Ann: FLLYR: LIC: Livestock Improvement announces

• Release Date: 25/07/13 13:54
• Summary: FLLYR: LIC: Livestock Improvement announces year end result
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LIC
25/07/2013 11:54
FLLYR

REL: 1154 HRS Livestock Improvement Corporation Limited (NS)

FLLYR: LIC: Livestock Improvement announces year end result

Strong year for farmer cooperative with growth in demand for on-farm
productivity services

Dairy farmer cooperative, LIC, turned in another strong performance during
the 2012/13 year, with increased farmer uptake of a range of products and
services driven by a growing farmer focus on cow health and herd reproductive
performance.

LIC Chairman, Murray King, said "last year's drought provided farmers with a
unique set of problems to overcome with many needing to shorten the dairy
season and dry herds off early. This resulted in a decrease in the number of
herd tests carried out by LIC during autumn 2013.

"However, against the backdrop of the drought we still experienced strong
farmer demand for our services, especially artificial breeding.  LIC
maintained the price freeze that we first applied to our Premier Sires
genetics in the 2009/2010 season.

"Our GeneMark DNA parentage testing and animal health testing services also
delivered record activity levels."

Farmers responded very positively to LIC initiatives to help them improve
their herd's reproductive performance.

"Farmers are recognising the potential to improve their farm's profitability
through a better in-calf rate.  A significant number signed up for the '6
week challenge' with the goal of getting closer to the national and industry
target, and improving the farm's prosperity.

"This focus on improving the reproductive performance of the herd saw
increased demand for software programmes like MINDA Weights and MINDA Land &
Feed which help farmers monitor many of the factors which contribute to herd
fertility, like body condition score."

The 2012/2013 year was not without its international challenges for LIC with
some offshore genetics markets experiencing softer demand.

"Difficult weather conditions in the UK and Ireland had an impact on feed
crops and farmer cash-flows ultimately affecting sales in those markets for
the year.  The USA also experienced weaker demand during the year," Murray
King said.

LIC's herd recording programme, MINDA, is used by the majority of New Zealand
dairy farmers and the software was modified during the year to help farmers
comply with the newly introduced NAIT animal traceability requirements.  The
changes resulted in a large proportion of LIC customers using MINDA as their
NAIT data provider.

LIC's commitment to research and development was reflected in $12.8m of R & D
expenditure during the year representing 6.6% of revenue.

"Our focus on genomics and DNA research has enabled the remarkable
achievement of 500 dairy sires having their entire DNA sequence mapped by LIC
scientists during the year. This DNA information is expected to make a
significant impact to LIC's genomics program by helping to identify those
parts of the bovine animal genome that have more impact on key animal
traits," Murray King said.

"The benefit which will accrue to the industry from our genetics research
programme was demonstrated during the year with the discovery and isolation
(in record time) of the gene responsible for Small Calf Syndrome - a
recessive genetic variation thought to have existed in the New Zealand dairy
herd for decades."

In 2012/2013 LIC was awarded a Government research grant through Callaghan
Innovation of $6.5 million to further support its research work over the next
three years.

LIC launched its first smartphone data recording application at the National
Fieldays in June this year. The app, which simplifies and improves the
process of recording calving details, has received great customer reviews and
customer uptake levels have exceeded estimates.

Murray King said good progress is being made on the formal agreement with
DairyNZ for the transfer of the New Zealand Dairy Core Database from LIC to
DairyNZ.  "Teams from both organisations are working well to ensure a smooth
transfer while protecting the interest of New Zealand dairy farmers," he
said.

Revenue
LIC revenue and other income for 2012/2013 was $199 million, 12% ahead of the
$177 million achieved during 2011/2012.

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 $23.7 million, down $0.7 million from the
previous year. Net profit after tax for LIC includes the annual revaluation
to fair value of the biological elite bull team which, this year, was an
increase net of tax of $2.7 million compared to an increase of $9.4 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.

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) increased from
$14.99 million to $20.93 million this year, which flows through to a record
dividend to farmer shareholders of $16.75 million compared to $11.99 million
last year.

EBIT excluding fair value adjustment to elite biological assets
Improved sales volumes across most business areas resulted in earnings,
before interest, taxation and fair value adjustments on elite biological
assets, increasing by 42% to $27.29 million, compared to $19.25 million in
2011/2012. Excluding the one-off goodwill payment in 2011/2012 of $4.7
million paid to early adopters of genomic technology, this EBIT (excluding
change in fair value of elite biological asset) result was still an
impressive increase of 14% over the prior year.

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 $275.5 million, an
increase of $15 million over the previous year with a stable equity ratio of
75%.

Cash flow
Cash flows from operations were strong for the 2012/2013 year generating
$25.8 million, compared to $27.7 million in 2011/2012. Purchases of both
tangible and intangible assets increased from $18.35 million to $23.97
million as the Cooperative ramped up its investment in innovative products
for farmers and technology upgrades.

Dividend
LIC will pay a record dividend of $16.75 million, representing 80% of
underlying earnings, to its Cooperative and Investment Shareholders.   This
contrasts with the dividend paid in 2012 of $11.99 million, and $13.6 million
in 2011.

The 2012/2013 dividend translates to 8.4 cents per Cooperative Control Share
and 54.91 cents per Investment Share and represents a gross yield of 13.2% on
Investment Shares compared to 11.1% last year. The fully imputed dividend
payments will be made to shareholders on 23 August 2013.

Ends

Enquiries for further information should be directed to Clare Bayly, LIC
Communications Manager, phone 027 499 8862 or [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 2012/2013 are now available on
its website www.lic.co.nz/publications.
End CA:00238965 For:LIC    Type:FLLYR      Time:2013-07-25 11:54:40