Landcorp - Crown Ownership Monitoring Unit

Note 5 – Operational Management (continued)CDNet operating profitLandcorp considers Net Operating Profit to be the best measure of management effectiveness. This profit measure includes the factorsthat are part of Landcorp’s core operations and management policies. Changes in the general price level of livestock, forests and farmlandare considered incidental to the activities of Landcorp and are not part of Landcorp’s management policies, so are classified outside of NetOperating Profit. The effect of these price changes also form the major part of the tax expense reported under NZ IFRS. As it is unlikely thatany tax expense related to these price changes will be incurred with the Inland Revenue Department, tax expense is also classified outside ofNet Operating Profit.Deferred tax asset/liabilityNZ IFRS requires deferred tax to be calculated on the difference between accounting and tax values for most balance sheet items.The majority of the deferred tax liability results from Landcorp having to recognise a tax charge for all revaluations on livestock, investmentsand some land revaluations. These tax liabilities are unlikely to be fully incurred in the ordinary course of business and are not included inmanagement reporting.Note 6 – Livestock RevenueA description of Landcorp’s activities relating to livestock is included in Note 24.Landcorp’s livestock revenue by species was:Group Group Parent Parent2010 2009 2010 2009$000 $000 $000 $000Sheep 37,634 43,711 37,676 43,554Beef 31,297 30,674 29,390 29,736Deer 14,539 24,079 14,539 24,079Other (1) – (1) –Total Livestock Revenue 83,469 98,464 81,604 97,369Group Group Parent Parent2010 2009 2010 2009Note $000 $000 $000 $000Livestock sales 87,801 94,035 86,214 92,988Birth of animals 24 26,934 21,929 25,745 20,716Growth of animals 24 45,098 49,768 42,599 47,995Livestock losses 24 (8,850) (9,570) (8,446) (8,778)Book value of livestock sold 24 (67,514) (57,698) (64,508) (55,552)Total Livestock Revenue 83,469 98,464 81,604 97,369Livestock revenue includes the recognition of net profit or loss arising from changes in livestock numbers due to the birth, growth, death and salesof livestock. This value change arising from the change in livestock numbers and growth is calculated by assigning an internally assessed annualvalue for each livestock class.Livestock revenues in 2009/10 were severely impacted by decreased sales prices from 2008/09, largely due to unfavourable exchange rates overthe year. Deer revenue (down $9.5 million or 40%) was impacted by a combination of lower average sales prices (down 13%), lower numbers(down 12%) and higher sales costs. The average sales prices for sheep and beef were both down 7%, with sheep revenue (down $6.1 million or14%) also impacted by lower sales due to a lower lambing percentage. Overall beef revenues were largely similar to 2008/09 (up $0.6 million or2%) as the lower sales prices were offset by higher sales numbers (up 3%) and lower costs.65