Live Export

Livecorp cuts costs, lifts program budget

James Nason, 14/11/2012

Sam BrownSavings gleaned through an internal rationalisation drive will allow Livecorp to increase its investment in research, development and marketing this financial year, in defiance of export cutbacks and reductions in the organisation’s levy-funded revenue.

Livecorp is the livestock export industry’s service delivery company, and uses levies paid by exporters to invest in industry research, development, marketing and extension programs in conjunction with Meat & Livestock Australia under the combined Live Export Program (LEP).

Livecorp’s revenue is directly tied to export activity, with levies accrued at rate of $0.0095238/kilogram of cattle exported, 60c/head of sheep exported and 50c/head of goats exported.

A 54 percent decline in Australian livestock exports over the past four years has resulted in a 56pc decline in revenues for Livecorp over the same period.

Twelve-months ago Livecorp reported the worst financial result in its 14 year history, a $416,099 operating loss which reflected the dramatic impact of the one-month ban on live exports to the major market of Indonesia in June 2011 and the significant loss of associated levy income.

The board and executive have since focused on measures to absorb the impact of further declines in export activity and levy revenue through cost-cutting in order to reduce the need to pull back on levy-funded RD&E and marketing services.

Livecorp chief executive officer Sam Brown, who took over the job in March this year, told Beef Central this week that he believes that initial  goal has largely been achieved.

A central plank of the belt-tightening has involved a decision to give up Livecorp’s underutilised rented premises in North Sydney and to rent office space in Meat & Livestock Australia’s nearby offices instead, a move that is expected to save in the vicinity of $100,000 a year.

A decision to convert two former full-time positions into part-time roles and to realign the personnel requirements of existing programs had unlocked further efficiency gains, Mr Brown said.

Livecorp now relies on a staff of just three full-timers, including Mr Brown, and two part-time equivalents.

Another proposal to achieve further efficiencies by reducing the size of the board from seven directors to five, and to make the board selection criteria entirely skills-based, was voted down by members at yesterday’s Livecorp annual general meeting in Fremantle.

As a consequence of the rationalisation program Livecorp has reported a break-even result for the 2011-12 financial year, but has also been able to increase its projected commitment to the LEP for 2012-13 to over $1 million, above the $950,000 it invested last year.

Budget in constant flux

A perpetual challenge for Livecorp is to keep important investments in industry services ticking over while not overcommitting a budget that is in a constant state of flux due to continually changing market circumstances.

The recent decision by Australian exporters to suspend trade with Bahrain and Pakistan on welfare grounds in the wake of last month’s devastating sheep cull underlines how sudden changes in the market environment can impact Livecorp’s financial position.

Bahrain was Australia’s second largest market for sheep, accounting for 439,731 head, or 15pc of the trade, in 2010-11. In that year the market generated $263,838 in levies for Livecorp, revenue that has now disappeared from its projected budgets for the foreseeable future.

“You are continually refining and recutting the cloth as markets are disrupted or as quotas change,” Mr Brown said.

“We are watching the trade down to the last vessel to know what levies are coming in so we can apply that.”

Livecorp maintains around $2 million in reserves, held in a mix of shares, managed funds and term deposits, to ensure funding commitments can be met for long-running R&D programs regardless of how levy revenues fluctuate in future.

While reserves were partially drawn down this year to help meet last year’s deficit, Mr Brown believed that would be a one-off result.

“We aim to maintain a zero balance, we don’t want to run into reserves, but we don’t want to run a deficit either,” Mr Brown said.

“All of these savings we have been able to apply directly into the LEP, into program delivery through R&D and extension, and we’ve been able to decisively  increase our investment in these areas.

“I’m particularly proud of what we have done this year because we have really created some efficiencies and made every dollar we invest count.”

Looking ahead Livecorp is forecasting a slight decline in overall exports this financial year, which means more time walking the budgetary tight-rope for the leaner-than-ever Livecorp team. 

“For us it is about budgeting responsibly, we have to set budgets around what we expect to receive in levies and making sure we don’t overcommit in a budget sense,” Mr Brown said.

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