Full year results 2024-25

Livestock Improvement Corporation Limited (LIC) Financial Statements

For the year ended 31 May 2025

There's always room for improvement

Contents

Key metrics 4

Financial trends 5

Directors' report 6

Key results and position 8

Our results for the year 8

Our position at year end 9

Our cash flows for the year 10

Changes in our position for the year 11

More details 12

Accounting policies 12

Business analysis 13

Our core assets 14

Our funding 18

Risk and Other assets 19

Tax 20

Other expenses and Other liabilities 21

Transactions with Related Parties, Cash flow reconciliation and Subsequent events 22

Independent auditor's report 23

‌Key Metrics

Results at a glance

$30.6m

Net profit

after tax (NPAT)

$295.1m

Revenue

$21.7m

Underlying earnings*

$56.4m

Operating cashflow

From $7.7m

From $267.3m

From $13.9m

From $40.1m

15c

Underlying earnings* per share

7.3%

Underlying earnings* Return on equity

$22.5m

R&D expense

12.22c

Dividend

From 10 cents

From 5.0%

From $21.2m

From 5.84 cents

*Non-GAAP financial information

4 Livestock Improvement Corporation Financial Statements 2024/25

These charts represent the key financial metrics for LIC to provide a historical summary of our performance.

Net profit after tax ($m)* Revenue ($m)*

27.4

30.6

22.9

26.7

7.7

276.5

249.0

263.2

267.3

295.1

2021 2022 2023 2024 2025 2021 2022 2023 2024 2025

Underlying earnings ($m)** Operating cashflow ($m)*

25.7

22.3

23.7

21.7

13.9

57.1

56.4

40.5

36.8

40.1

2021 2022 2023 2024 2025 2021 2022 2023 2024 2025

Underlying earnings** per Share (cents) Underlying earnings** Return on equity %

0.16

0.18

0.17

0.15

0.10

7.6%

8.8%

8.0%

7.3%

5.0%

2021 2022 2023 2024 2025 2021 2022 2023 2024 2025

R&D Expense ($m)*

Total Dividends (Cents Per Share)***

Full year dividend declared Special dividend paid

21.2

22.5

17.1

18.2

18.6

28.43

12.51

16.38

18.84

12.22

2021 2022 2023 2024 2025 2021 2022 2023 2024 2025

* Excludes discontinued operations - the Automation business was divested in June 2021.

** Non-GAAP financial information: excludes bull team and nil paid share revaluations and discontinued operations.

*** The full year dividend declared is paid in the subsequent year, while special dividends are paid within the year.

Directors' Report 2024-25

‌LIC reports positive full year results with increased dividend for shareholders

The LIC Board announces a positive year-end financial result as it continues to invest in innovations for its farmer shareholders. The co-operative ends the 2024-25 financial year

with a solid profit and Directors have declared a dividend of 12.22 cents per share.

Summary of financials:

• Total Revenue: $295.1 million, up 10.4% from

  $267.3 million last year

• Net Profit After Tax (NPAT): $30.6 million, up significantly from $7.7 million last year

• Underlying Earnings: $21.7 million, up 56.9% from $13.9 million last year

• Dividend: $17.4 million - 12.22 cents per share, representing 80% of Underlying Earnings

• Total assets: $392.0 million, up 9.3% from

  $358.6 million last year

• Strong balance sheet with no debt at year-end

The Board is pleased to deliver such a positive result for farmer owners, especially one which reflects the hard work that has been put in to deliver value behind the farm gate. In the past 12 months we have seen Non-Return Rates (NRR) of our fresh sexed semen lift to within

1% of conventional semen, we have had close to 1.5 million animals genotyped through our

GeneMark™ Genomics programme and we have continued to work with our industry partners to increase the number of integrations available through our MINDA herd improvement platform.

Whether it's allowing farmers to generate more replacement heifers from their top performing cows, increased certainty around parentage or reducing time spent on paperwork our co-

operative is focused on putting farmers and their herds at the heart of everything we do.

Revenue has increased by 10.4% as farmer owners invested further into their herds and the co-operative achieved a 14.8% improvement

in underlying earnings, excluding the one-off negative impacts of the semen quality issue and the tax deductibility on commercial buildings change included in last year's financial result.

Recent years' investments in digital capability have resulted in a $4.0m increase in depreciation and amortisation compared to last year and operating cashflows increased by $16.3m year on year on the back of improved underlying earnings and prudent capital management.

The co-operative continued to invest into Research and Development, representing a 6.3% increase on last year at $22.5m.

With robust underlying earnings of 15 cents per share and a strong cash position, the Board declares an annual dividend of 12.22 cents per share, which equates to a fully imputed cash distribution of $17.4m.

Outlook

The co-operative expects underlying earnings for 2025-26 to be in the range of $18-22 million, assuming no significant events, including climate events, or milk price change takes place between now and then.

From the 2025-26 year, LIC is planning a multi-year investment into customer facing

systems and process improvements. This is an important initiative to replace aging systems and improve customer experience, making the cooperative easier to work with. This investment is predominantly into Software as a Service (SaaS) tools, the costs of which are generally expensed as incurred, rather than amortised over future financial periods. For the purpose of determining the underlying earnings of LIC, this expenditure will be excluded. Reported Net Profit After

Tax (NPAT) will be negatively impacted by the implementation costs incurred within a given year.

The co-operative will also continue to invest in R&D with the next stage of its methane research due to get underway in the last quarter of 2025.

Key Results and Position

‌

Director

‌

Director

Date: 17 July 2025

Date: 17 July 2025

‌STATEMENT OF CHANGES IN POSITION FOR THE YEAR

For the year ended 31 May 2025

More Details

‌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 year ended 31 May 2025.

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. LIC is an FMC Reporting Entity for the purposes of the Financial Reporting Act 2013 and the Financial Markets Conduct Act 2013.

Basis of Preparation

1. Statement of compliance

   These financial statements comply with NZ GAAP as appropriate for Tier 1, for-profit entities, NZIFRS and IFRS.

2. 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 financial statements have been prepared on a historical cost basis, except for the Bull team, Land & Buildings and Investments, which are all measured at fair value.

   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.

3. 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.

4. 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.

5. New or amended standards adopted in current year and standards issued but not yet effective

   Accounting policies have been applied consistently with prior periods. No new or amended standards were

   adopted in the current year that had a significant impact.

   NZ IFRS 18 Presentation and Disclosure in Financial Statements is effective for the year ending 31 May 2028 and will impact the presentation of the Statement of Results for the Year, with an allocation of income and expenses between operating, investing and financing categories, and new sub-totals such as Operating profit. Financial performance measures used to explain the Group financial performance in public communications outside the financial statements will also be required to be disclosed, and there is enhanced guidance on the

   aggregation and disaggregation of information. The Group is assessing the effect of applying NZ IFRS 18.

6. Climate risk

   Climate change and how farmer shareholders, regulators and others respond may have an impact 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 (including the valuation of the bull team in Note 2, and

   the valuation of land and buildings in Note 3), judgements and impairment testing assumptions (refer to note 4) have considered potential future impacts of climate change.

   1. ‌Business analysis

      1. Operating segments

         The Group operates in four key operating segments, and across four key geographies as set out below. The information below reflects the 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

         • Testing: herd testing, on-farm support and DNA and animal health testing services

         • Farm software: data recording, tags and farm management information services

         • International: provides bovine genetic breeding material and related services to offshore markets

           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

           2025	NZ market genetics	Testing	Farm International		Other	Eliminations	Total
           External revenue	119,933	79,442	61,800	16,037	17,895	-	295,107
           Inter-segment revenue	-	-	-	-	2,133	(2,133)	-
           Total revenue	119,933	79,442	61,800	16,037	20,028	(2,133)	295,107
           Depreciation & amortisation	(3,476)	(10,377)	(3,742)	(169)	(10,287)	-	(28,051)
           Segment gross profit before tax	31,138	11,609	33,232	2,963	2,263	-	81,205
           Bull team revaluation							12,292
           Unallocated amounts							(53,220)
           Profit/(loss) before tax expense							40,277
           2024 NZ market Testing Farm International Other Eliminations Total
           	genetics		software
           External revenue	110,784	69,415	56,437	15,050	15,602	-	267,288
           Inter-segment revenue	-	-	-	-	2,247	(2,247)	-
           Total revenue	110,784	69,415	56,437	15,050	17,849	(2,247)	267,288
           Depreciation & amortisation	(3,465)	(9,752)	(3,383)	(157)	(7,290)	-	(24,047)
           Segment gross profit before tax	27,966	6,026	31,477	1,901	1,675	-	69,045
           Bull team revaluation							(8,768)
           Unallocated amounts							(46,495)
           Profit/(loss) before tax expense							13,782

           software

           The Other operating segment includes research & development and support services. Unallocated amounts include personnel costs, other expenses and net finance costs. Operating segments have been updated, including comparatives, to more closely align with LIC's strategy. The changes consolidate LIC's testing services and provide greater insight on the performance of LIC's international business.

           1. Business analysis (cont.)
           (ii) Geographic analysis
           In thousands of New Zealand dollars 2025	New Zealand	Australia	Ireland	UK	Other	Total
           Revenues	275,211	8,857	4,049	2,961	4,029	295,107
           Non-current assets	274,888	4,560	1,075	51	-	280,574
           2024
           Revenues	248,420	8,999	3,545	2,337	3,987	267,288
           Non-current assets	254,087	4,397	1,157	59	-	259,700

           ‌Non-current assets includes the Bull team, Land, buildings & equipment, Software, goodwill and other intangible assets, Nil Paid Share receivable and investments.

           The Group's significant subsidiaries are:

           • New Zealand: LIC Agritechnology Company Limited (100%)

           • Australia: Livestock Improvement Pty Ltd (100%), Beacon Automation Pty Ltd (100%)

           • Ireland: LIC Ireland Limited (100%)

           • United Kingdom: Livestock Improvement Corporation (UK) Ltd (100%)

           The Group is not dependent on any one major customer in any of its reportable segments. New Zealand revenues include government grants and R&D tax incentive income of $7.685 million (2024: $8.179 million).

   2. Bull Team

      The bull team is the cornerstone asset of LIC's genetics business. The 826 total bulls (2024: 810 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 year. The fair value from the bulls is partly dependent on the future sales mix of LIC's genetics products, which correlates to movements in the cow population and Farmgate Milk Price. The valuation is also sensitive to a change 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.

      In thousands of New Zealand dollars 2025 2024

      Opening balance 88,872 Bull team revaluation 12,292	97,640 (8,768)
      Closing balance 101,164	88,872

      Key drivers of the model:

      Forecasted Fonterra Farmgate Milk Price*	$9.50	$8.85
      WACC annualised post tax rate	7.25% - 8.74%	8.11% - 8.76%
      Number of bulls in the team	122	124
      Average % of run-off profile (years 2-5)	45%	42%

      *This is the short term Milk Price outlook.

      The impact on the fair value of a change to these key drivers is summarised below:

      Change in the bull run-off profile $8.4m - average of a 5% shift across years 2-5

      Reduction of 5% in sales demand (due to unforeseen reduction in milk price, cow population or other significant events)

      $7.4m

      $3.1m

      WACC moves 100 basis points

      $3.0m

      $2.5m

   3. Land, buildings and equipment

      Land and buildings are carried at fair value, determined by an independent valuer as at April 2025 (most recent full valuation as at April 2024). Fair value is based on comparable sales for land and based on depreciated replacement cost for buildings. Revaluations are primarily reflected in the revaluation reserve. Equipment includes plant, vehicles, furniture and fittings and IT hardware, and is carried at depreciated cost. Buildings and equipment are depreciated on a straight-line basis over their estimated useful lives, and are reviewed annually for any indications of impairment.

      In thousands of New Zealand dollars 2025 2024

      	Land	Buildings	Equipment	Total	Land	Buildings	Equipment	Total
      Opening balance	38,733	55,701	24,563	118,997	37,990	51,500	24,057	113,547
      Additions	-	5,133	9,532	14,665	-	4,852	7,331	12,183
      Disposals	-	(451)	(73)	(524)	-	-	(126)	(126)
      Depreciation	-	(3,362)	(7,158)	(10,520)	-	(3,048)	(6,906)	(9,954)
      Revaluation	360	1,232	-	1,592	743	2,650	-	3,393
      Foreign exchange	-	-	18	18	-	-	(2)	(2)
      Right of use leased assets movement - note 5	-	2,426	(809)	1,617	-	(253)	209	(44)
      Closing balance	39,093	60,679	26,073	125,845	38,733	55,701	24,563	118,997

      Value if carried at cost	11,726 24,456	N/A	11,726 23,135	N/A
      Estimated useful lives	N/A 10-60 years	3-10 years	N/A 10-60 years	3-10 years

   4. Software and other intangibles

      1. Software and other intangible asset balances

         Software development expenditure is capitalised only where costs are directly attributable, and once the product or process is commercially feasible, the benefits are probable, and the Group intends to sell or use the completed software.

         Software assets are amortised over their useful lives of up to seven years on a straight line basis, and are reviewed annually for indicators of impairment.

         Intellectual property (IP) assets are amortised over their estimated useful lives of up to 13 years.

         The genetic data in the LIC database increases with each successive generation. Both goodwill and the LIC database have indefinite useful lives. They are recognised at cost and are not amortised, are allocated to a cash generating unit ("CGU") and tested for impairment annually.

         In thousands of New Zealand dollars 2025 2024

         	Software & IP	Goodwill	Database	Total	Software & IP	Goodwill	Database	Total
         Opening balance	33,046	2,371	10,500	45,917	25,798	2,363	10,500	38,661
         Additions	13,808	-	-	13,808	16,081	-	-	16,081
         Disposals/impairment	(183)	-	-	(183)	-	-	-	-
         Amortisation	(11,813)	-	-	(11,813)	(8,842)	-	-	(8,842)
         Foreign exchange	(20)	(12)	-	(32)	9	8	-	17
         Closing balance	34,838	2,359	10,500	47,697	33,046	2,371	10,500	45,917

         1. Software and other intangibles (cont.)

            At reporting date, software includes $8.024 million (2024: $11.595 million) of work in progress, which is not being amortised until it is ready for use.

      2. Impairment testing of intangible assets

Allocation of Goodwill and the LIC Database to CGUs:

In thousands of New Zealand dollars 2025 2024

International CGU relates to two separate CGU's - LIC Ireland and Beacon Automation. The LIC database and each of the International CGU Goodwill recoverable amounts have been separately tested using a value in use method.

For the LIC database and International CGU Goodwill, a discounted cash flow model is used for impairment testing based on expected results and capital expenditure from the current year forecast, Board approved budgets and a projection for further periods using

a terminal growth rate. A five year cash flow projection period is used. The terminal growth rate used is 1.5% (2024: 1.5%) for the LIC database and International CGU Goodwill. The discount rate applied is reviewed and updated annually for movements in published Treasury risk-free rates and is 8.5-10.6% for the LIC database and International CGU Goodwill (2024: 8.7-10.9% for the LIC database and International CGU Goodwill).

1. Leases

   1. LIC as a lessee

      The Group has lease contracts for buildings, equipment and vehicles used in its operations. The Group's obligations under its leases are secured by the lessor's title to the leased assets. Several lease contracts include extension and termination options. The Group's discount or incremental borrowing rate applicable to leases is 5.2% (2024: 5.1%).

      The Group also has certain leases of machinery with lease terms of 12-months or less and leases of office equipment with low value. The Group applies the 'short-term lease' and 'lease of low-value assets' recognition exemptions for these leases.

      1. Leases (cont.)

   2. Lease balances in the Statement of Position Right of use assets

      Set out below are the carrying amounts of right-of-use assets recognised (under Land, buildings and equipment) and the movements during the period:

      In thousands of New Zealand dollars 2025 2024

      	Buildings	Equipment	Vehicles	Total	Buildings	Equipment	Vehicles	Total
      Opening Balance	12,399	385	7,327	20,111	12,652	180	7,323	20,155
      Depreciation	(1,591)	(166)	(3,961)	(5,718)	(1,471)	(142)	(3,638)	(5,251)
      Additions	4,010	337	3,216	7,563	1,420	347	3,871	5,638
      Disposals/modifications	7	(139)	(96)	(228)	(202)	-	(229)	(431)
      Closing balance	14,825	417	6,486	21,728	12,399	385	7,327	20,111

      Lease terms 3-28 years 1-9 years 1-7 years 2-28 years 2-5 years 2-8 years

      Lease liabilities

      Set out below are the carrying amounts of lease liabilities recognised at 31 May (included in Other liabilities):

      In thousands of New Zealand dollars 2025 2024

      	Buildings	Equipment	Vehicles	Total	Buildings	Equipment	Vehicles	Total
      Within 1 year	1,490	164	3,390	5,044	1,341	72	3,549	4,962
      Between 1 to 5 years	6,017	262	3,403	9,682	4,612	161	4,301	9,074
      More than 5 years	8,587	-	-	8,587	7,662	-	-	7,662
      Closing balance	16,094	426	6,793	23,313	13,615	233	7,850	21,698

   3. Lease related amounts in the Statement of Results

In thousands of New Zealand dollars 2025 2024

The Group had total non-variable cash outflows for leases of $6.782 million in 2025 ($6.086 million in 2024).

1. ‌Funding

   The Group's funding comes from Share Capital, Retained earnings, Other reserves and Borrowings.

   1. Ordinary Shares

      All Ordinary Shares have voting rights and the right to receive dividends based on the profits of the Company.

      At reporting date there were 142,344,836 Ordinary Shares on issue, excluding 5,337,584 shares held as treasury stock (2024: 142,344,836 Ordinary Shares, excluding 5,337,584 shares held as treasury stock).

   2. Nil Paid Shares

      Ordinary Shares includes both fully paid shares and shares on which full payment has not yet been made. These Nil Paid Shares must be paid up over time by Shareholders via a combination of dividend payments forgone, voluntary payments and payments made

      on exit as a Shareholder. At year-end the outstanding amount on Nil Paid Shares has been recorded in the Statement of Position as a receivable, valued at $0.722 million (2024: $0.972 million) using a discounted cash flow model. The model uses assumptions on expected future dividends, voluntary and compulsory payments and applies a discount rate of 6.5% (2024: 8.6%).

   3. Other reserves and equity

      In thousands of New Zealand dollars

      Hedge revaluation

      Investment revaluation

      Land & building

      Foreign currency

      Other

      	reserve	reserve	revaluation reserve	translation reserve	reserves
      Balance at 1 June 2024	(80)	1,456	46,291	(60)	47,607
      Revaluations	(150)	196	1,134	(48)	1,132
      Balance at 31 May 2025	(230)	1,652	47,425	(108)	48,739
      Balance at 1 June 2023	171	6,569	43,360	(85)	50,015
      Revaluations	(251)	8,805	2,931	25	11,510
      Reclassification of investment revaluations on divestment*	-	(13,918)	-	-	(13,918)
      Balance at 31 May 2024	(80)	1,456	46,291	(60)	47,607

      *In the 2024 year, LIC sold it's shareholding in National Milk Records Plc for £9.019 million (NZD $18.963 million). Associated accumulated revaluations were reclassified from Other reserves to Retained earnings on divestment.

   4. Market capitalisation

      As at 31 May 2025, the Group's market capitalisation of $134.501 million (2024: $172.365 million) was below the carrying value of net assets of $298.372 million (2024: $274.911 million). The share price is not considered an accurate reflection of the fair value of the Group's net assets for a number of reasons, including the nature of the co-operative and its restricted capital structure. Accounting standards consider market capitalisation below net assets to be an indicator of possible impairment and an impairment test has therefore been performed. The Group recoverable amount has been determined using a value in use method as with the impairment tests in Note 4, a discounted cash flow model has been used based on Board approved budgets and a projection covering five years using a terminal growth rate of 1.5% (2024: 1.5%). The discount rate applied is reviewed and updated annually for movements in published Treasury risk-free rates and is 8.5% (2024: 8.7%). The calculated recoverable amount of the group was higher than the carrying value of the net assets, and therefore no impairment was recognised.

   5. Bank debt

      Bank loans for seasonal funding requirements are secured by a Negative Pledge granted to Westpac and Rabobank over certain New Zealand-based subsidiaries.

2. ‌Liquidity and interest rate risk

   1. Liquidity risk

      Liquidity risk is the risk of having insufficient liquid assets to pay the Group's debts as they fall due. The Group manages the risk by monitoring forecast cash flows and holding sufficient bank facilities to meet the Group's needs. The contractual maturity of the Group's funding is shown below.

      In thousands of New Zealand dollars 2025 2024

      	Demand to 6 months	6 months to 1 year	1 year plus	Total	Demand to 6 months	6 months to 1 year	1 year plus	Total
      Creditors	25,187	-	-	25,187	23,831	-	-	23,831
      Total	25,187	-	-	25,187	23,831	-	-	23,831

      The Group has bank funding facilities in place until February 2026 and expects to be able to meet any obligations which fall due.

   2. Interest rate risk

      Interest rate risk is the risk that changes in interest rates will impact the Group's results or position. The weighted average effective interest rate paid on borrowings in 2025 was 6.5% (2024: 7.3%). A 1.0% increase in interest rates would increase interest paid and reduce profit after tax by approximately $0.018 million (2024: $0.001 million).

3. Debtors and other assets

   1. Debtors

      Bad debts of $0.053 million have been expensed during the year (2024: $0.020 million), and 91.3% of trade receivables are not past due (2024: 87.8%).

   2. Other assets

      In thousands of New Zealand dollars 2025 2024

      Inventories 16,703 Investments 5,145 Other livestock 926	20,808 4,941 808
      Total 22,774	26,557

      Inventories utilised and expensed during the period amounted to $31.613 million (2024: $29.176 million). Net inventories written on in 2025 totalled $0.201 million (2024: $0.095 million written off), and comprised of $0.396 million of stock written off and

      $0.597 million of previously written off stock written back on into inventory.

      Investments are non-current assets and are held at fair values based on available share prices and other market information. Gains and losses are recognised in other comprehensive income, as investments are not held for trading. Investments include Figured Limited $3.358 million (2024: $3.358 million).

4. ‌Tax

   Tax expense is recognised for items arising this year that are either taxable this year (current tax) or in other years (deferred tax). The main items giving rise to deferred tax are revaluations of the Bull team and Buildings.

   1. Tax expense

      In thousands of New Zealand dollars 2025 2024

      Profit/(loss) for the year Tax expense	30,643 9,634	7,734 6,048
      Profit/(loss) before tax expense	40,277	13,782
      Tax at 28% NZ company tax rate	11,278	3,859
      Effect of overseas income	(93)	(34)
      Non-deductible items	(1,449)	(521)
      Adjustments from prior periods	(102)	(899)
      Impact of changes to building depreciation	-	3,643
      Tax expense	9,634	6,048
      Current tax expense	7,246	3,919
      Deferred tax expense	2,388	2,129
      Imputation credits available	13,117	9,468

      In March 2024, legislation was enacted which removed the deductibility of depreciation on long-life commercial buildings for tax purposes. At 31 May 2024, the impact of this change decreased the tax base for these assets, giving rise to an increased temporary difference between the carrying cost and tax base and resulted in a one-off, non-cash, increase in both deferred tax liability and tax expense of $3.643 million.

      Given the Group's current turnover, and the lack of significant operations in foreign jurisdictions with tax rates below 15%, it does not expect to be impacted by Pillar II tax reforms and the move towards global minimum tax rates of 15%.

      LIC claims credits under the R&D Tax Incentive scheme. Claims include eligible core research expenditure and technology development, as well as expenses that support R&D, and the credits are recorded as non-taxable revenue.

      (ii) Deferred tax liability
      In thousands of	As at 31 May	Through	Through	As at 31 May	Through	Through	As at
      New Zealand dollars	2025	Profit/(loss)	Other reserves	2024	Profit/(loss)	Other reserves	31 May 2023
      Bull team & livestock	27,741	3,320	-	24,421	(2,414)	-	26,835
      Buildings & equipment	6,433	235	348	5,850	3,304	784	1,762
      Intangible assets	2,940	-	-	2,940	1,480	-	1,460
      Other	(3,791)	(1,167)	(58)	(2,566)	(241)	-	(2,325)
      Total	33,323	2,388	290	30,645	2,129	784	27,732

5. ‌Other expenses

   Other expenses includes the following amounts paid to the Group's auditors, KPMG:

   In thousands of New Zealand dollars 2025 2024

   Audit and audit related services Audit of the financial statements Agreed upon procedures* GHG scope 1 & 2 assurance as it relates to year end	232 26 25	222 24 -
   Total audit and audit related services	283	246
   Tax - compliance services	78	-
   Total	361	246

   *Agreed upon procedures relate to the R&D Tax Incentive scheme and disclosure of historical financial data in the sustainability report.

   As part of business activities, LIC incurs research and development expenses while working on a number of projects.

   In thousands of New Zealand dollars 2025 2024

   Research & Development expenses 22,549

   21,215

6. Other liabilities

   In thousands of New Zealand dollars 2025 2024

   Provisions for employee entitlements	10,194	7,596
   Provision for sire proving rebate	2,441	2,522
   Derivatives used for hedging	295	87
   Provision for tax	(1,712)	(3,259)
   Lease liabilities - current	5,044	4,962
   Lease liabilities - non-current	18,269	16,736
   Other	621	577
   Total	35,152	29,221

   The provision for sire proving rebate represents a rolling three years of expected rebate payments, with between $0.8 - $1.0 million due to be paid in each of the next three years, discounted to 31 May 2025.

7. ‌Transactions with Related Parties - Directors and Management

   The Group has had the following short-term transactions with key Management and Directors during the year:

   In thousands of New Zealand dollars 2025 2024

   Remuneration of key Management and Directors	4,622	4,960
   Sale of goods and services to key Management and Directors	996	468
   Purchases of goods and services from key Management and Directors	-	3

   Directors of the Company and their related entities hold 617,474 Ordinary Shares, representing 0.42% of shares on issue (2024: 378,001 Ordinary Shares, representing 0.26%).

   There are no loans or deposits with related entities outside of the consolidated Group.

8. Reconciliation of the Profit/(loss) for the year to Net operating cash flows

   In thousands of New Zealand dollars 2025 2024

   Profit/(loss) for the year	30,643	7,734
   Adjusted for:
   Depreciation and amortisation on all assets	28,051	24,047
   Bull team revaluation	(12,292)	8,768
   Deferred tax expense	2,388	2,129
   Working capital movements and other non-cash items	7,597	(2,626)
   Net operating cash flows	56,387	40,052

9. Subsequent events

After 31 May 2025, a dividend of 12.22 cents per Ordinary Share was proposed by the Directors in relation to the 2025 year, or $17.397 million (2024: 5.84 cents per Ordinary Share, or $8.314 million).

‌Independent Auditor's Report

Independent Auditor's Report

To the shareholders of Livestock Improvement Corporation Limited

Report on the audit of the consolidated financial statements

Opinion

We have audited the accompanying consolidated financial statements which comprise:

-

-

the consolidated statement of financial position as at 31 May 2025;

the consolidated statements of results, changes in position and cash flows for the year then ended; and

notes, including material accounting policy information and other explanatory information.

In our opinion, the accompanying consolidated financial statements of Livestock Improvement Corporation Limited (the Company) and its subsidiaries (the Group) on pages 8 to 22 present fairly in all material respects:

-

-

-

the Group's financial position as at 31 May 2025 and its financial performance and cash flows for the year ended on that date;

In accordance with New Zealand Equivalents to International Financial Reporting Standards (NZ IFRS) issued by the New Zealand Accounting Standards Board and the International Financial Reporting Standards issued by the International Accounting Standards Board.

Basis for opinion

We conducted our audit in accordance with International Standards on Auditing (New Zealand) (ISAs (NZ)). We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

We are independent of Livestock Improvement Corporation Limited in accordance with Professional and Ethical Standard 1 International Code of Ethics for Assurance Practitioners (Including International Independence Standards) (New Zealand) issued by the New Zealand Auditing and Assurance Standards Board and the International Ethics Standards Board for Accountants' International Code of Ethics for Professional Accountants (including International Independence Standards) (IESBA Code), as applicable to audits of financial statements of public interest entities. We have also fulfilled our other ethical responsibilities in accordance with Professional and Ethical Standards 1 and the IESBA Code.

Our responsibilities under ISAs (NZ) are further described in the Auditor's responsibilities for the audit of the consolidated financial statements section of our report.

Our firm has provided other services to the Group in relation to assurance services, agreed upon procedures engagements, and taxation compliance services for the R&D tax incentive scheme. Subject to certain restrictions, partners and employees of our firm may also deal with the Group on normal terms within the ordinary course of trading activities of the business of the Group. These matters have not impaired our independence as auditor of the Group. The firm has no other relationship with, or interest in, the Group.

© 2025 KPMG, a New Zealand Partnership and a member firm of the KPMG global organization of independent member firms affiliated with KPMG International Limited, a private English company limited by guarantee. All rights reserved.

Document classification: KPMG Public

Materiality

The scope of our audit was influenced by our application of materiality. Materiality helped us to determine the nature, timing and extent of our audit procedures and to evaluate the effect of misstatements, both individually and on the consolidated financial statements as a whole. The materiality for the consolidated financial statements as a whole was set at $1,310,000 determined with reference to a benchmark of the Group's profit/(loss) for the year before tax (excluding bull team revaluation movements). We chose the benchmark because, in our view, this is a key measure of the Group's performance.

Key audit matters

Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the consolidated financial statements in the current period. We summarise below those matters and our key audit procedures to address those matters in order that the shareholders as a body may better understand the process by which we arrived at our audit opinion.

Our procedures were undertaken in the context of and solely for the purpose of our audit opinion on the consolidated financial statements as a whole and we do not express discrete opinions on separate elements of the consolidated financial statements.

The key audit matter How the matter was addressed in our audit

Valuation of the Bull Team

Refer to Note 2 to the Financial Statements.

Determining the valuation of the bull team, which is the core asset to both the domestic and international genetics operations of the Group, is a highly judgemental and complex area. Management prepares a model that projects the number and types of straws that the current team can produce and will be sold over the useful life of the bulls. The valuation model factors the cost of rearing, animal and farm management costs, and forecasts of processing costs to make sales. The calculated surplus is discounted to reflect the time value of money.

Our audit procedures included challenge of management's significant assumptions such as:

• Projected sales volumes and pricing;

• Discount rates applied; and

• Runoff Profile of the bulls.

  We compared sales and costs growth, and inflation rates to historical data and published market forecast data where available.

  We utilised our valuation specialists to review market and industry data to assess management's discount rate applied to the valuation model.

  We assessed the runoff profile of the bulls against historical data and found the inputs to be comparable.

  We considered the adequacy of the related financial statement disclosures.

  We had no matters to report as a result of our procedures.

  Carrying Value of Intangible Assets

  Refer to Note 4 to the Financial Statements

  The Group has a Database intangible asset of

  $10.5m with an indefinite useful life.

  The significant cash generating unit (CGU) holding this asset is tested twice a year for

  We challenged management on the reasonableness of the assumptions included in the cashflow forecast models, with particular attention paid to the following:

  - Assessing management's future sales and growth assumptions compared to external market and industry data and historical performance of the CGU and the

  The key audit matter How the matter was addressed in our audit

  impairment using a discounted cashflow model to determine the recoverable amount.

  The market capitalisation deficit that exists at balance date is an indicator of impairment at a Group level and has therefore been tested for impairment using a discounted cashflow model to determine the recoverable amount of the Group.

  The annual impairment tests performed by the Group were significant to our audit due to the magnitude of the intangible assets and because the discounted cashflow models involve judgement about the future performance of the CGU and the Group, including considering future economic and market conditions.

  Group. We used our own valuation specialists to assist us with the consideration of the discount rates;

• Comparing management's previous forecasts to actual results achieved in the CGU and the Group; and

• Performing sensitivity analysis around the key assumptions used in the model.

We had no matters to report as a result of our procedures.

Other information

The directors, on behalf of the Group, are responsible for the other information. The other information comprises the Key Metrics, Financial Trends and the Directors Report (but does not include the consolidated financial statements and our auditor's report thereon), which we obtained prior to the date of this auditor's report, and the Annual Report, which is expected to be made available to us after that date.

Our opinion on the consolidated financial statements does not cover any other information and we do not express any form of assurance conclusion thereon.

In connection with our audit of the consolidated financial statements our responsibility is to read the other information and in doing so, consider whether the other information is materially inconsistent with the consolidated financial statements or our knowledge obtained in the audit or otherwise appears materially misstated.

If, based on the work we have performed on the other information that we obtained prior to the date of this auditor's report, we conclude there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.

When we read the Annual Report, if we conclude that there is a material misstatement therein, we are required to communicate the matter to directors.

Use of this independent auditor's report

This independent auditor's report is made solely to the shareholders. Our audit work has been undertaken so that we might state to the shareholders those matters we are required to state to them in the independent auditor's report and for no other purpose. To the fullest extent permitted by law, none of KPMG, any entities directly or indirectly controlled by KPMG, or any of their respective members or employees, accept or assume any responsibility and deny all liability to anyone other than the shareholders for our audit work, this independent auditor's report, or any of the opinions we have formed.

Responsibilities of directors for the consolidated financial statements

The directors, on behalf of the Group, are responsible for:

• the preparation and fair presentation of the consolidated financial statements in accordance with NZ IFRS issued by the New Zealand Accounting Standards Board and the International Financial Reporting Standards issued by the International Accounting Standards Board;

• implementing the necessary internal control to enable the preparation of a consolidated set of financial statements that is free from material misstatement, whether due to fraud or error; and

• assessing the ability of the Group to continue as a going concern. This includes disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless they either intend to liquidate or to cease operations or have no realistic alternative but to do so.

  Auditor's responsibilities for the audit of the consolidated financial statements
  
  

  Our objective is:

• to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error; and

• to issue an independent auditor's report that includes our opinion.

Reasonable assurance is a high level of assurance but it is not a guarantee that an audit conducted in accordance with ISAs NZ will always detect a material misstatement when it exists.

Misstatements can arise from fraud or error. They are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of the consolidated financial statements.

A further description of our responsibilities for the audit of the consolidated financial statements is located at the External Reporting Board (XRB) website at:

https://www.xrb.govt.nz/standards/assurance-standards/auditors-responsibilities/audit-report-1-1/ This description forms part of our independent auditor's report.

The engagement partner on the audit resulting in this independent auditor's report is David Gates. For and on behalf of:

KPMG

Wellington 17 July 2025

605 Ruakura Road

Newstead 3286 Hamilton

New Zealand

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