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DJ National Milk Records Plc Interim Results For Six Months to 30 Sept 2016

 
TIDMNMRP 
 
For immediate release 
                                                                         10 
November 2016 
 
                                    NMR plc 
   ('NMR', the 'Company', or, together with its subsidiaries, the 'Group' ) 
 
          INTERIM RESULTS FOR THE SIX MONTHS ENDED 30 SEPTEMBER 2016 
 
NMR, the leading UK supplier of dairy and livestock services, announces its 
unaudited results for the six months ended 30 September 2016. 
 
Business Highlights 
 
  * Turnover steady at GBP9.9M (2015: GBP10.1M) 
 
  * Profit on ordinary activities before taxation of GBP505k (2015: GBP599k) 
 
  * Reduction in core milk recording as farms trade down or leave dairy sector 
    altogether 
 
  * Continued growth in new revenue streams, including health and genetics 
 
  * Resilient business model generating profits and operating cash flows 
    against a backdrop of continued falling milk prices, and lower frequency 
    and uptake of milk recording services 
 
  * Cash from operations in the first half of the year was GBP0.6M (2015: GBP0.3M) 
 
  * Increased burden of recovery payment for Milk Pension Fund GBP418k (GBP359k) 
 
  * Immediate post-Brexit vote impact on inflation and bond yields has led to 
    estimated re-measurement of pension deficit to GBP6.25M (2015: GBP3.5M), 
    reducing net assets by GBP2.1M net of related deferred tax 
 
Managing Director Andy Warne commented: 
 
"I am personally disappointed with the financial results for this 6 month 
period but I remain confident the NMR Group is positioned to regain better 
financial performance as overall market conditions in the UK and Irish dairy 
sectors recover. Even in this depressed market, we are seeing success in the 
new revenue stream projects and we are confident of a recovery in existing 
service revenues. Improvements in the milk price paid to farmers are already 
underway, although there is a lag between a higher milk price and available 
cash in farmers' balance sheets. NMR's relationship with the Milk Pension Fund 
has been the focus of great deal of management time and resource. This dialogue 
is expected to remain a key focus of the NMR management team which has been 
bolstered by our appointment of Mark Frankcom as Finance Director." 
 
For further information please contact: 
 
NMR plc 
Andy Warne, Managing Director                 +44-7970-009141 
                                              andyw@nmr.co.uk 
 
Mark Frankcom, Finance Director               +44-7458-002444 
                                              markf@nmr.co.uk 
 
Peterhouse Corporate Finance Limited          +44-20-7220-9796 
Duncan Vasey or Mark Anwyl 
 
St Brides Media Partners                      +44-20-7236-1177 
Elisabeth Cowell 
 
This announcement is available on the NMR website at www.nmr.co.uk 
 
About NMR 
 
NMR is the leading supplier of management information to UK dairy farmers. 
Through a team of self-employed milk-recorders, we collect and test milk 
samples for approximately 50% of the UK's 2 million cows. In addition, our 
laboratories provide payment testing and disease testing services for Britain's 
milk processors. We have a joint-venture laboratory in the Republic of Ireland 
providing similar services to farmers and processors across the whole of 
Ireland. In the Group we also have a small livestock traceability business, 
Nordic Star, which services the UK dairy and beef sectors, and a genetics 
business, Inimex Genetics Ltd, which provides semen for UK and Northern 
Ireland. 
 
Group Results 
 
Group turnover of GBP9.9M is GBP0.2M down on the same period last year. 
 
Growth in three of our four trading areas i.e. laboratory services, livestock 
surveillance and genetics, has helped to partially offset shortfalls in core 
milk recording which has again been under pressure this year. 
 
Milk recording is a vital component for measuring herd performance and 
maximising the farm balance sheet. In the first half of this year, we have seen 
a further squeeze on dairy farm profitability and cash flows with milk prices 
seeing a drop of 1.14 pence per litre in September 2016 compared to the same 
period a year earlier, and this has led to some farms dramatically cutting back 
on costs. Ultimately, this has hit our recording revenues with farms either 
trading-down to a less regular recording option, or some resigning altogether. 
Encouragingly, though, we continue to see enrolments onto milk recording 
contracts, and in particular Herdwise, NMRs screening service for management of 
Johne's disease, which is becoming an increasingly important criterion to our 
milk processor customers. 
 
The demand from milk processors for ever increasing due-diligence has boosted 
revenues in laboratory services, led by companies such as Arla moving to daily 
testing for milk samples and testing of milk in tankers for validation 
purposes. In livestock surveillance, NMR has increased sales by optimising 
cross-selling and innovation across the Group, introducing red ID tags, for 
instance, as an element of the Johne's screening programme, and delivering new 
sales channels via an Android and iOS Nordic Star app. NMR's genetics and 
genomics business has seen a slow increase in the year, with revenues in the 
new technologies of Heat Detection and Genomic testing supporting the 
underlying genetics business of selling straws of semen. Again, on-farm 
spending reductions have hampered development of the Group here: Farmers can 
see clear benefits of introducing new technology, but with their higher price 
point some customers see the new services as desirable but not essential in 
times of tight farm margins. 
 
Operating costs for the period are proportionally down with primary variable 
costs, such as the costs of our third-party milk recorders, managed in line 
with volume. Corporate costs are exacerbated by some investment in our overhead 
lines, not least as the fallout from the Brexit vote has compelled us to seek 
more advice on the Milk Pension Fund. 
 
Investment 
 
Capital investment has been modest in the first half of the year. We have, 
however, committed to a substantial rejuvenation programme for our laboratory 
equipment in our blue-riband site at Four Ashes. This will see one new 
sample-analyser arrive before Christmas, with another scheduled later this 
financial year. Also, we are investing in our core laboratory systems this 
year, introducing a laboratory information management system or LIMS, and 
replacing our finance and business ERP (Enterprise Resource Planning) systems, 
starting in the second half of the financial year. These investments in our 
core capability will further strengthen our market leading position by 
significantly enhancing the provision of business intelligence. 
 
Cash flow and Debt 
 
Cash in bank at the end of September was c. GBP2,835k, a quarterly peak in our 
cash flows ahead of payment for VAT. The group finances its fleet of motor 
vehicles through finance leases, with GBP613k owing at the half year (2015: GBP 
647k). Net cash is therefore GBP2.2M. Net cash will reduce in the second half of 
the year, as our investment programme gathers pace. 
 
Milk Pension Fund 
 
In a letter dated 19 August 2016, the Trustee of the Milk Pension Fund ('MPF') 
advised that the total deficit of the fund is likely to be in the region of GBP 
100M, compared to GBP61.6M at the last valuation date. The NMR Board has made a 
proportional estimate on the impact of this change to our interim accounts. 
This increases the MPF pension deficit for NMR from GBP3.5M to an estimated GBP 
6.25M before any account of deferred taxation. Following last years' GBP5.1M 
credit as a result of the switch advised by the Trustee from RPI to CPI, we now 
include both changes within Other Comprehensive Income. More recently following 
the reduction in the value of sterling and fears of increased inflation, the 
Board notes that 10-year bond yields are beginning to return to pre-Brexit 
levels. Our audited accounts to 31 March 2017 will include a comprehensive 
actuarial assessment of our pension deficit and we anticipate a full 
revaluation exercise by the Trustee of the Milk Pension Fund in March 2017. 
 
Dividend 
 
Against the backdrop of significant variability in our balance sheet, the 
Directors consider it prudent to pay no dividend at this time (2015: nil). 
 
Outlook 
 
Milk prices are, at last, on the rise with many milk buyers having increased 
prices in September and again in October 2016. It may take a while, though, for 
on-farm confidence to recover, and NMR is cautious about forecasting an 
immediate recovery in the second half of the year. The weak pound is also a 
cause for concern for genetics as most of our product is sourced in the US and 
Europe. We remain focused on careful management of our costs, and targeting our 
resources at the right opportunities as the market turns after a decline that 
has lasted since the summer of 2014. The Board is pleased that our strategy to 
innovate and modestly diversify has assured revenues and profits in a depressed 
market. We are confident that with continued focus on the three pillars of 
service, innovation, and cost control, NMR, by playing a lead role in 
driving-up profitability for UK Dairy farmers, will itself make increasing 
returns on capital. However, the Board does not expect any significant 
improvement until the next financial year. 
 
 
 
 
NMR plc - Consolidated Statement of Comprehensive Income 
 
                                           Unaudited 6 months       Audited 
                                                 ending           Year ending 
 
GBP'000                                       Sep-16    Sep-15        Mar-16 
 
Turnover 
 
    NMR                                        7,510     7,794         15,634 
 
    NML                                        4,220     4,075          8,321 
 
    NLR                                          491       438            939 
 
    Inimex Genetics                              397       373          1,095 
 
    Interco                                   -2,329    -2,260         -4,587 

(MORE TO FOLLOW) Dow Jones Newswires

November 10, 2016 02:00 ET (07:00 GMT)

DJ National Milk Records Plc Interim Results For Six -2-

 
                                              10,290    10,420         21,402 
 
    less share of Joint Venture                 -374      -347           -789 
    Turnover 
 
    Turnover                                   9,915    10,073         20,613 
 
Operating profit/(loss) before other comprehensive income/ 
amortisation 
 
    NMR                                         -119        71            142 
 
    NML                                          637       664          1,448 
 
    NLR                                           82        94            205 
 
    Inimex Genetics                              -90      -113           -163 
 
    Share of Joint Ventures' OP                  130       117             55 
 
    Operating Profit                             641       833          1,687 
 
Goodwill amortisation                           -114      -210           -528 
 
Interest and Finance Income                      -22       -24           -295 
 
Profit on Ordinary Activities Before             505       599            864 
Tax 
 
Tax on Ordinary Activities                      -101      -120           -153 
 
Profit on Ordinary Activities After              404       479            711 
Tax 
 
Earnings Per Share 
 
    Basic EPS (pence)                           5.63      6.69           9.92 
 
    Diluted EPS (pence)                         5.42      6.45           9.56 
 
Other Comprehensive Income 
 
Re-measurement of net defined benefit         -3,167    -1,158          5,158 
pension liability 
 
Tax on Other Comprehensive Income                633       232         -1,032 
 
Total Comprehensive Income                    -2,130      -447          4,837 
 
 
 
 
NMR plc - Statement of Financial Position 
 
                                            Unaudited 6 months     Audited 
                                                  ending         Year ending 
 
GBP'000                                        Sep-16     Sep-15     Mar-16 
 
Fixed Assets 
 
       Intangible fixed assets                    658      1,671         772 
 
       Tangible fixed assets                    2,096      2,465       2,295 
 
       Investments                                618        548         488 
 
                                                3,371      4,684       3,555 
 
Current Assets 
 
       Stock                                      398        411         408 
 
       Debtors                                  2,704      2,114       2,625 
 
       Cash at bank and in hand                 2,835      2,083       2,405 
 
                                                5,938      4,608       5,438 
 
Creditors: less than one year                  -3,815     -3,079      -3,537 
 
Net current assets                              2,123      1,529       1,901 
 
Total assets less current                       5,494      6,213       5,456 
liabilities 
 
       Creditors: more than one year             -383     -1,025        -388 
 
       Provision for liabilities                 -193       -309        -220 
 
       Pension liability                       -6,250    -10,500      -3,500 
 
       Related Deferred Tax                     1,250      2,100         700 
 
Net assets                                        -82     -3,521       2,048 
 
                                               -20.0%     -20.0%      -20.0% 
 
Capital and Reserves 
 
       Called-up Share capital                    754        754         754 
 
       Share Premium                               76         76          76 
 
       Share option reserve                        22         22          22 
 
       Profit and loss account                   -934     -4,373       1,196 
 
Shareholders' funds                               -82     -3,521       2,048 
 
 
 
 
NMR plc Group Statement of Cash Flows 
 
                                            Unaudited 6 months        Audited 
                                                  ending            Year ending 
 
GBP'000                                       Sep-16      Sep-15         Mar-16 
 
Operating Activities 
 
   Operating Profit excl JV                       397         506          6,262 
 
   Depreciation and Amortisation                  414         531            948 
 
   Impairment of fixed assets                       0           0            240 
 
   Defined Benefit Pension Charge /                 0           0         -4,958 
   (Credit) 
 
   Loss/(Profit) on disposal of fixed             -15         -12            -29 
   assets 
 
   (Increase)/Decrease in stock                    10          86             89 
 
   (Increase)/Decrease in debtors                 -79          28           -483 
 
   Increase/(Decrease) in creditors               278        -481           -121 
 
   Operating Cashflow                           1,004         658          1,948 
 
   Defined Benefit Pension Recovery            74-418        -359           -733 
   Payments 
 
   UK Corporation tax (paid)/repaid                13           0           -438 
 
   Net cash inflow from operating                 599         300            777 
   activities 
 
Investing Activities 
 
   Purchase of fixed assets                       -55        -132           -270 
 
   Sale of fixed assets                            16          25            118 
 
                                                  -39        -107           -152 
 
Financing Activities 
 
   Share capital issued in the year                 0          12             12 
 
   Repayment of Borrowings                          0           0              0 
 
   Payment of finance lease obligations          -130         -96           -211 
 
   Interest received                                0           0              5 
 
                                                 -130         -84           -194 
 
Net cash inflow/(outflow)                         430         109            431 
 
   Opening cash balance                         2,405       1,974          1,974 
 
   Closing cash balance                         2,835       2,083          2,405 
 
Increase in cash                                  430         109            431 
 
ENDS 
 
 
 
END 
 

(END) Dow Jones Newswires

November 10, 2016 02:00 ET (07:00 GMT)