LIC PBT up 192% to $40.3m as tax rate normalises from 43.9% to 23.9%

Operating cash flow rose 40.8% to $56.4m, year-end cash reached $57.1m, and gross borrowings remained at zero.

The headline NPAT growth is materially flattered by a tax-rate move: the effective tax rate fell from 43.9% to 23.9%, so PBT growth of 192.0% is the cleaner operating read. The board declared a 12.22 cents per share dividend, more than double the 5.84 cents prior, representing 80% of underlying earnings per management and 55.6% of statutory NPAT. The first-half NPAT of $39.1m exceeded the full-year figure, implying an H2 NPAT loss of roughly $8.4m – consistent with the seasonal shape of the dairy genetics cycle but worth holding alongside the full-year print.

• PBT of $40.3m versus $13.8m (+192.0%) is the proper operating comparison; the NPAT print of $30.6m versus $7.7m (+297.4%) embeds a 20-percentage-point tax-rate compression that is unlikely to repeat. Investors anchoring on +297% NPAT growth will overstate the run-rate improvement.
• Every reported segment delivered a lower result despite group revenue rising. NZ market genetics revenue rose to $119.9m but segment result fell to $31.1m from $70.7m; Testing revenue almost doubled to $79.4m but result fell to $11.6m from $19.9m; Farm software, International, and Other all show the same pattern. The release does not reconcile this against the strong group PBT, which leaves an open question on cost allocation, reclassification, or genuine margin compression at the segment level.
• Working capital absorbed $37.6m of cash. Operating working capital moved from roughly $19.9m to $57.5m, with debtors of $36.7m at year-end and receivable days of 45.4. Operating cash flow still rose, but the build means a meaningful share of FY25 trading profit is sitting in receivables rather than cash.

The 62.9% first-half share of revenue and the implied H2 NPAT loss line up with LIC's seasonal pattern around the spring mating season; this result does not, in itself, signal a deteriorating exit run-rate, but it does mean the FY25 outcome was substantially built in by the half-year. The HY25 release was flagged as an amendment, and the FY24 comparable is inferred rather than exact-matched, so growth percentages should be read with that selection caveat.

The operating recovery is genuine: PBT +192.0% on revenue +10.4% reflects real operating leverage off a soft FY24 base, and ROE rebuilt to 10.3% from 2.8%. But three quality flags temper the read:

• Tax normalisation contributed roughly $6m of the NPAT uplift versus a constant 43.9% rate.
• Segment-result compression across all five reported segments is unexplained in the release.
• The $37.6m working-capital build means cash conversion deteriorated even as headline operating cash flow grew.

This briefing cannot assess underlying earnings, segment cost allocations, or the durability of the lower tax rate from the supplied release.