LIC
24/07/2014 10:31
FLLYR
REL: 1031 HRS Livestock Improvement Corporation Limited (NS)
FLLYR: LIC: Livestock Improvement announces year end result 2013/2014
Strong farming year drives good result for LIC and its farmer owners
Increasing demand for solutions to improve the prosperity and productivity of
New Zealand dairy farms has resulted in a strong year of revenue growth and
on-farm innovation for farmer-owned co-operative LIC.
Chairman Murray King said the result reflects a great season for dairying,
with high demand for LIC's herd testing and artificial breeding services and
an increasing number of farmers investing in technology which drive
efficiency gains on-farm.
"Today's farmers manage more animals and land than ever before, and they are
also very high users of technology that helps them run their businesses more
efficiently.
"As their co-operative, it's our job to provide our farmers with solutions
they need - now and into the future - to address the challenges they face,
make their daily working lives easier, and improve their overall productivity
and prosperity."
He said LIC does this with its growing range of information management and
automation systems and the uptake of its three smartphone apps, which have
been downloaded more than 11,000 times, is a great example of farmer-demand
for technology.
The use of automation also continues to grow, and as part of plans to deliver
more innovations which fit the co-operative's new strategy, LIC purchased
Dairy Automation Limited (DAL) in February, a Waikato-based company which
manufactures sensor technology for the real-time analysis of milk on-farm.
Murray King said the co-op is also investing more than $40 million in its own
information systems, to ensure improved service can be provided as well as
faster delivery of new products, and this is reflected in the lower
year-on-year profit resulting from increased depreciation costs and
accelerated new product development. Work to upgrade LIC's back-end database
technology during 2013/2014 improved synchronisation times for farmers
updating their records and uploading information to the LIC database, he
said.
LIC is working closely with DairyNZ to ensure the successful transfer of the
Core Database later this year and work is also under way to identify scope
and timeframes for the second phase of this four phase project which involves
the transfer of the Animal Evaluation Unit operations to DairyNZ in
approximately mid-2015.
LIC's ongoing commitment to research and development was also reflected in
the year-end result, with $14.9 million of direct R&D expenditure, and
combined with other new product development totalling approximately $22
million, representing over 10% of revenue.
"Our work in DNA sequencing continues and over the last year it has been
responsible for the discovery of two genetic variations in dairy cows, one
which causes loss of pregnancy and another which impacts milk composition and
the amount of fat a cow produces.
"These findings are now being used in our genomics programme, to improve the
accuracy of sire selection and allow for further isolation of negative genes
and traits from the national herd."
Murray King said two new genetics solutions were launched to farmers this
year, after many years of R&D investment. These are fresh sexed semen with
near normal conception rates and a new team of AB bulls, known as SGL, that
will shorten the period of dairy cow gestation by an average 10 days on-farm.
"We are thrilled to launch these two new genetics solutions this year. Both
will have a huge impact on the industry over the coming years.
"LIC's fresh sexed semen is the only of its kind in the world with near
normal conception rates, and farmers who use it this spring can expect to see
more heifer calves born next year. Those who use SGL will see more days in
milk the next season, from the earlier calving cows."
Murray King said the appointment of LIC's new CEO, Wayne McNee, in July was a
highlight for the year and for LIC's future as it signals a change in step
for the co-op.
"Wayne brought a wealth of experience to LIC, and was tasked with completing
a thorough analysis of the co-operative, and developing a new strategy to
grow the business and improve the service and solutions we provide to
farmers."
Murray King says the LIC board is both supportive of and encouraged by the
aspiration of the new strategy, which aims to deliver $1 billion revenue by
2025.
"It's an ambitious target, but one that represents a significant opportunity
for LIC, our shareholders, and for New Zealand agribusiness."
The current high level of capital investment in information systems and
technology will continue for 2-3 more years and this, coupled with the new
growth strategy and potential for more M&A activity, has meant the directors
are declaring a dividend of 60% of net underlying earnings this year compared
to 80% last year.
Murray King said the 2013/2014 year presented challenges for the co-op's
international business but this will be addressed as a key theme of the new
strategy, with a deeper focus on growing key markets, particularly UK,
Ireland, Brazil and China, and looking at what businesses could be acquired
to align with the co-op and its growth aspirations.
Revenue
LIC revenue and other income for 2013/2014 was $211 million, 6% ahead of the
$199 million achieved during 2012/2013. All profit is returned to LIC's
10,500 New Zealand dairy farmer owners/shareholders as products, research and
development or dividends.
NPAT
LIC net profit after tax was $18.0 million, down $5.6 million from the
previous year. This decrease largely reflects the large spend on core
technology and infrastructure to ensure the co-op's technology is up-to-date,
supported and able to provide a stable platform for delivering new products
to farmers. Net profit after tax for LIC includes the annual revaluation to
fair value of the biological elite bull team which, this year, was a decrease
net of tax of $0.57 million compared to an increase of $2.7 million last
year.
The fluctuations on fair value of the elite bull team are excluded for the
purposes of dividend for LIC and are not considered as a key indicator of
trading performance. For this reason LIC also reports:
Underlying Net Earnings
LIC Underlying Net Earnings (NPAT excluding the increase or decrease on fair
value of elite biological assets and the related tax effect) decreased from
$20.93 million to $18.6 million this year, which flows through to a dividend
to farmer shareholders of $11.168 million compared to $16.75 million last
year.
EBIT excluding elite biological assets
Improved sales volumes across most business areas was offset by higher
investment in technology and new product development, and resulted in
earnings, before interest, taxation and fair value adjustments on elite
biological assets, decreasing by 7.2% to $25.32 million, compared to $27.29
million in 2012/2013.
Strength of balance sheet
LIC continues to operate a strong balance sheet with total assets including
cash, software, land and buildings and bull teams of $283.8 million, an
increase of $8 million over the previous year with a stable equity ratio of
75%.
Cash flow
Cash flows from operations were very strong for the 2013/2014 year generating
$37.0 million, compared to $25.8 million in 2012/2013, with higher sales and
strong cashflows on-farm from the high milk payout. Purchases of both
tangible and intangible assets increased from $23.9 million to $34.6 million
as the co-operative ramped up its investment in development of innovative
products for farmers and technology upgrades.
Dividend
LIC will pay a dividend of $11.17 million, representing 60% of underlying
earnings, to its Co-operative and Investment Shareholders. This contrasts
with the dividend paid in 2013 at 80% of $16.75 million, and $11.9 million in
2012.
The 2013/2014 dividend translates to 8.65 cents per Co-operative Control
Share and a net 35.90 cents per Investment Share and represents a gross yield
of 6.94% on Investment Shares compared to 13.2% last year. The fully imputed
dividend payments will be made to shareholders on 22 August 2014.
Ends
For further information, contact Ashleigh Sattler LIC Senior Communications
Advisor 027 617 1942, [email protected].
Note
Annual Report
In accordance with the Companies Act, companies are no longer required to
automatically mail printed copies of the Annual Report to shareholders. The
LIC Annual Report and financial statements for 2013/2014 are now available at
www.lic.co.nz/publications.
End CA:00253034 For:LIC Type:FLLYR Time:2014-07-24 10:31:47
(20min delay)