LIC rules out another cost shock from reforms

LIC is dominant in the country's dairy genetics supply and herd testing sectors and provides information technology and farm advisory services.

LIC shareholders have been assured they're not in for another big costs shock from two years of work on a new share structure proposal now being promoted around the country.

LIC is farmer-owned with farmer "investment" shares listed on the NZAX. It has a market capitalisation of $66m and is dominant in the country's dairy genetics supply and herd testing sectors and provides information technology and farm advisory services.

Farmers were startled to learn in LIC's recent half-year results that $20.7 million had been spent on "transformation costs" over two years by the company.

Chairman Murray King has repeated a company response at the time that the share standard work was not part of the "transformation", and has assured shareholders the bill for this work was already worked into LIC's underlying earnings forecast for the 2018/19 year of $18m to $26m.

"The costs are nothing like it [transformation costs], they're embedded in the guidance we gave to the market. This hasn't had consultants crawling all over it."

Meanwhile, King, in the South Island this week presenting the proposal to simplify LIC's two-share structure to one share, has warned farmers and other shareholders there was no Plan B if they voted down the proposal.

In a letter to shareholders he said there was a misconception "this proposal is simply our first go" and that if it got a no vote, the board would tweak it and return for a second vote.

King said the board and advisors had been working on the proposal for two years, had considered the issues of having a two-share system closely, and were clear the resulting proposal was the fairest, most balanced and transparent resolution.

Some cooperatives had dragged out their share restructures for years and LIC had no wish to do the same, King said.

Turnouts to proposal presentations had been pleasing, with a good mix of farmer ages, he said.

Internet and postal voting closes on March 12. A special meeting, where shareholders can also vote, will be held on March 14.