LIC Half-Year Financial Results

Livestock Improvement Corporation Limited (LIC)
Interim Financial Statements
For the six months ended 30 November 2018

Livestock Improvement Corporation
Consolidated financial statements
For the six months ended 30 November 2018
In thousands of NZD
ContentsPage
Introduction1
Key results and position
Our results for the period2
Our position2
Our cash flows for the period3
Changes in our position for the period3
More details
Business analysis4
Equity and contingencies5
Other information6
Introduction
LIC is domiciled in New Zealand, registered under the Companies Act 1993 and the Co‐operative Companies Act 1996, and listed 
on the Alternative Board of the New Zealand Stock Exchange Limited ("NZAX"). LIC is an FMC Reporting Entity for the purposes 
of the Financial Reporting Act 2013 and the Financial Markets Conduct Act 2013.
These financial statements set out the performance, position and cash flows of Livestock Improvement Corporation Limited 
("LIC" or the "Company") and its subsidiaries (the "Group") for the six months ended 30 November 2018.
The functional currency of the Company and the presentation currency of the financial statements is NZD.
Accounting standards relevant to the Group that have been issued but are not yet effective, and have not been early adopted, 
include:
‐ NZ IFRS 16 Leases: effective January 2019, impact assessed to be immaterial.
The key estimations and judgements made in preparing these financial statements are the valuation of the Bull team and the 
impairment testing of software and other intangible assets.  There has been no significant changes to these estimations and 
judgements for the six month period to 30 November 2018.
The financial statements have been prepared on a GST exclusive basis, with the exception of trade receivables and trade 
payables, which are reported inclusive of GST.
These financial statements comply with NZ GAAP as appropriate for Tier 1, for‐profit entities, which comply with NZ IAS 34.   The 
Interim Financial Statements should be read in conjunction with the annual report for the year ended 31 May 2018.  The 
accounting policies applied are consistent with those used in the comparative period (the six months to 30 November 2017) and 
in the audited annual report for the year ended 31 May 2018.  NZ IFRS 9 Financial Instruments and NZ IFRS 15 Revenue were 
adopted in the current period, however the impact of these standards is immaterial.
1

Key results and position
Livestock Improvement Corporation
Consolidated financial statements
For the six months ended 30 November 2018
In thousands of NZD
STATEMENT OF RESULTS FOR THE PERIODYear to 31 May
201820172018
NoteUnauditedUnauditedAudited
Revenue1161,089152,815236,420
Purchased materials(18,104)(16,064)(35,140)
People costs(58,180)(56,471)(98,943)
Depreciation and amortisation(13,169)(14,302)(28,295)
Research and developmen
t(5,058)(5,608)(13,246)
One‐off transformation costs‐(20,665)(20,665)
Other expenses(20,449)(17,219)(33,816)
Net finance costs(403)(884)(1,297)
Bull team revaluation‐‐8,634
Profit/(loss) before tax expense45,72621,60213,652
Tax expense(12,960)(6,535)(4,387)
Profit/(loss) for the period32,76615,0679,265
Hedge revaluations‐‐216
Investment revaluation
s(62)2,3623,138
Land & buildings revaluations‐‐3,450
(62)2,3626,804
Comprehensive income for the period32,70417,42916,069
Profit per Ordinary Share (excl. treasury stock)0.23$ 0.11$ 0.07$ 
Supplementary note to the results for the period:
Profit/(loss) for the period32,76615,0679,265
Less Bull team revaluation‐‐(8,634)
Tax effect ‐‐2,418
Underlying earnings under LIC Constitution32,76615,0673,049
Underlying earnings per Ordinary Share (excl. treasury stock)0.23
$
 0.11
$
 0.02
$
 
STATEMENT OF POSITION AT PERIOD ENDYear to 31 May
201820172018
UnauditedUnauditedAudited
Cash7,7237,5612,521
Debtors83,82379,49045,090
Bull team120,808112,174120,808
Land, buildings and equipmen
t476,24369,34272,030
Software, goodwill and other intangible assets74,15474,75074,011
Nil paid shares receivabl
e15,479‐‐
Other assets30,81427,35127,265
Total assets409,044370,668341,725
Creditors26,22021,80624,253
Borrowings25,62839,16619,636
Co‐operative Control Shares‐6,3096,262
Deferred ta
x39,71039,71640,945
Other liabilities21,90214,7298,528
Total liabilitie
s113,460121,72699,624
Share capital276,44158,46453,126
Retained earning
s2180,207155,884150,141
Other reserves238,93634,59438,834
Total equit
y295,584248,942242,101
DirectorDirector
Date: 8 February 2019Date: 8 February 2019
2

Key results and position
Livestock Improvement Corporation
Consolidated financial statements
For the six months ended 30 November 2018
In thousands of NZD
STATEMENT OF CASH FLOWS FOR THE PERIODYear to 31 May
201820172018
NoteUnaudited UnauditedAudited
Customer receipts121,932 108,530227,082
Supplier payment
s(100,619) (102,891)(188,855)
Tax payments(1,719)(614)(2,231)
Other operating cash flows(243)3831,834
Net operating cash flows619,3515,40837,830
Software development(9,746) (11,888)(21,214)
Net sales/(purchases) of land, buildings and equipment(7,724) 12,0258,958
Other investment cash flows(1,689)(6,225)(6,162)
Net investment cash flows(19,159)(6,088)(18,418)
Drawdown/(repayment) of bank debt6,0007,000(12,500)
Issue of Co‐operative Control Shares1,130914914
Repurchase of Co‐operative Control Shares‐(842)(889)
Interest paid on Co‐operative Control Share
s‐(543)(543)
Investment Share repurchase
s‐‐(5,338)
Nil Paid Share payments443‐‐
Dividends paid(2,536)(1,900)(2,043)
Net financing cash flows5,0374,629(20,399)
Movement in cash for period5,2293,949(987)
Cash at beginning of the year2,5213,4583,458
Currency movement on cash holding
s(27)15450
Cash at end of the period7,7237,5612,521
STATEMENT OF CHANGES IN POSITION FOR THE PERIOD
Share capital
Retained 
earnings
Other 
reserves 
Total 
equity
Balance at 1 June 201758,464 141,28533,664233,413
Profit/(loss) for the period‐ 14,85421315,067
Dividends paid‐ (1,900)‐(1,900)
Hedge revaluations‐‐‐‐
Investment revaluations‐‐2,3622,362
Transfer of asset revaluations on sale‐ 1,645(1,645)‐
Balance at 30 November 2017 (Unaudited)58,464 155,88434,594248,942
Balance at 1 June 201758,464 141,28533,664233,413
Profit/(loss) for the year‐ 9,1111549,265
Dividends paid‐ (1,900)(143)(2,043)
Hedge revaluations‐‐216216
Investment revaluation
s‐‐3,1383,138
Land & buildings revaluations‐‐3,4503,450
Transfer of asset revaluations on sale‐ 1,645(1,645)‐
Investment Share repurchases(5,338)‐‐(5,338)
Balance at 31 May 2018 (Audited)53,126 150,14138,834242,101
Balance at 1 June 201853,126 150,14138,834242,101
Profit/(loss) for the period‐ 32,51025632,766
Dividends paid‐ (2,444)(92)(2,536)
Hedge revaluations‐‐‐‐
Investment revaluation
s‐‐(62)(62)
Co‐operative Control Shares converted to Ordinary Share
s7,392‐‐7,392
Nil Paid Shares issued15,923‐‐15,923
Balance at 30 November 2018 (Unaudited)76,441 180,20738,936295,584
3

More details
Livestock Improvement Corporation
Consolidated financial statements
For the six months ended 30 November 2018
In thousands of NZD
1. Business analysis
2018 
(Unaudited)
NZ market 
genetics Herd testing
Farm 
software
Farm 
automation Other EliminationsTotal
External revenue89,045 13,283 23,190 13,396 22,175‐161,089
Inter‐segment revenue‐‐‐ 1,821 693 (2,514)‐
Total revenue89,045 13,283 23,190 15,217 22,868 (2,514)161,089
Depreciation & amortisation(347) (1,365) (3,747) (1,835) (5,875)‐(13,169)
Segment profit before ta
x61,262 6,238 14,341 5,270 16,298‐103,409
Bull team revaluation‐
One‐off transformation costs‐
Unallocated amounts(57,683)
Profit/(loss) before tax 45,726
2017 
(Unaudited)
NZ market 
genetics Herd testing
Farm 
software
Farm 
automation Other EliminationsTotal
External revenue85,457 12,629 21,502 12,869 20,358‐152,815
Inter‐segment revenu
e‐‐‐ 1,368‐ (1,368)‐
Total revenue85,457 12,629 21,502 14,237 20,358 (1,368)152,815
Depreciation & amortisation(557) (1,377) (3,459) (1,327) (7,582)‐(14,302)
Segment profit before tax60,065 6,208 13,055 5,998 11,884‐97,210
Bull team revaluation‐
One‐off transformation costs(20,665)
Unallocated amounts(54,943)
Profit/(loss) before tax 21,602
NZ market 
genetics Herd testing
Farm 
software
Farm 
automation Other EliminationsTotal
External revenue92,943 31,369 43,924 20,177 48,007‐236,420
Inter‐segment revenue‐‐‐ 2,217 1,520 (3,737)‐
Total revenue92,943 31,369 43,924 22,394 49,527 (3,737)236,420
Depreciation & amortisation(1,033) (2,828) (7,060) (2,893) (14,481)‐(28,295)
Segment profit before ta
x62,360 12,005 26,822 8,937 28,922‐139,046
Bull team revaluation8,634
One‐off transformation costs(20,665)
Unallocated amounts(113,363)
Profit/(loss) before tax 13,652
LIC's business, particularly the Parent's artificial breeding business, is highly seasonal. November results, since they incorporate the 
majority of the artificial breeding revenues but not a similar proportion of total costs, are not indicative of the second half result nor, 
therefore, the full year result.
The Group operates in four key operating segments as set out below.  Figures in the following tables reflect information regularly 
reported to the Chief Executive on those key operating segments:
‐ NZ market genetics: provides bovine genetic breeding material and related services, predominately to dairy farmers
‐ Herd testing: herd testing and animal recording for pastoral farmers
‐ Farm software: data recording and farm management information services 
‐ Farm automation: provides dairy automated equipment and technology
The Other segment includes international operations, diagnostics, animal health, research & development and support services.  
Unallocated amounts include personnel costs, administrative and other fixed costs and net finance costs.
Year to 31 May 2018 
(Audited)
4

More details
Livestock Improvement Corporation
Consolidated financial statements
For the six months ended 30 November 2018
In thousands of NZD
2. Equity
Other reserves and equity
Hedge 
revaluation 
reserve
Investment 
revaluation 
reserve
Non‐
controlling 
interests
Other 
reserves
Balance at 1 June 2017(265) 1,62832,07422733,664
Profit/(loss) for the period‐‐‐213213
Revaluations‐ 2,362‐‐2,362
Non‐controlling interest movement‐‐(1,645)‐(1,645)
Balance at 30 November 2017 (Unaudited)(265) 3,99030,429440 34,594
Balance at 1 June 2017(265) 1,62832,07422733,664
Profit/(loss) for the year‐‐‐154154
Dividends paid‐‐‐ (143)(143)
Revaluations216 3,1383,450‐6,804
Transfer of asset revaluations on sale‐‐(1,645)‐(1,645)
Non‐controlling interest movemen
t‐‐ ‐‐‐
Balance at 31 May 2018 (Audited)(49) 4,76633,879238 38,834
Balance at 1 June 2018(49) 4,76633,87923838,834
Profit/(loss) for the period‐‐‐256256
Dividends paid‐‐‐(92)(92)
Revaluations‐(62)‐‐(62)
Transfer of asset revaluations on sale‐‐‐‐‐
Non‐controlling interest movemen
t‐‐ ‐‐‐
Balance at 30 November 2018 (Unaudited)(49) 4,70433,879402 38,936
3. Contingencies
Following the approval by shareholders of the share simplification described above, a small number of shareholders elected to 
exercise their minority buy‐out rights arising from the proposal under the Companies Act 1993 ("Act"). On 19 April 2018 LIC 
bought back 1,334,396 Investment Shares as a result of the shareholders exercising their rights. LIC holds these shares as treasury 
stock. Those shareholders that exercised their minority buy‐out rights have objected to the price proposed by LIC, being $4.00 
per share, and the final purchase price to be paid by LIC for the affected shares will therefore be determined in an arbitration. 
The $4.00 price was the relative value attributed to each investment share under the share simplification proposal accepted by 
shareholders. Each investment share was reclassified into four fully paid ordinary shares with a relative value of $1.00 per share. 
No provision has been made for any additional payments in these financial statements as LIC believes the price paid was fair and 
reasonable and is supported by independent valuations.
During July 2018, LIC's share capital was reorganised and its constitution amended to reflect the share simplification approvals 
obtained at LIC's Special Meeting of Shareholders held on 14 March 2018.  As part of the reorganisation LIC's two classes of 
shares were bought together into a single class of Ordinary Shares.  Ordinary Shares have both voting rights and the right to 
receive dividends based on the profits of the Company.
Land & building 
revaluation 
reserve
5

More details
Livestock Improvement Corporation
Consolidated financial statements
For the six months ended 30 November 2018
In thousands of NZD
4. Acquisitions and disposals
Year to 31 May
201820172018
Unaudited UnauditedAudited
(i) Land, buildings and equipment
Acquisitions7,7184,5837,671
Disposals514,5829,658
(ii) Software and other intangible assets
Acquisitions8,79010,80921,146
Disposals‐‐129
5. Transactions with related parties, directors and management
Year to 31 May
201820172018
Unaudited UnauditedAudited
Remuneration of key management and directors 2,2762,0564,249
Sale of goods and services to key management and director
s440567669
6. Reconciliation of the Profit/(loss) for the period to Net operating cashflows
Year to 31 May
201820172018
Unaudited UnauditedAudited
Profit for the period32,76615,0679,265
Adjusted for non‐cash items:
Depreciation and amortisation13,16914,30228,295
Bull team revaluation‐‐(8,634)
Working capital movements and other non‐cash item
s(26,584) (23,961)8,904
Net operating cash flows19,3515,40837,830
7. Audit
8. Dividend
The Group has had the following short term transactions with key management and directors during the period, noting sale of 
goods and services were under normal trade terms:
In accordance with the Financial Reporting Act 2013 these interim financial statements are not required to be audited and 
therefore, in line with previous years, have not been audited.
In relation to the 2018 financial year LIC declared a dividend of 1.71c per Ordinary Share, or $2.4 million (2017: 6.44 cents per 
Investment Share, or $1.9 million).
6

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Private Bag 3016
Hamilton 3240
New Zealand

0800 651 156
www.lic.co.nz
LIC is the trading name of Livestock Improvement Corporation Limited
Market statement – LIC Half-Year Financial Results
8 February 2019

LIC Half-Year Profit Rises On Improved Performance And New Product Innovations

Performance Highlights H1 FY18-19:
 $161 million total revenue, 5% up from $153 million in the same period last year.
 $409 million total assets, up from $371 million on the same period as last year.
 $59.3 million earnings before interest, tax, depreciation and amortisation (EBITDA)
1
, up 3% on the same
period last year.
 $46.1 million earnings before interest and tax (EBIT)
1
, up 7%.
 $32.8 million net profit after tax (NPAT), up 117% from $15.1 million in the same period last year.
Livestock Improvement Corporation (NZX: LIC) (LIC) announces its half-year financial results for the six
months to 30 November 2018.

Board Chair Murray King said the half-year result reflected the recurring benefits from the
co-operative’s business transformation, which improved business performance and profitability; and the
value of its ongoing investment in research and development to commercialise high-value genetics and
technology products for its farmers.

Total revenue, EBIT, EBITDA and NPAT were all up on the same period as last year.

Cash flows from operations were positive $19.4 million, compared to $5.4 million for the same period last
year. This is reflective of increased sales.

LIC continues to operate a strong balance sheet with total assets including cash, software, land and
buildings and bull teams of $409 million, up from $371 million on the same period as last year.

Investment in research and development also continues (5.6% of total revenue in prior year), as well as
significant capital investment in software development.

Half year results incorporate the majority of AB and herd testing revenues but not a similar proportion of
total costs so are not indicative of the second half, nor the full year, result. No dividend is declared at half
year.

King said the result was in-line with the market guidance reported in July.

Strategy for growth
“With the business transformation programme ongoing and embedded into the co-operative’s operations,
we are seeing the significant recurring benefits in improved business performance, growth and profitability
in this result. We expect these benefits to continue to deliver earnings improvements in future years.

“LIC’s refreshed business strategy to deliver innovation led growth by focusing on optimising and
enhancing our core business will build on our transformation to keep LIC and our customers as leaders of
the global pastoral dairy system.

“The strategy is also critical to a modern, progressive co-operative that can meet the needs of its customers
and the challenges in the broader industry by continually adapting and improving.

Page 2 of 3

“Total cow numbers in the national dairy herd are steady, but our focus on driving value for farmers from
our core products through innovation is delivering more value as farmers invest in new genetic products to
fast track genetic gain within their herds and meet changing market demands,” King said.

Protecting the national herd from Mycoplasma bovis (M. bovis)
The half-year result was achieved even with the investment of more than $800,000 on new measures to
protect customers from M. bovis, including a world-leading daily testing regime of its bulls through the peak
mating period. The co-op absorbed these costs to avoid additional price increases.

Strong sales
Sales across LIC’s range of products were strong in New Zealand, particularly those that enable farmers to
put more emphasis on cow quality over quantity. This included its DNA testing service with more farmers
utilising the service to confirm parentage of their young stock and identify the best herd replacements to
secure future herd productivity.

Total AB sales were up on the previous year as more farmers extended their farm’s AB period and opted
for short gestation genetics over natural mating bulls. Across the country, 36% more farms adopted an all-
AB mating plan than the previous year – the biggest spike the co-op has seen in the emerging no-bull
trend, King said.

“This is partly due to the heightened biosecurity focus from M. bovis but with the demand we’ve seen for
other solutions it’s evident farmers are looking for opportunities to maximise their profitability and
productivity.”

Demand in international markets for LIC genetics and automation systems also increased.

New innovations
LIC’s ‘A2 bull team’, introduced to meet the growing demand of A2 milk, was also in high demand
accounting for 10% of total AB sales in its debut season as more farmers look to breed an A2A2 herd. LIC
also saw strong uptake in its premium genetics product, the Forward Pack bull team, which provides
access to elite new genetics earlier to increase the rate of genetic gain on-farm.

During the year LIC continued the rollout of its SPACE service, which measures pasture via satellite
imagery and algorithms, and implemented a number of improvements to the system which has now been
adopted by 1200+ farmers in Southland, South Otago, Canterbury, Manawatu, Waikato, and Bay of Plenty.

Outlook
The co-operative’s work to transform its business operations, simplify its capital structure and refresh its
business strategy has built a strong platform for growth.

Underlying Earnings (NPAT excluding bull valuation)
*
at year-end remain forecast 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.

LIC expects Underlying Earnings to increase to a range of $22-28 million in 2019-20.

ENDS

For more information visit www.halfyearinreview.lic.co.nz and refer additional notes overpage
Media contact: Ashleigh Sattler, ashleigh.sattler@lic.co.nz, 027 617 1942
For any shareholder enquiries please phone 0800 264 632

Notes to Financial Information
1
One-off transformation costs pre-tax of $20.7 million were incurred in the same period of the prior financial year (H1 2017-18). EBITDA and
EBIT numbers for that period are presented excluding one-off transformation costs as they are considered useful to investors to provide an
indication of the change in business performance. The numbers presented are non-GAAP financial information.

Page 3 of 3
*Underlying Earnings is the company’s NPAT excluding bull valuation and is considered useful to investors as it is the basis on which LIC has
historically reported and it is the basis on which LIC makes its determination of dividends. These numbers should be all read in conjunction
with the interim financial accounts.

Non-GAAP financial information does not have a standardised meaning prescribed by GAAP and therefore may not be comparable to similar
financial information presented by other entities. As this is a half-year update, the numbers relating to November 2017 and November 2018
have not been audited.

About LIC
LIC is a farmer-owned co-operative that provides a range of services and solutions to improve the productivity and prosperity of farmers. This
includes dairy genetics, information technology, herd testing, DNA parentage verification and farm advisory services through FarmWise.
Subsidiary business LIC Automation also provides integrated automation systems and unique milk testing sensors that present real-time data
while a cow is being milked. With origins dating back to 1909, LIC has a long history of world-leading innovations for the dairy industry.
Today the New Zealand-based co-operative employs more than 700 permanent staff, swelling to 2000 during the peak dairy mating season. LIC
also has offices in the United Kingdom, Ireland and Australia. All LIC profit is returned to its farmer owners/shareholders in dividends, or
reinvested for new solutions, research and development. www.lic.co.nz

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Reporting Period6 months to 30 November 2018
Previous Reporting Period6 months to 30 November 2017
Amount (000's)Percentage change
Revenue from ordinary activities$NZ 161,0895.41%
Profit (loss) from ordinary activities after
tax attributable to security holders
$NZ 32,766117.47%
Net profit (loss) attributable to security
holders
$NZ 32,766117.47%
Interim/Final DividendAmount per securityImputed amount per security
Interim Dividend
Record DateNot Applicable
Dividend Payment DateNot Applicable
Comments:
LIVESTOCK IMPROVEMENT CORPORATION LIMITED
Results for announcement to the market
An interim dividend has not been
declared
These results reflect the highly seasonal nature of our business
activity and are not indicative of the second half, nor the full year
result. For commentary on the results, please refer to the market
statement.