Our Business

Financials

Financial Management

Landcorp's financial management and business planning are based on sound commercial practice, and all relevant statutory and regulatory requirements including those established by the SOEs Act and summarised in the Owners' Expectation Manual for State-Owned Enterprises. These requirements, applying to all SOEs, include:

  • The Company will aim to be as efficient and profitable as comparable corporates not owned by the Crown, and it will be compensated by the Crown if asked to perform non-commercial activities.
  • The Company will operate with an optimal capital structure, consistent with holding a BBB credit rating. The Crown does not guarantee or support any borrowings by the Company.
  • The level of dividends paid will be determined by the optimal capital structure and future investment requirements of the Company, and also by the preferences of Shareholding Ministers. Any surplus capital will be returned to the Crown.
  • Approval is required from Shareholding Ministers for any major transactions (as defined in the SOEs Act). In general, the shareholders have powers over and above those in the Companies Act 1993 to require Company information, request changes in strategy and approve, or be consulted on, significant transactions.
  • The Crown encourages the Company to broaden the nature and scope of its activities by diversifying its technological, product and market portfolio, and extending the timeline over which returns on investment are required.
  • The Company will publish a Statement of Corporate Intent (SCI) each year, setting out objectives and activities for the three years ahead, and performance targets, including targeted financial outcomes. The SCI is Landcorp's key accountability document, developed in consultation with the Shareholding Ministers and officials before finalised for tabling in Parliament.

SOEs have comprehensive reporting and accountability obligations intended to substitute for the equity market disciplines applying to publicly-traded companies. These obligations include:

  • Regular oversight by officials of the Crown Company Monitoring and Advisory Unit (CCMAU), acting on behalf of Shareholding Ministers.
  • Clear expectations that Shareholding Ministers will be kept informed on any matters of relevance to wider government policy and to the government's public accountability obligations, or likely to have financial implications for the Crown and its balance sheet.
  • Quarterly financial reporting to Shareholding Ministers, and the preparation of half yearly and annual financial statements and commentary for Ministers to table in Parliament.
  • Questioning by Parliament's Primary Production Select Committee, or by other select committees under its delegation.
  • Response to public information requests under the Official Information Act 1982 (legislation applying to all SOEs).

In addition to these requirements, Landcorp is governed and managed in accord with the high standards of corporate governance established in the Principles and Guidelines of the New Zealand Securities Commission (2004).

Landcorp's measures of performance include a Balanced Scorecard, found here.

Capital Structure and Dividend Policy

Landcorp Farming's level of debt is set by direct reference to a target level meeting key banking covenants. In particular, Landcorp targets a capital structure and debt level based on maintaining an interest cover ratio (Earnings before interest, tax, depreciation, amortisation and revaluations to net interest expense) of 3:1 with an expected range between 2.75:1 and 3.25:1.

Subject to maintaining the target capital structure, Landcorp's dividend policy is to pay up to 75% of net operating profit after tax. This is consistent with the Company achieving and maintaining its optimal capital structure, and meeting its future investment requirements.

In 2007, Landcorp entered an agreement with the Crown whereby dividend payments are diverted back to a subsidiary company, Landcorp Holdings Limited, in part payment for properties which are deemed "protected land" (protected from sale by Landcorp in the normal course of business). Dividend diversions are expected to occur over four years from 2007-08, ultimately providing for the Crown to use the "protected land" to meet public policy objectives.

Financial Performance

Landcorp Farming's total financial return for owners is a combination of cash profits or losses, and movements in capital value. On this measure, the Company had an average 14.4% annual rate of return on average shareholders' funds for the five years between 1 July 2004 and 30 June 2009. The table includes key financial numbers and ratios for the five years.

Landcorp reported under the New Zealand equivalents to International Financial Reporting Standards (NZ IFRS) from 1 July 2007. Reported numbers for financial years ended 30 June 2006 and earlier have been derived using previous New Zealand General Accepted Accounting Practice ("previous GAAP").

Financial reports

Landcorp annual and half year reports are found here