Ticker:  LIC

Website: http://www.lic.co.nz/

CEO: Mark Dewdney

Chairman: Stuart Bay

Annual meeting date: 11 October 2006, Hamilton

Shares.net.nz comment

Livestock Improvement Corporation (LIC) started back in 1909 with the first organized herd testing of dairy cattle. Today the states its mission as: "Leading the world with genetics and knowledge to create wealth for pastoral dairy farmers".

LIC has three key divisions; Bovine Semen and Artificial Insemination, Herd Recording and Information Service, and Herd Testing.

Revenue rose to$110.5 million representing an increase of 6.2% while the net profit rose $425,000 to $7.6m.

If the investment in biotechnology had been excluded the profit would have been $10.9 million. LIC has no debt and has $19 million of cash on hand.

Now the bad news: share ownership is restricted to New Zealand dairy farmers that are clients of LIC.

Financial comment

LIC is arguably one of the best buys on the New Zealand market at the time of writing (20 September 2006). The only problem is that investors can't buy shares in this company unless they are farmer clients of the company.

LIC trades on a pe forecast of  6.5 and a healthy dividend yield of  14.5%.
An average pe of 12 for this sector would price the shares at $3.12.

Company comments on its latest result

Announcing the company's annual result in July (a record profit), chairman Stuart Bay, said that five years ago LIC set three broad performance objectives, and had delivered on all three.

"We committed to delivering a profit of $10 million (before biotechnology), Return on Capital Employed of 10% and achieving Silver Business Excellence, and have delivered on all three," he said.

"We are delivering what can only be described as an excellent return to our shareholders in terms of dividend yield, let alone an increasing range of products and services.

"It's been a very strong effort by everyone and really marks the company's successful transition from an industry good focus to a commercial farmer co-operative."

Latest financial result (full year)

Figures for the year to May 31, 2006

(Released 13 July, 2006 - figures in $NZ'000,000)

                                                This year            Previous year

Total operating revenue             110.5               104.0

Operating surplus before

biotech research & tax            10.9                 8.7

Net profit                                 7.6                   5.3

Recent milestones

April 2006             A project involving LIC, in collaboration with Australian firm Innovative Dairy Products Pty Ltd, is one of two to receive funding from the Australia New Zealand Biotechnology Partnership Fund. The project aims to identify genetic traits in some dairy cows that give them more metabolic efficiency and enables higher milk production.

March 2006            LIC Mark Dewdney as its new CEO. He is an experienced dairy sector executive who left the role of Regional Managing Director of Fonterra Ingredients Asia to rejoin LIC as CEO. He had previously worked for LIC in the late 1990s as General Manager of the company's international subsidiary, LIC (NZ) Ltd.

April 2004            LIC becomes the first agricultural co-operative to list on the NZAX. The company introduces a dual share structure with two classes of shares: a ‘Co-operative Control Share' held in proportion to patronage and an ‘Investment Share' which is tradable among co-operative control shareholders.

Company activities

Livestock Improvement Corporation Ltd (LIC) is a dairy farming co-operative supplying artificial breeding, herd testing, herd recording and advisory services to approximately 12,000 dairy farmer clients.

The co-operative also supplies allied services to other New Zealand agricultural sectors and exports dairy semen to a number of countries.

The origins of LIC trace back to the early 1900s. It has evolved through a number of structures, eventually becoming a 100% user owned co-operative under the Dairy Industry Restructuring Act 2001.