Livestock Improvement Corporation Limited (LIC)
Interim Financial Statements
For the six months ended 30 November 2024
There's always room for improvement
2 Livestock Improvement Corporation Interim Financial Statements for the six months ended 30 November 2024
Contents
Key results and position | |
Our results for the period | 4 |
Our position | 5 |
Our cash flows for the period | 6 |
Changes in our position for the period | 7 |
More details | |
Accounting policies | 8 |
Business analysis | 9 |
Bull team | 10 |
Equity | 11 |
Other information | 12 |
Key results and position
STATEMENT OF RESULTS FOR THE PERIOD
For the six months ended 30 November 2024
SIX MONTHS ENDED | YEAR ENDED | |||||
In thousands of New Zealand dollars | 30 Nov 2024 | 30 Nov 2023 | 31 May 2024 | |||
Note | Unaudited | Unaudited | Audited | |||
Revenue | 1 | 185,666 | 171,949 | 267,288 | ||
Purchased materials | (21,694) | (20,931) | (41,255) | |||
People costs | (72,342) | (68,619) | (119,758) | |||
Depreciation and amortisation | (13,553) | (11,358) | (24,047) | |||
Other expenses | (31,605) | (31,020) | (60,516) | |||
Net finance costs | 151 | 37 | 647 | |||
Bull team revaluation | 2 | 7,512 | - | (8,768) | ||
Fair value change in Nil Paid Share receivable | (14) | 284 | 191 | |||
Profit/(loss) before tax expense | 54,121 | 40,342 | 13,782 | |||
Tax expense | (15,046) | (11,361) | (6,048) | |||
Profit/(loss) for the period | 39,075 | 28,981 | 7,734 | |||
Profit per Ordinary Share (excl. treasury stock) | $0.27 | $0.20 | $0.05 | |||
Hedge revaluations | 3 | 304 | (152) | (251) | ||
Foreign currency translation movements | 3 | 116 | (27) | 25 | ||
Investment revaluations | 3 | 251 | 9,573 | 8,805 | ||
Land and buildings revaluations | - | - | 3,715 | |||
Tax effect of building revaluations | - | - | (784) | |||
671 | 9,394 | 11,510 | ||||
Comprehensive income for the year | 39,746 | 38,375 | 19,244 | |||
Supplementary non-GAAP note to the results for the period: | ||||||
Profit/(loss) for the period | 39,075 | 28,981 | 7,734 | |||
Plus/(less): Bull team revaluation | (7,512) | - | 8,768 | |||
Tax effect on Bull team revaluation | 2,103 | - | (2,455) | |||
Plus/(less): Fair value change in Nil Paid Share receivable | 14 | (284) | (191) | |||
Underlying earnings | 33,680 | 28,697 | 13,856 | |||
Underlying earnings per Ordinary Share (excl. treasury stock) | $0.24 | $0.20 | $0.10 |
4 Livestock Improvement Corporation Interim Financial Statements for the six months ended 30 November 2024
Key results and position
STATEMENT OF POSITION
As at 30 November 2024
SIX MONTHS ENDED | YEAR ENDED | |||||
In thousands of New Zealand dollars | 30 Nov 2024 | 30 Nov 2023 | 31 May 2024 | |||
Note | Unaudited | Unaudited | Audited | |||
Cash | 29,704 | 38,281 | 42,341 | |||
Debtors | 89,350 | 86,673 | 34,952 | |||
Other assets | 26,205 | 25,932 | 26,557 | |||
Nil Paid Shares receivable | 668 | 1,887 | 972 | |||
Bull team | 2 | 96,384 | 97,640 | 88,872 | ||
Land, buildings and equipment - owned & leased | 4 | 119,876 | 117,865 | 118,997 | ||
Software, goodwill and other intangible assets | 4 | 47,873 | 42,265 | 45,917 | ||
Total assets | 410,060 | 410,543 | 358,608 | |||
Creditors | 29,897 | 27,246 | 23,831 | |||
Borrowings | - | - | - | |||
Deferred tax | 32,248 | 28,898 | 30,645 | |||
Other liabilities | 41,572 | 41,853 | 29,221 | |||
Total liabilities | 103,717 | 97,997 | 83,697 | |||
Net assets | 306,343 | 312,546 | 274,911 | |||
Share capital | 3 | 76,737 | 76,737 | 76,737 | ||
Retained earnings | 181,328 | 190,318 | 150,567 | |||
Other reserves | 3 | 48,278 | 45,491 | 47,607 | ||
Total equity | 306,343 | 312,546 | 274,911 | |||
Director | Director |
Date: 22 January 2025 | Date: 22 January 2025 |
Livestock Improvement Corporation Interim Financial Statements for the six months ended 30 November 2024 5
Key results and position
STATEMENT OF CASHFLOWS FOR THE PERIOD
For the six months ended 30 November 2024
SIX MONTHS ENDED | YEAR ENDED | ||||
In thousands of New Zealand dollars | 30 Nov 2024 | 30 Nov 2023 | 31 May 2024 | ||
Note | Unaudited | Unaudited | Audited | ||
Customer receipts | 130,112 | 122,701 | 264,919 | ||
Supplier payments | (118,441) | (118,112) | (223,940) | ||
Net tax payments | (236) | (1,656) | (2,189) | ||
Other operating cash flows | (75) | 436 | 1,262 | ||
Net operating cash flows | 6 | 11,360 | 3,369 | 40,052 | |
Software development | (7,519) | (7,647) | (16,097) | ||
Net sales/(purchases) of land, buildings and equipment | (5,854) | (8,049) | (11,570) | ||
Sale / (purchase) of investments | (8) | 19,022 | 19,030 | ||
Net investment cash flows | (13,381) | 3,326 | (8,637) | ||
Payment of principal portion of lease liabilities | (2,693) | (2,384) | (5,408) | ||
Nil Paid Share receipts | 71 | 163 | 165 | ||
Dividends paid | (8,095) | (20,762) | (38,446) | ||
Net financing cash flows | (10,717) | (22,983) | (43,689) | ||
Movement in cash for the period | (12,738) | (16,288) | (12,274) | ||
Cash at beginning of the year | 42,341 | 54,596 | 54,596 | ||
Currency movement on cash holdings | 101 | (27) | 19 | ||
Cash at end of the period | 29,704 | 38,281 | 42,341 | ||
6 Livestock Improvement Corporation Interim Financial Statements for the six months ended 30 November 2024
Key results and position
STATEMENT OF CHANGES IN EQUITY FOR THE PERIOD
For the six months ended 30 November 2024
In thousands of New Zealand dollars | Note | Share capital | Retained earnings | Other reserves | Total equity | ||
Balance at 1 June 2024 | 76,737 | 150,567 | 47,607 | 274,911 | |||
Profit/(loss) for the period | - | 39,075 | - | 39,075 | |||
Dividends paid | - | (8,314) | - | (8,314) | |||
Hedge revaluations | 3 | - | - | 304 | 304 | ||
Foreign currency translation movements | 3 | - | - | 116 | 116 | ||
Investment revaluations | 3 | - | - | 251 | 251 | ||
Balance at 30 November 2024 (Unaudited) | 76,737 | 181,328 | 48,278 | 306,343 | |||
Balance at 1 June 2023 | 76,737 | 170,742 | 50,015 | 297,494 | |||
Profit/(loss) for the period | - | 28,981 | - | 28,981 | |||
Dividends paid | - | (23,323) | - | (23,323) | |||
Hedge revaluations | - | - | (152) | (152) | |||
Foreign currency translation movements | - | - | (27) | (27) | |||
Investment revaluations | - | - | 9,573 | 9,573 | |||
Reclassification of investment revaluations | - | 13,918 | (13,918) | - | |||
on divestment | |||||||
Balance at 30 November 2023 (Unaudited) | 76,737 | 190,318 | 45,491 | 312,546 | |||
Balance at 1 June 2023 | 76,737 | 170,742 | 50,015 | 297,494 | |||
Profit/(loss) for the year | - | 7,734 | - | 7,734 | |||
Dividends paid | - | (41,827) | - | (41,827) | |||
Hedge revaluations | - | - | (251) | (251) | |||
Foreign currrency translation movements | - | - | 25 | 25 | |||
Investment revaluations | - | - | 8,805 | 8,805 | |||
Land and buildings revaluations | - | - | 2,931 | 2,931 | |||
Reclassification of investment revaluations | - | 13,918 | (13,918) | - | |||
on divestment | |||||||
Balance at 31 May 2024 (Audited) | 76,737 | 150,567 | 47,607 | 274,911 | |||
Livestock Improvement Corporation Interim Financial Statements for the six months ended 30 November 2024 7
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 2024.
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 NZX Ltd.
Basis of preparation
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Statement of compliance
These financial statements comply with NZ GAAP as appropriate for Tier 1, for-profit entities, NZIFRS and IFRS. - 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.
The majority of the Group's business does not follow a clearly identifiable operating cycle, therefore the balance sheet is presented in order of liquidity as it is more relevant to the users of the financial statements. - 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. - 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.
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 2024.
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New or amended standards adopted in current year and standards issued but not yet effective
Accounting policies have been applied consistently with prior periods. - Climate risk
Climate change and how farmer shareholders, regulators and others respond may have significant impacts on the Group's future revenue and the recognised amounts of assets and liabilities. While the effects of climate change are a continuing source of uncertainty, climate-related risks have been assessed as not having a material impact on these financial statements. Reviews of accounting estimates, judgements and impairment testing assumptions have considered potential future impacts of climate change.
8 Livestock Improvement Corporation Interim Financial Statements for the six months ended 30 November 2024
Notes to the Financial Statements
1. Business analysis
The Group operates in four key operating segments as set out below, and across four key geographies. 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, animal recording and on-farm support for dairy farmers.
- Farm software: data recording, tags and farm management information services.
- Diagnostics: provides DNA and animal health testing services.
NZ Market Genetics revenue is primarily recognised at a point in time, upon delivery of product to the customer. All other revenue lines are primarily recognised over time, as the service to the customer is provided.
In thousands of New Zealand dollars
SIX MONTHS ENDED 30 NOV 2024 | NZ market | Herd | Farm | Diagnostics | Other | Eliminations | Total | ||
(Unaudited) | genetics | testing | software | ||||||
External revenue | 106,841 | 17,653 | 29,155 | 15,664 | 16,353 | - | 185,666 | ||
Inter-segment revenue | - | - | - | - | 1,639 | (1,639) | - | ||
Total revenue | 106,841 | 17,653 | 29,155 | 15,664 | 17,992 | (1,639) | 185,666 | ||
Depreciation & amortisation | (1,011) | (2,901) | (952) | (2,073) | (6,616) | - | (13,553) | ||
Segment gross profit before tax | 70,241 | 8,365 | 21,731 | 7,874 | 7,966 | - | 116,177 | ||
Bull team revaluation | 7,512 | ||||||||
Unallocated amounts | (69,568) | ||||||||
Profit/(loss) before tax expense | 54,121 | ||||||||
SIX MONTHS ENDED 30 NOV 2023 | NZ market | Herd | Farm | Diagnostics | Other | Eliminations | Total | ||
(Unaudited) | genetics | testing | software | ||||||
External revenue | 99,406 | 15,287 | 27,085 | 14,811 | 15,360 | - | 171,949 | ||
Inter-segment revenue | - | - | - | - | 1,525 | (1,525) | - | ||
Total revenue | 99,406 | 15,287 | 27,085 | 14,811 | 16,885 | (1,525) | 171,949 | ||
Depreciation & amortisation | (945) | (2,858) | (591) | (1,753) | (5,211) | - | (11,358) | ||
Segment gross profit before tax | 64,985 | 7,080 | 20,896 | 6,424 | 10,077 | - | 109,462 | ||
Bull team revaluation | - | ||||||||
Unallocated amounts | (69,120) | ||||||||
Profit/(loss) before tax expense | 40,342 | ||||||||
Livestock Improvement Corporation Interim Financial Statements for the six months ended 30 November 2024 9
Notes to the Financial Statements
1. Business analysis (cont.)
In thousands of New Zealand dollars | |||||||||
YEAR ENDED 31 MAY 2024 (Audited) | NZ market | Herd | Farm | Diagnostics | Other | Eliminations | Total | ||
genetics | testing | software | |||||||
External revenue | 110,689 | 39,831 | 54,187 | 29,314 | 33,267 | - | 267,288 | ||
Inter-segment revenue | - | - | - | - | 7,830 | (7,830) | - | ||
Total revenue | 110,689 | 39,831 | 54,187 | 29,314 | 41,097 | (7,830) | 267,288 | ||
Depreciation & amortisation | (1,922) | (5,790) | (1,336) | (3,548) | (11,451) | - | (24,047) | ||
Segment gross profit before tax | 70,686 | 19,877 | 41,422 | 13,193 | 11,164 | - | 156,342 | ||
Bull team revaluation | (8,768) | ||||||||
Unallocated amounts | (133,792) | ||||||||
Profit/(loss) before tax expense | 13,782 | ||||||||
The Other segment includes international operations, research & development and support services. Unallocated amounts include personnel costs, other expenses and net finance costs, and are unallocated because the effort and cost involved to accurately allocate these amounts to individual business segments would outweigh the benefit.
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.
2. Bull team
The bull team is the cornerstone asset of LIC's genetics business. The bulls from which the bull team are selected are carried at their fair value, which is based on LIC's modelling of future cash flows from the bulls (a "Level 3 valuation"). Changes in their fair value are reported in profit/(loss) for the period. The fair value from the bulls is partly dependent on the future sales mix of LIC's genetics products, which is historically strongly correlated to the Farmgate Milk Price paid by Fonterra Co-operative Group. The valuation is also sensitive to changes in the WACC rate used to discount future cash flows and the run-off profile of bulls (revenue attributable) that make up the bull team. Further information on the bull team and key drivers of the valuation is available in the annual report for the year ended 31 May 2024.
10 Livestock Improvement Corporation Interim Financial Statements for the six months ended 30 November 2024