Annual Meeting Presentation

LIC ANNUAL MEETING
18 October 2018
A Transformational Year

Murray King – Chairman

Meeting Agenda
1. Financial Overview
2. Business Highlights
3. Transformation Programme Results
4. Dairy Herd Improvement Regulatory
Review
5.
M. bovis Update
6. Outlook
7. Strategy Refresh
8. Financial Detail
9. Shareholder Council Report
10. Honoraria Report
11. Voting on Resolutions
12. General Business

Financials
After a year of transformation and change, including
share simplification, our co-operative is in strong shape.
As a business, we are more match-fit than we have ever
been and better positioned to drive good outcomes
for our farmers.

Highlights
236.4M
TOTAL REVENUE
up 16% from 2016-17.
3.0M
UNDERLYING EARNINGS
Net profit after tax excluding the increase on fair value of the
biological assets and related tax effect. Same as 2016-17.
27M
EARNINGS BEFORE
INTEREST AND TAX (EBIT)
up 175% from 2016-17 excluding bull team
revaluation and one-off transformation costs.
2.44M
FULL YEAR DIVIDEND
Fully imputed and paid to shareholders on
17 August 2018, representing 80% of underlying earnings.
14.9M
REPORTED EBIT
down 54% from 2016-17 due to the impact of
the one-off transformation costs and the annual
revaluation of the biological bull team.
13.2M
R&D INVESTMENT
continued to be high at 5.6% of revenue.
18-22M
EXPECTED FUTURE UNDERLYING
EARNINGS FOR 2018-19
Assuming no significant climate event or milk price drop takes
place between now and then nor any major impacts from M. bovis.

60M
RECURRING BENEFITS
30.7M
ONE-OFF BENEFITS
Organisational
Health Score:
Before transformation
programme started:
54
FOURTH QUARTILE
After one year:
66
SECOND QUARTILE
After two years:
68
SECOND QUARTILE
Transformation Programme Results

201020112012201320142015
Year
$Billions$Billions
Gross Agtech Investment
Net Farm Income
3b
2b
1b
0
150b
100b
50b
0b
0.4b
77b
114b
96b
124b
93b
81b
0.9b
2.0b
3.0b
0.5b0.5b
80%
CAGR
Evolution of AgriTech Investment
Global AgriTech investment is up,
despite lower farm income.
Sources: US Department of Agriculture, August 30,2016;AgFunder

SPACE
™
A New Zealand First For Pasture Management
WATC H

Imaging Tech - Automated Lameness Detection
WATC H

Dairy Herd Improvement Regulatory Review
• Core database was transferred to DairyNZ in December 2014
• Expected benefits to LIC have not been realised
• The Cabinet paper on the regulatory review suggests regulatory shackles on
LIC will be removed
• MPI argues the current regulations do not keep pace with technology
• LIC does not consider any further regulation is needed as the industry’s current
voluntary arrangements are working well
• More regulation could add cost to dairy farmers for no clear benefit

World-leading measures to combat Mycoplasma bovis (M. bovis)
• LIC bulls extensively tested and no sign or indication of M. bovis found
• Working closely with farmers and MPI
• Investing $800,000 in changes to effectively manage any risk of transmission of
M. bovis
• LIC absorbing cost – no price increases for farmers this season
• Daily testing of semen and confirming results before distribution
• Antibiotic to target
M. bovis added to semen diluents
• Heightened hygiene protocols for all farm visits and within LIC

Separation
Transformation
Share Simplification
Strategy Refresh
2016
Step 1
2017
Step 2
2018
Step 3
2018
Step 4
Our Strategic Roadmap
Next Step

Strategy - Findings
Transformation
Programme
DELIVERING ONGOING
BENEFITS
FY19
Performance
$18-22m
FORECAST underlying
earnings
Share
Simplification
IMPLEMENTED
JULY 2018
A strong platform for future growth

Outlook
The increased revenue position in the 2017-18 financial year was
driven by the success of the transformation programme.
 
LIC expects underlying earnings for the 2018-19 financial year to
be in the range of $18-22 million, assuming no significant climate
event or milk price drop takes place between now and then nor
any major impacts from
M. bovis.

Wayne McNee – Chief Executive
Strategy Refresh & Financial Detail

Rising
environmental
demands
1234567
Macro FactorsIndustry DynamicsConsumer
Technology
enabled and data
driven agriculture
Changing shape of
the NZ dairy
industry
Globalised
competition
Advances in animal
genetics
Continued global
demand for dairy
fat and protein
Consumer demand
for transparency &
food trust
Strategy - Findings
External Factors Influencing LIC Strategy

LIC 2018
Strategy Refresh
OUR
PURPOSE
LIC is a dairy farmer
owned cooperative which
empowers livestock farmers
through the delivery of superior
genetics and technology.
An innovation-led
growth strategy for
LIC, with an ongoing
focus on the core NZ
Dairy industry
STRATEGYOUR
AMBITION
Continuing to lead the
global pastoral dairy
system

Our potential
Global Pastoral Genetics
and Farm Management
International
MINDA
Traceability
Traceability
Global Food
Safety
Our
core
business
Livestock
Genetics
New Dairy
Genetics
Technology
Milk

Pregnancy
Testing
Dairy Animal

Health
AI Farm
Sensors
Inline Milk
Meters
Agrigate
NZ MINDA AI
SPACE™
Beef
Genetics
International

Full Service
(Dairy)
International
Dairy

Automation
OEM

Diagnostics
Lab
International
Dairy

Genomics
Global AI
Enabled Farm
Management
International
MINDA
Traceability
Biosecurity
Country Level
Algorithms
Traceability
Global Food
Safety











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A
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G
E
N
E
T
I
C
S
F
A
R
M

M
A
N
A
G
E
M
E
N
T
Optimise
the core
Drive value from
the current business
Enhance
the core
Growth through
innovation
Capture value
beyond the core
Leverage existing capabilities
for profitable growth
outside pastoral dairy
60%
30%
10%
LIC 2018
Strategy Refresh

The Future of Genetics
Transforming Dairy Cattle Improvement Through Next Generation
Genomic Selection And Strategic Mating
WATC H

LIC 2017/18
Investment in Research
& Product Development
15%
New Product Development
28%
Genetics & Information
5%
Commercial
1% International
4% Information to Improve
Decision Making
14%
Hardware & Systems
2%
R&D Support
& Delivery
30% Dairy Sire Proving
Around $13m invested annually
in product development and
R&D; approx 5.6% of revenue
R&D TOTAL
$13M
approx

Improving Farm Management
MINDA
®
LIVE

Capital Approvals 2018/19
fi9.6M
fl™ Projects – APIs, Multi herd
$0.8M
Computer hardware and office furniture
$1.5M
LIC Automation product development
$1.7M
Digital channel store, HT online booking
system and diagnostics rebuild
$1.4M
IP and trademarks, server upgrade
and external software acquired
$1.1M
Other PACE initiatives
$1.0M
Other projects and WRs- DIGAD,
EZ Link, DataMATE and
Milk Pregnancy Testing
$4.1M
Herd Test Equipment, Analyser
and Robot replacement
$1.3M
Building improvement,vehicles
and other PPEs
CAPITAL APPROVALS
$22.3M

Financial Overview
Total Revenue
240M
220M
200M
180M
160M
140M
120M
100M
80M
60M
40M
20M
0M
NZD $M
10/11 11/1212/1313/1414/1515/1616/1717/18
166M
177M
199M
212M211M
233M
Year End Result
M
204M
236M
NZD $M
Year End Result

LIC Contribution to Value on Farm
Genetic Merit
Health
Reproduction
Production
2018/19
$334M
$3.3M
$30M
$39M
2019/20
$339M
$3.5M
$30M
$41M
2020/21
$344M
$3.7M
$30M
$44M

Mark Meyer
Council Chair
Shareholder Council Report

David Gasquoine
Honoraria Committee
Honoraria Report

Director Remuneration
CURRENT
$120,000
$50,000
$60,000
$630,000
PROPOSED
$123,600
$51,500
$60,000
$647,100
DIFFERENCE
$3,600
$1,500
$0
$17,100
Chair
Each of the other nine directors
Total for LIC Board (as a whole)
*maximum pool available to LIC Board to set the remuneration required for
Appointed Directors honoraria and/or the Committee Chairs’ remuneration
*Maximum sum available to reimburse for
additional duties and skills

Resolution 1
Approval of LIC Directors’ Remuneration
To receive and consider the LIC Shareholder
Honoraria Committee’s recommendation as to
Directors’ remuneration, and if thought fit, to
resolve by way of ordinary resolution to:
“Approve the total remuneration of all Directors
taken together being increased by $17,100 from
$630,000 to $647,100.”

LIC Shareholder Council Remuneration
Chair
Deputy Chair
Each of the other 19 Councillors
Total
for LIC Shareholder Council (as a whole)
CURRENT
$30,000
$9,000
$5,000
$134,000
PROPOSED
$30,000
$9,000
$5,000
$134,000
DIFFERENCE
Nil
Nil
Nil
Nil
There is also a daily allowance of $220 available for Councillors who carry out
extraordinary duties at the request of the Company.

Resolution 2
Reappointment of External Auditor
To consider and, if thought fit, to resolve by
way of ordinary resolution to:
“Reappoint the chartered accountancy partnership
KPMG as the Auditor until the conclusion of the
Company’s next Annual Meeting, and that the
Directors be authorised to fix its remuneration.”

2018/192017/18
LIC Shareholder Council’s Budget
EXPENDITURE
Honoraria (inc daily allowance)
Training Costs
Meeting Related Expenses
Administration
TOTAL
BUDGET
$140,300
$15,000
$59,207
$4,030
$218,537
ACTUAL
$138,251
$0
$45,536
$2,576
$186,363
BUDGET
$142,000
$15,500
$74,672
$4,280
$236,452

Resolution 3
Approval of Shareholder Council Budget
To consider and, if thought fit, to resolve by way
of ordinary resolution to:
“Approve the LIC Shareholder Council’s budget
for the year ending 31 May 2019 as outlined in the
Explanatory Note in the Notice of Annual Meeting.”

Resolution 4
Ratify the reappointment of Ms Candace Kinser Reed
as an Appointed Director
To consider and, if thought fit, to resolve by way
of ordinary resolution to:
“Ratify the reappointment of Ms Candace Kinser
Reed as an Appointed Director for a further three
year term.”

General Business