LIC Half Year Financial Results

Livestock Improvement
Corporation Limited (LIC)
Interim Report

For the six months ended
30 November 2020

Key results and position
LIVESTOCK IMPROVEMENT CORPORATION - INTERIM REPORT 2020
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Key results and position
LIVESTOCK IMPROVEMENT CORPORATION - INTERIM REPORT 2020
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Key results and position
LIVESTOCK IMPROVEMENT CORPORATION - INTERIM REPORT 2020
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Accounting Policies
Accounting entity
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 2020.
LIC is domiciled in New Zealand, registered under the Companies Act 1993 and the Co-operative Companies Act 1996,
and listed on the Main Board of the New Zealand Stock Exchange Limited ("NZX"). 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 should be read in conjunction with the annual report for the year ended 31 May 2020.
Basis of Preparation
(i) Statement of compliance
These financial statements comply with NZ GAAP as appropriate for Tier 1, for-profit entities, NZIFRS and IFRS.
(ii) Basis of measurement
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.
(iii) Functional and presentation currency
The functional currency of the Company and the presentation currency of the financial statements is New Zealand
Dollars ("NZD"), with amounts rounded to the nearest thousand.
(iv) Use of estimates and judgements
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.
(v) New or amended standards adopted in current year and standards issued but not yet effective
The accounting policies have been applied consistently with prior periods.
LIVESTOCK IMPROVEMENT CORPORATION - INTERIM REPORT 2020
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Notes to the Financial Statements
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 Other segment includes international operations, diagnostics, animal health, research & development and
supportservices. Unallocatedamountsincludepersonnelcosts,administrativeandotherfixedcostsand netfinance
costs.
1. Business analysis
(i) Operating segments
The Group operates in four key operating segments, and across four key geographies 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.
LIVESTOCK IMPROVEMENT CORPORATION - INTERIM REPORT 20206

Notes to the Financial Statements
2. Equity
In July 2018 LIC's share structure was simplified and its two classes of shares, Investment Shares and Co-operative
Control Shares, were brought together into a single class of Ordinary Shares. All Ordinary Shares have voting rights
and the right to receive dividends based on the profits of the Company.
Following approval by the 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. As a result,
LIC agreed to purchase the 1.3 million Investment Shares held by the Shareholders concerned, to be held as treasury
stock. During 2020 LIC has been required to pay an additional $1.7 million to acquire these Investment Shares and as
a consequence Share Capital has decreased to $76.7 million (2019: $78.4 million).
Each Investment Share was subsequently reclassified into four fully paid Ordinary Shares with a relative value of
$1.00 per share (at the time of reclassification) resulting in LIC holding 5.4 million Ordinary Shares as treasury stock.
LIVESTOCK IMPROVEMENT CORPORATION - INTERIM REPORT 20207

Notes to the Financial Statements
6. Audit
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.
7. Dividend
In relation to the 2020 financial year LIC declared a dividend of 12.75 cents per Ordinary Share, or $18.2 million (2019:
10.98 cents per Investment Share, or $15.6 million).
LIVESTOCK IMPROVEMENT CORPORATION - INTERIM REPORT 20208

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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

LIC Half-Year Result – Genomics Investment Delivering For Farmers and Co-op
Performance Highlights H1 2020-21:
 $169.7 million total revenue, up 3.8% from $163.4 million in the same period last year.
 $33.4 million net profit after tax (NPAT), up 10.4% from $30.3 million.
 $60.0 million earnings before interest, tax, depreciation and amortisation (EBITDA), up 2.7%.
 $46.4 million earnings before interest and tax (EBIT), up 7.6%.
 Underlying earnings (NPAT excl bull valuation change)* range is forecast to be $19-23 million for year-end, up
from $16-22 million, compared to $22.7 million in 2019-20.
Livestock Improvement Corporation (NZX: LIC) (LIC) announces its half-year financial results for the six months to 30
November 2020, which show continued strength in the cooperative’s financial performance with increased revenue
and underlying earnings.
Net profit was up 10.4%, primarily due to a strong growth in sales of LIC’s premium artificial breeding options and
animal health and diagnostics testing,
as farmers invest to optimise the value of their dairy herds. The cooperative
also continued investment in Research & Development (R&D) and the MINDA
®
farm management software, and
made capital investments in new facilities on the cooperative’s farms.

Board Chair Murray King said the cooperative is balancing profit with focussed R&D and technology investment for the
long term.

“We are investing in the areas where LIC has unique capability to maximise the value LIC’s customers generate from
their livestock and their product; providing technology and services to make farmers’ lives easier.

“This includes investment in key areas such as genetics and R&D, through to updating and enhancing LIC’s MINDA
farm management software given its critical importance to LIC’s farmer shareholders and their businesses.”

King said the highlight of the result was farmers’ growing confidence in LIC’s genomic selection with around 1.4 million
inseminations from genomic sires this year, up from just under 400,000 in 2017.

“Genomic science and genome sequencing technology is generating markedly increased productivity and health traits
for dairy cows and better returns for dairy farmers.

“LIC is now a world leader in pastoral dairy genomic science thanks to the foresight of LIC’s Board and shareholders.
The cooperative has invested $78 million into genomic science over the last three decades to speed up valuable
genetic gain in dairy herds, enabling our customers to produce the most sustainable and efficient animals and the
highest value product.”
Genomic sires feature in premium artificial breeding offerings, including Premier Sires Forward Pack, A2/A2, Alpha
genomic and liquid sexed semen.
Growth in the interest of sexed semen has seen inseminations move from 30,000 in 2019 to over 100,000 nationally in
2020. King said this has been achieved through the expansion of regional availability and making all liquid sexed
semen AB replacement breeds available for delivery this year.
“Delivery has been daily and we have pulled out all the stops to get product to farm including chartering flights for
weekend delivery to ensure supply. Farmers are seeing the value of mating their best animals to high genetic merit
sires, while using a beef sire on their lower performing animals.”
King said ongoing R&D and innovation focussed on herd sustainability, health and efficiency were continuing with LIC
launching the HoofPrint
®
index, a new tool giving farmers accurate insights on bulls born since 1 January 2009 that

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have the potential to breed progeny for dairy herds with a lighter environmental footprint – cows that produce less
methane and nitrogen per kilogram of milksolids. LIC is also leading a world first pilot trial seeking to identify a
possible link between the methane cows produce and their genetics.
During the period the cooperative also launched the AgCelerator™ fund to grow and scale innovations of value to the
dairy industry. The first two investments made through the fund were an Auckland-based blockchain agriculture
solution Trackback and Dunedin-based mastitis detection company Mastaplex. Further investments are being
considered on an ongoing basis.
Murray King said the half-year result was pleasing considering the disruption of the second COVID-19 lockdown and
he paid tribute to the cooperative’s management and staff.
“To ensure business security and continuity, the majority of our staff at LIC’s Newstead campus worked remotely
between August and December. Our farm, laboratory and scientific staff worked at Newstead, Riverlea Road (both are
located in Hamilton) and Christchurch through this period under heightened protocols wearing PPE equipment.
“Our people have had to overcome significant challenges to ensure business continuity and uninterrupted service for
LIC’s 10,000 New Zealand customers and their dedication, resilience and effort is very much appreciated.”
During the period Shareholders voted to update and streamline the governance of the cooperative, including changes
to the Board and replacing the Shareholder Council with a smaller, more focussed Shareholder Reference Group.

LIC continues to operate a strong balance sheet with total assets including cash, software, land and buildings and bull
teams of $414 million, down from $425 million on the same period as last year, primarily due to a reduction in the
valuation of the Bull team in the second half of the prior year. Cash flows from operations were $10.8 million, down
from $15.8 million for the same period last year, mainly due to differences in timing of tax payments and customer
receipts. LIC has not utilised the Government COVID-19 wage subsidy in either the current or prior period.

Half-year results incorporate the majority of revenues from the farmer owned cooperative’s core artificial breeding
(AB) and herd testing services, but not a similar proportion of total costs so are not indicative of the second half, nor
the full year, result. Revenue from international and technology products is also spread through the year. No dividend
is declared at half-year.

Outlook

We will continue to prioritise a sharper, deeper focus on investment in the areas where LIC is uniquely placed to drive
value, innovate and deliver positive impacts for our customers and shareholders.

Underlying earnings (NPAT excl bull valuation change)* at year-end is now forecast to be in the range of $19-23
million, assuming no significant climate event or milk price drop takes place between now and then, nor any major
impacts from M. bovis or COVID-19.

LIC expects underlying earnings* in 2021-22 to be in the range of $19-25 million.

ENDS

For more information and commentary about the result, visit www.halfyearinreview.lic.co.nz.

Media enquiries: Aleisha Clark, aleisha.clark@lic.co.nz, 027 571 1702
Shareholder enquiries: 0800 264 632

*Notes to Financial Information: Underlying Earnings is the company’s NPAT excluding bull valuation and nil paid share valuation movements 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. 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 2020 have not been audited. These numbers should be all read in conjunction with the interim financial accounts.

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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Results announcement
27 January 2021

Results for announcement to the market
Name of issuer Livestock Improvement Corporation Limited
Reporting Period 6 months to 30 November 2020
Previous Reporting Period 6 months to 30 November 2019
Currency NZD

Amount (000s) Percentage change
Revenue from continuing
operations
$169,683 +3.83%
Total Revenue $169,683 +3.83%
Net profit/(loss) from
continuing operations
$33,437 +10.41%
Total net profit/(loss) $33,437 +10.41%
Interim Dividend
Amount per Quoted Equity
Security
No dividend has been declared
Imputed amount per Quoted
Equity Security
Not applicable
Record Date Not applicable
Dividend Payment Date Not applicable
Current period Prior comparable period
Net tangible assets per
Quoted Equity Security
$1.87 $1.86
A brief explanation of any of
the figures above necessary
to enable the figures to be
understood
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.

The Net Tangible Assets per Quoted Equity Security excludes
LIC ordinary shares held as treasury stock and unquoted LIC Nil
Paid shares which have the same voting and dividend rights as
LIC’s quoted ordinary shares.

Authority for this announcement
Name of person

authorised
to make this announcement
Marise Winthrop
Contact person for this
announcement
Marise Winthrop
Contact phone number +64 27 488 4615
Contact email address Marise.Winthrop@lic.co.nz
Date of release through MAP

27 January 2021

Unaudited financial statements accompany this announcement.