STEPPING BACK AND STEPPING UP PEOPLE IN TRANSITION SA Dairy March 2015

SA - Stuffing Around FTCF - Focus, tight cash flow TAF - Tight arse factor HD - High debt HEQ - High Equity Cons – Consolidation DI - Discretionary involvement

CORE VALUES FOR SUCCESS  EMPATHY –  The ability to understand and share the feelings of someone else  RESPECT –  Consideration for the feelings or rights of others  CONFIDENCE –  Faith in someone or something  PATIENCE –  The ability to accept delay without becoming angry or upset  TRUST –  Firm belief in the reliability of someone or something

ACTIVE PARTIES: Ron (58), Julie (55), Hayden (31), Sheree (30) INTERESTED PARTIES: 6 siblings THE BALLINGERS

TimeFarm SituationFarm parametersH&S Personal assets/liabilities Pre 2009 Ron running farm business with some milking paid labour -in 2009 Hayden and Sheree (with Ron and Julie) purchased 50 acre block close by to run young stock. -Hayden DPI $45K -Ron and Julie 100% business – low debt 270 cows 310 acres home farm 100 ac support (leased) 20 AS herringbone dairy $25,000 personal savings (shares) $180,000 land debt Hayden and Sheree trial share farming with Ron and Julie. - Leased neighbors farm (150acres) - Hire purchased 100 cows (through MG) $800 each. -Over time also bought a second hand tractor, fertiliser spreader and four-wheeler. (50K total) - Fair share: 66/34 All FWE 370 cows 310 acres home farm 50 acres support close by 150 acres leased 100 acres support leased Totals 460 acres milking 150 acres support 20 AS herringbone dairy Cleared all debt on cows and machinery (130K) Still had land debt (150K) and shares (30K) Assets – 370K Liabilities – 150K Net worth – 220K now Hayden and Sheree start buying farm business. - Hayden and Sheree purchased the home block (112 acres) from Ron and Julie (616K) - Purchased additional 25 cows (plus 60 cows transferred to Hayden and Sheree over time at minimal expense) -Rotary dairy built to accommodate growing cow numbers (700K in total) 50% contribution by each party --Fair share 50/50 All FWE 420 cows 310 acres home farm 50 acres support close by 150 acres leased 100 acres support leased Totals 460 acres milking 150 acres support 50 stand rotary dairy Cleared debt on new cows and paid down existing land debt (30K left) Have 970K new debt (620K land + 350K dairy) Assets – 1.2M Liabilities – 1M Net worth – 200K (drop – new dairy) FutureHayden and Sheree continue to buy farm business -Hayden and Sheree purchase remaining home block (200 acres) from Ron and Julie (1-1.2M) -Look to purchase/secure existing lease blocks Same as above

The business has grown and is more complex

Has it worked for all concerned??

THE HARRISES ACTIVE PARTIES:Phil (61), Cate (59), Alistair (29), Sophie (33) and Clint (28) INTERESTED PARTIES: 2 other siblings

WRITHGIL PTY LTD 300 ha dryland dairy farm 600 cows 550 kg MS/cow Support blocks

BUSINESS STRUCTURE Writhgil Pty Ltd owns cattle, machinery, fodder and operates on behalf of a Family Trust LAND ASSETS PS & CL HARRISP & C HARRIS SUPER FUND DIVERSE ASSETS – 36% NOT RELATED TO WRITHGIL 86% EQUITY

Alistair and Sophie Pre 2011 SEPTEMBER The process started

Has it worked?? Are there challenges?? What about Clint??

“...Unless I can sharefarm or lease I’ll have to move on, but I love it here!...”

50/50 share

CLINT’S PATHWAY  2005 school based apprenticeship  Certificate 4 and Diploma in Ag  Work at Harrises – then Al came home  Helped convert 174 ha Alvie property to dairy  Managed Alvie for 2 years, working closely with Al and Phil  Phil let me buy and rear Friesian calves  2014: Alvie Partnership helped finance me in the buying of the herd and all basic machinery  Fair 50/50 share

CLINT’S FINANCIAL PROFILE  Annual debt servicing for tractor and cows (all P and I) - $83,900  $671/cow for Clint – Hot enough!  He’s well on his way!!!

Now... The Murphy Family

ACTIVE PARTIES:Terry (72), Marie, Damian (42), Trudy (39) INTERESTED PARTIES:3 siblings

“THINGS MUST BE DONE DIFFERENTLY WITH OUR KIDS!!”  1966 – 1974: The Murphy brothers were sharefarming with parents (79) and had no control  Terry and Marie moved to their own farm in 1980 – Dumbalk, high rainfall Gippsland (70 ha)  Hoped that a son or sons would want to take over the farm in future  If so, this should happen at around 40, but not debt free

OMJ’s PERSPECTIVE IN 2000  102 ha, 257 cows, 91,691 kg solids  Tough years and tight cash flow  A good pasture consumption farm  Marie and Terry: $676 k liabilities; net worth $804 k  Marie and Terry need a new house  Damian leaves his job as diesel mechanic/salesman and he and Trudy move in down the road

2015

OUTCOMES  Marie and Terry have a new, comfortable house on an excised title. They have no debt and assets of $1.1 M. Income is secure and they are only involved in the business at their discretion Damian and Trudy own the entire business and have a nice new house on the site of Terry and Marie’s old one. They milk 270 cows, producing 135,000 kg MS, have low equity (38%) and annual debt servicing of $150,000 ($560/cow = $1.12/kg MS) The 15 year climb up the mountain!

PATHWAY SUMMARY  : Damian worked for wages  2003 – 2005: 12.5 % share  2006: 33% share  2008: 50% share; purchased 50% cows (“chopper”) and then purchased the balance  2014: Purchased the farm Critical stages!! Hurdles??

The Mabin Story – a long one!

“Rising 3 year old” bottom left Off to NZ in 1956

55 Years of Dairy Passion  Graeme studied at Massey in NZ (1956)  Married Mary – she had 200 pounds, Graeme had 86 pence!  Traditional pathway through sharefarming and leasing  First farm purchase in 1966 – 160 acres and 166 cows.

Purchase of adjoining farms New dairies

CURRENT POSITION  400 cow dairy  $1.4 M off-farm assets  Net assets: $6.2 M They are tired and have other interests!!

Mark and Mabins 2013/2014  38% income/ 38% selected costs  Minimal asset provision  Budget operating surplus after all farm working expenses: $177,225 (M), $328,544 (G & M). 380 cows

Getting it sorted ten years too late!