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DJ National Milk Records Plc Half-year Report

For immediate 
13 February 2019 
                           National Milk Records plc 
    ("NMR", the "Company", or, together with its subsidiaries, the "Group") 
NMR, the leading UK supplier of dairy and livestock services, announces its 
unaudited results for the six months ended 31 December 2018. 
  * Turnover substantially increased to GBP11.7 million ("M") (2017: GBP10.5M) 
      + One-off and seasonal activity provided 48% of this growth 
  * Profit on ordinary activities, before taxation, of GBP1.130M (2016: GBP0.957M) 
  * EBITDA increased by GBP0.2M to GBP1.4M 
  * Increased overhead costs represents inflation and investment in training 
    and Information Technology systems 
  * EBITDA percentage increased from 11.2% to 11.7% 
  * Net Debt reduced to GBP2.064M after paying a dividend of GBP0.5M 
  * Cash generation from operations of GBP0.9M and capital investment of GBP0.3M 
  * Net assets of GBP2.8M, up from GBP1.0M last year 
Managing Director, Andy Warne, commented: 
"We are delighted to announce this strong set of interim results which are 
supported by a number of one-off projects carried out during the period. 
Additionally, almost half of our revenue growth can be attributed to new 
revenue streams; however, NMR remains focused on its core business and is 
encouraged that it is delivering positive results from both new revenue streams 
and core business areas. It is also very satisfying to note that within the 
six-month period we have paid a dividend and continued to reduce debt. 
We are continuing our strategic planning, which is beginning to paint an 
exciting vision for our future development and, to help support this ambition, 
we are continuing to invest in our internal systems and the training and 
development of our people. 
With regard to the British Dairy industry, we believe both our farming and 
corporate customers will continue to feel margin pressure for the next six 
months due to higher feed prices and general over supply in the global market. 
However, we remain positive that UK dairy is a good place to do business and 
look forward to a successful second half of the year." 
For further information please contact: 
NMR plc 
Andy Warne, Managing Director            +44-7970-009141 
Mark Frankcom, Finance Director                  +44-7458-002444 
Peterhouse Capital Limited 
Duncan Vasey 
Mark Anwyl                         +44-20-7220-9796 
Blytheweigh (Financial PR) 
Megan Ray 
Rachael Brooks                               +44-20-7138-3204 
This announcement is available on the NMR website at 
About NMR 
NMR is the leading supplier of management information to the UK dairy supply 
chain. Through a team of self-employed milk-recorders, it collects and tests 
milk samples for approximately 50% of the UK's two million cows. In addition, 
its laboratories provide payment testing and disease testing services for 
Britain's milk processors. NMR has a joint-venture laboratory in the Republic 
of Ireland providing similar services to farmers and processors across the 
whole of Ireland. Another division of the Group is a livestock traceability 
business, Nordic Star, which services the UK dairy and beef sectors. 
Group Results 
The interim results for NMR show strong development when compared to the same 
period last year. Turnover for the six-month period has increased by more than 
11%, now standing at GBP11.7M, and EBITDA has increased by more than 15% to GBP1.4M 
for the same period. 
As reported in the quarterly update in November 2018, the first quarter of the 
financial year was boosted by a one-off contract for genomic tests of a bovine 
tuberculosis index, as well as some grant activity supporting the sale of heat 
detection systems. Within NMR's cornerstone revenue streams, revenues for 
testing of payment samples for bulk milk have increased by 1.8%, whilst milk 
recording revenue for farmers is flat, with a modest fall in the number of cows 
on the database being offset by inflation. Underlying revenues have been 
enhanced by the continuing growth in testing for Johne's disease, which has 
increased by 22% when compared to the same period last year, now standing at GBP 
2.1M for the first six months of the year. New testing services, notably for 
antibiotic detection and analysis, are also showing a positive development in 
the first half and whilst revenues from these other testing services are still 
modest, comprising approximately 2.6% of total sales, revenues from this sector 
have grown by approximately 36% year on year. 
Growth in revenue and margins has been partially diluted in the first half of 
the year by additional costs; some inflationary, some investment in revenue 
items, and some additional costs to support outgoing legacy systems. The sum of 
these effects has pushed costs up by 6.6% in the period, with approximately 
half of this increase due to inflation and additional spend. Additional 
investment sees NMR growing its training budget together with documentation and 
mapping of Information Technology infrastructure as it prepares for its digital 
transformation project. 
Additionally, it is important to note that NMR has changed the segmental 
analysis of its turnover to more closely represent its internal management of 
revenue streams. 
NMR has increased its capital investment in the first half of the financial 
year, increasing investment from GBP0.198M in the six months ended 31 December 
2017 to GBP0.319M for the six months ended 31 December 2018. This comprises 
investment in laboratories, including a deposit being paid on a third analyser 
which is expected to be fully operational by the end of February, investment in 
software development to support new services, and the early phase of investment 
for the implementation of Dynamics365 from Microsoft, to replace the existing 
finance and CRM systems. The second half of the year will also see the 
deployment of three new robotic liquid handlers, two in the Wolverhampton 
laboratory and one in the Hillington laboratory in Glasgow. 
NMR is also focussing on measured revenue investment in training and 
Information Technology to support its growth ambitions. 
Cash flow and Debt 
NMR's cash position at the end of December 2018 was just under GBP1.3M, having 
paid a dividend of GBP0.521M in November 2018. Net debt, including lease finance 
of motor vehicles, was GBP2.064M at 31 December 2018, compared to GBP3.311M a year 
earlier, despite having paid suppliers before 31 December this year, rather 
than just after. Net Debt at 0.7 times EBITDA is well within the Group's target 
covenant ratio of 2.0, leaving the Group with headroom for debt financing if 
A final dividend of 2.5 pence per share for the financial year ended 30 June 
2018 was paid on 23 November 2018 (2017 = Nil). Although the first six months 
of the year has been positive with regards to development in balance sheet 
value and decreasing net debt, the Directors continue to prioritise investment 
in business development and efficiencies and capabilities and therefore propose 
no interim dividend at this time (2017: nil). 
Dairy Farmer milk volumes are forecast to be strong for the remainder of NMR's 
financial year. This is a product of a projected 1.8% decline in the national 
herd, offset by increases in yields combined with more normal weather 
conditions following the "Beast from the East" and the summer drought 
conditions in 2018. Milk prices are already tightening with recent 
announcements from dairy buyers of reduced prices for March collections. This, 
coupled with increasing costs of production, notably in feed, where forage 
costs are up 25% year on year, has meant that there is a squeeze on raw-milk 
margins. Therefore, NMR anticipates a growing difference between the top and 
bottom of the milk price league-tables, which highlights the need for NMR's 
services and the greater information for management of British dairy herds. 
At the time of this announcement, there is still no certainty as to the terms 
of Brexit, particularly, the solution for the movement of raw-milk and dairy 
commodities across the Irish border, which, in NMR's view, needs to be 
realistic and practical. There may be an initial period of uncertainty after 29 
March 2019, however, following much analysis, NMR continues to believe that the 
impact of Brexit on the UK dairy sector will be mildly positive in the medium 
As such, against this backdrop of mixed-confidence, NMR anticipates that it 
will see modest growth in its key services and associated revenues and profit 
in the coming year. 
Consolidated Statement of Comprehensive Income 
                                              6 months   6 months        12 months 
                                                 ended      ended            ended 
                                             31-Dec-18  31-Dec-17        30-Jun-18 
                                                 GBP'000      GBP'000            GBP'000 
    Milk recording and genomics services         5,167      4,969           10,020 
    Disease testing services                     2,551      2,164            4,495 
    Payment testing services                     2,230      2,156            4,353 
    Other testing services                         311        229              507 
    Non-testing revenues                         1,475      1,015            2,030 
                                                11,734     10,532           21,405 
    Costs of sales                             (4,407)    (3,766)         (10,125) 
    Administrative Expenses                    (6,166)    (5,839)          (9,387) 
                                                 1,161        927            1,893 

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February 13, 2019 02:00 ET (07:00 GMT)

DJ National Milk Records Plc Half-year Report -2-

    Share of operating profit in joint              47         91              243 
Operating Profit                                 1,208      1,019            2,136 
Loss on Disposal of Fixed Asset Investments          -          -                3 
Net Finance Cost                                  (78)       (61)            (145) 
Profit on Ordinary Activities Before Tax         1,130        957            1,994 
Tax on Ordinary Activities                       (220)      (180)            (167) 
Profit on Ordinary Activities After Tax            910        777            1,827 
Earnings Per Share 
    Basic EPS (pence)                              4.3        3.7              8.7 
    Diluted EPS (pence)                            4.2        3.6              8.6 
Other Comprehensive Income 
    Exchange Rate difference                                                     4 
Total comprehensive income for the year            910        777            1,831 
Consolidated Balance Sheet 
                                             as at        as at             as at 
                                         31-Dec-18    31-Dec-17         30-Jun-18 
                                             GBP'000        GBP'000             GBP'000 
Fixed assets 
     Intangible fixed assets                   476            -               358 
     Tangible fixed assets                   2,507        2,703             2,524 
     Investments                               909          714               862 
     Other Investments                           -           44                 - 
                                             3,892        3,461             3,744 
Current assets 
     Stock                                     197          125               222 
     Debtors                                 2,254        2,563             2,896 
     Debtors > 1 year                        1,761        1,920             1,761 
     Cash at bank and in hand                1,282          764             1,551 
                                             5,494        5,372             6,430 
Creditors: less than one year              (3,593)      (4,219)           (4,507) 
Net current assets                           1,901        1,152             1,923 
Total assets less current liabilities        5,793        4,614             5,667 
     Creditors: more than one year         (2,705)      (3,364)           (2,968) 
     Provision for liabilities               (256)        (207)             (256) 
Net assets                                   2,832        1,043             2,443 
Capital and reserves 
     Called-up share capital                    53        2,124                53 
     Share premium                               -        7,426                 - 
     Share option reserve                        -           22                 - 
     Own shares reserve                      (195)        (195)             (195) 
     Profit and loss account                 2,974      (8,334)             2,585 
Shareholders' funds                          2,832        1,043             2,443 
Group Statement of Cash Flows 
                                                6 months   6 months         12 months 
                                                   ended      ended             ended 
                                               31-Dec-18  31-Dec-17         30-Jun-18 
                                                   GBP'000      GBP'000             GBP'000 
Cash flows from operating activities 
  Operating Profit (before share of JV             1,161        927             1,893 
  Add back Depreciation and Amortisation             218        260               653 
  Share option vesting expense                         -          -                13 
  Profits on disposal of tangible assets                       (16)              (23) 
  Release of warranty provision                                                    45 
  (Increase)/decrease in trade and other             529         79             (140) 
  (Increase)/decrease in stocks                       25         59              (38) 
  Increase/(decrease) in creditors               (1,215)      (224)               392 
                                                   (443)        157               902 
  Income taxes refunded                              188          -                 - 
  Cash from operations                               906      1,085             2,795 
Cash flows from investing activities 
  Dividends received                                   -          -                52 
  Purchase of fixed assets                         (319)      (198)             (801) 
  Proceeds from sale of tangible assets &              -          -                47 
  Proceeds on exercise of share options                -          -                52 
                                                   (319)      (198)             (650) 
Cash flows from financing activities 
  Dividends paid                                   (521)          -                 - 
  New loans raised                                    65        252               251 
  Repayments of borrowings                         (256)      (696)             (986) 
  Repayments of obligations under finance           (66)       (93)             (173) 
  Interest paid                                     (78)       (44)             (145) 
                                                   (856)      (582)           (1,053) 
Net increase in cash and cash equivalents          (269)        305             1,092 
  Cash and cash equivalents at beginning of        1,551        459               459 
Cash and cash equivalents at end of period         1,282        764             1,551 
The information contained within this announcement is deemed by the Company to 
constitute inside information as stipulated under the Market Abuse Regulations 
(EU) No. 596/2014. Upon the publication of this announcement via a Regulatory 
Information Service, this inside information is now considered to be in the 
public domain. 

(END) Dow Jones Newswires

February 13, 2019 02:00 ET (07:00 GMT)