncertainties" were disclosed - whether it would continue to trade within expectations; whether the asset sale program would be achieved in respect of quantum and timing of sales; and whether debt reduction milestones would be met or be supplanted in whole or in part by alternative capital or funding proposals".
"Resolution of these material uncertainties is fundamental to the ability of the group to pay its debts as and when they become due and payable and to continue as a going concern," the report said.