LIC 2017/18

A Transformational Year

Highlights
  • 236.4M
    Total Revenue
    up 16% from 2016-17.
  • 27M
    Earnings before interest and tax (EBIT)
    excluding bull team revaluation and one-off transformation costs.   up 175% from 2016-17.
  • 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.
  • 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.
  • 2.44M
    Full Year Dividend
    fully imputed will be paid to shareholders on 17 August, representing 80% of underlying earnings.
  • 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.

Our
Directors

Chairman's
Message

Play

Our Transformation Strategy

Separation
of LIC

Completed on
01/12/16

Transformation
Programme

Delivering Ongoing
Benefits

Share
Simplification

Implemented
July 2018

A strong platform for future growth

Transformation Programme Results

60M
Recurring revenue benefits
30.7M
One-off benefits

Organisational Health Score:

Before transformation programme started:

54
Fourth Quartile

After one year:

66
Second Quartile

Business Overview

Play

Our Strategy & Purpose

  • 60%
    Optimise the core

    Drive value from the current business

  • 30%
    Enhance the core

    Growth through innovation

  • 10%
    Capture value beyond the core

    Leverage existing capabilities for profitable growth outside pastoral dairy

  • Our Purpose

    LIC is a dairy farmer owned cooperative which empowers livestock farmers through the delivery of superior genetics and technology.

  • Our Ambition

    Continuing to lead the global pastoral dairy system

  • Our Potential

    Global Pastoral Genetics and Farm Management

A year of transformational moments

Imaging tech revolutionising hoof health

Who’s your daddy – LIC’s super bulls

SPACE™ a New Zealand first for pasture management

Semen Valley: NZ’s agritech hub

A hunger for Wagyu

Innovating for Improvement
  • Satellites

    A New Zealand first for pasture measurement, LIC’s SPACE™ service emails farmers detailed pasture data from images taken by satellites. The service utilises an algorithm developed by LIC’s scientists to estimate pasture cover for New Zealand farmers. Data enables more accurate calculations for fertiliser application and animal feed.

  • Connected Cows

    Artificial intelligence (AI) software and sophisticated imaging techniques allow monitoring of animal health and well-being. With LIC technology farmers will receive daily alerts to help develop prevention strategies that address the underlying causes of illness.

  • Smart Sheds

    Through the integration of in-shed automation and sensor technology systems farmers can fine tune milk production and maintain accurate real-time data about individual animals to simplify decision making and improve profitability.

  • Farm Management App

    Farm generates vast quantities of rich and varied data. This is stored in the cloud and can be accessed via the MINDA App to assist with farm and animal management. This can drive insights for farmers in real time to help make better decisions that save time and money.

Innovating for Improvement

Play
Company Overview
  • 20+
    Countries
  • 16
    Sites
  • 11K
    New Zealand Customers
  • 700
    FTE Staff
  • 236.4M
    Full Year 17/18 Revenue16%

Directors' Report 2017-18

Another solid year for LIC

The 2017-18 financial year marked a solid 12 months for LIC despite at times, some challenging operating conditions.

The full-year result was in-line with market expectations and shows a strong underlying increase in profitability from the 2016-17 financial year after allowing of the one-off costs related to the transformation programme. Total revenue for the year was relative to last year and LIC’s highest ever annual revenue amount. This reflects sustained confidence from farmers in LIC and the value its products provide for herd improvement.

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 what we have been for a number of years and better positioned to drive good outcomes for our farmers.

We are pleased to confirm a dividend of $2.44 million fully imputed will be paid to shareholders on 17 August, representing 80% of underlying earnings. This is the first dividend to be paid on LIC’s ordinary shares.

Performance highlights:

  • $236.4 million total revenue, up 16% from $203.5 million last year.
  • $27 million earnings before interest and tax (EBIT) excluding bull team revaluation and one-off transformation costs of $20.7million, up 175% on last year.
  • Reported EBIT of $14.9 million, 54% down on same period last year. This is due to the impact of the one-off transformation costs and the annual revaluation of the biological bull team.
  • $9.3 million net profit after tax (NPAT), down from $20.8 million last year due to one-off transformation costs and a smaller increase in bull valuation than last year.
  • $3.0 million Underlying Net earnings (NPAT excluding the increase on fair value of the biological assets and related tax effect), same as previous year.

This is a positive result for LIC and reflects a strong performance in our core service areas, as well as continued benefits from our transformation programme.

We sold 5.2 million AB straws and 10.9 million milk samples were processed for herd testing. Demand for diagnostics and animal health testing was also strong and international business continued to grow with AB export sales exceeding 1 million straws for the first time.

Ongoing volatility in milk prices, increasing environmental constraints, and new biosecurity challenges such as Mycoplasma bovis (M. bovis) show how critical it is that as a co-operative we take nothing for granted and that we continue our focus on agility.

A highlight of the year was the successful shareholder vote on simplification of LIC’s share structure. This has allowed us to address concerns around the growing disparity between LIC’s two share classes and will ensure a more agile co-operative for the future.

We thank you for your support of the proposal.

During the financial year, LIC continued the transformation programme it begun in 2016-17 and the cost efficiencies gained were key contributors towards the improved full-year result. The business processes adopted as part of the transformation programme is now a normal part of how we operate. As such we expect it will continue to deliver earnings improvements in future years.

This annual result includes the annual non-cash revaluation of the biological bull team, required under accounting standards to reflect “fair value”. The valuation of the bull team is based on a model designed independently of LIC that looks at future revenue streams and costs associated with the current bulls owned, discounted back to current value. The 2017-18 financial year saw the valuation of the team increase slightly, after a significant increase the year prior. This reflects increased confidence for future year’s milk price and confidence from farmers, in NZ and internationally in LIC genetics, as well as cost efficiencies.

Other business highlights for the year included the launch of a new pasture management service SPACE™ which utilises satellite technology to estimate a farm’s pasture cover.

Investor communications

This year the Board has also reviewed how we communicate with you and how we can make our shareholder communications more engaging and easier to understand.

As a result of this work the Annual Report has been significantly reduced in length and a greater focus put on key details and making it easier to read. We have also introduced this online microsite for the first time to showcase the year’s financial results and highlights.

Strategy refresh

During the year there has also been a full refresh undertaken of LIC’s strategy to ensure it remains fit for purpose and aligned with the co-operative’s direction. The refreshed strategy reiterates that our growth will be innovation-led but with an ongoing focus on the core New Zealand dairy industry.

A summary of the strategy is on the LIC website.

Mycoplasma bovis (M. bovis)

A major focus for all of us in recent months has been the presence of M. bovis in New Zealand. It is a significant concern for everyone in the dairy industry.

LIC is taking all measures possible to protect the national herd from this disease and we are working closely with MPI in this process. We have extensively tested our bulls and found no sign or indication of M. bovis. We are taking nothing for granted but we are confident that the measures we have in place will protect our bulls and customers from the disease.

Outlook

The increased revenue position in the 2017-18 financial year was driven by the success of the transformation programme. However NPAT is lower as it includes the one-off implementation costs of the programme. These costs will not be incurred in years ahead, so a stronger reported EBITDA and reported EBIT is expected next financial year.

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.

Thank you for all your support over the last year.

We look forward to another positive and busy twelve months.

Thank you

The LIC board, management team, and staff thank you for all your support over the last twelve months. It has been a solid year for our co-operative despite at times challenging operating conditions. We look forward to another positive and busy twelve months.

Download Result Announcement
Download Annual Report