National Milk Recrds - Interim Results

For immediate release                                                                                                                  21 February 2023

National Milk Records plc

("NMR", the "Company", or together with its subsidiaries, the "Group")

INTERIM RESULTS FOR THE SIX MONTHS ENDED 31 DECEMBER 2022

National Milk Records plc (AQSE: NMRP), the established agri-tech information services provider in the UK dairy sector, is pleased to announce its unaudited results for the six months ended 31 December 2022.

Highlights

·    Turnover for the period increased by 5.0% to £12.0 million ("m") (2021: £11.4m)

·    Like for Like EBITDA^(*) for the period increased by 17.0% to £1.34m (2021: £1.15m)

·    Underlying EBITDA^(**) for the period decreased 8.8% to £1.05m (2021: £1.15m)

·    5.3% increase in Profit Before Tax to £0.79m (2021: £0.75m)

·    Basic and diluted earnings per share increased 34% to 4.3p (2021: 3.2p)

·    Investment in tangible and intangible assets up 83.3% to £1.1m (2021: £0.6m)

·    Net Debt down 14.2% to £0.9m (2021: £1.1m)

·    Dividend of 2.0 pence ("p") per share paid in November 2022 (2021: 1.5p)

·    Net assets increased 30% to £9.3m (2021: £7.2m)

^(*)Like for Like EBITDA excludes the investment in US GenoCells, reorganisation costs for consolidating milk testing, and differing accounting treatment for vehicles not under finance leases

^(**)Underlying EBITDA excludes a charge for share-based payments included in 2022 for the Executive Incentive Plan announced on 29 December 2021. £76,000 was accrued within overheads and is credited to reserves (2021: £187,000).

Mark Frankcom, Finance Director, commented:

"The results for the first half of the financial year show a solid performance year on year, albeit with EBITDA held back by the differing accounting treatment for vehicles not under finance leases, reorganisation costs for consolidating milk testing at our Four Ashes laboratory, and our investment in the opportunity for GenoCells in the US. On a like-for-like basis, EBITDA was approximately £290,000 higher, representing a year on year increase of 17%. At this level of analysis, the figures continue to demonstrate sustainable growth in revenues and earnings, in line with our medium term growth ambitions. In addition, the Group has increased its capital investment, whilst also reducing net debt and paying an increased  full year dividend.

"Our revenue growth demonstrates the validity of our strategy to focus on our core services whilst concurrently pursuing opportunities for innovation. It's really pleasing to see continued growth of Johne's disease testing revenues, but also for our oldest revenue categories of milk recording and payment testing. The number of cows on the database has held up well in the first half of the year, and we are  determined to grow this Key Performance Indicator.

"Genomics revenues are also worth comment, nearly doubling to £366,000, which provides a strong foundation as we look to launch GenoCells technology in the UK and the US  later this year. GenoCells provides farmers with a genomically driven individual animal cell count analysis, based purely on the sample of milk from their bulk tank. This allows them to manage mastitis in the herd, and its associated use of antibiotics, without the need for individual animal sampling.

"The first half of the financial year has seen significant capital investment, putting the Company in a strong position for the second half of the year and beyond, as we continue to pursue our strategic plan. We are installing the IT infrastructure to deliver GenoCells in the UK and US markets, and intangible investment also includes €375,000 for the second half of the licence for GenoCells in the US. Tangible fixed assets includes a substantial investment in our Four Ashes laboratory to support the cost saving initiative to consolidate milk-testing.

"We recognise the talent and commitment of the whole NMR team right across our operations, including our self-employed milk recorders and samplers, working hard to deliver the data and robust insights which support our customers to achieve their business objectives."

For further information please contact:

National Milk Records plc

Mark Frankcom, Finance Director                                                           markfr@nmrp.com

Canaccord Genuity Limited

Adam James                                                                                                    +44 20 7523 8000

Harry Rees                                                                                                       

BlytheRay (Financial PR)

Megan Ray

Rachael Brooks                                                                                               +44 20 7138 3204

This announcement is available on the NMR website at www.nmr.co.uk

The Directors of the Company are responsible for the contents of this announcement.

Group Results

The Company's strategy continues to focus on its core business and its associated adjacent revenue opportunities which is demonstrated in continued growth in revenues during this period. EBITDA performance compared to the same period last year was held back by costs arising from three factors: vehicle rentals; US GenoCells; and laboratory reorganisation. The widely understood lack of availability of new motor vehicles has led to a higher volume of rentals where an additional £38,000 of costs were borne in overheads (costs for vehicles under finance leases are borne in depreciation and interest, both below EBITDA). Progressing with the development of GenoCells technology in the United States resulted in costs of £162,000 (2021: nil), mainly for field trials and market research. The first half also includes £90,000 one-off costs associated with the restructure of laboratory operations to consolidate the majority of milk testing at the laboratory at Four Ashes.

The Core Business segment was the key driver behind revenue growth, with particular note on the revenues from Johne's testing, which grew by £172,000, an increase of 7.0% compared to the same period last year. Milk recording revenues were also higher by £183,000, up 3.5%. The number of cows on the database were at a similar level to the previous period, totalling 683,357 (2021: 684,477). Revenues from payment testing grew by 5.5% to £2.07m, focusing on the Company's KPI of revenue per unit being increased by greater penetration for these testing services.

Revenue from Genomic testing almost doubled to £337,000 (2021: £173,000) driven primarily by the commercial arrangement with Genus.

NMR's share of Joint Venture profit in Ireland grew by 10% to £308,000 in 2022, supported by continued growth in BVD testing and testing for chlorate contamination in milk products, particularly milk powders.

Dividend

A final dividend of 2.0 pence per share for the financial year ended 30 June 2022 was paid on 18 November 2022 (2021: 1.5 pence), having been approved at the Company's Annual General Meeting. NMR recommended the increase in dividend to reflect both the improved financial performance in the year as well as the Board's confidence for the business going forwards, balanced with the need to support its investment programme in line with the strategic plan of the Company. Consistent with prior interim periods, the Directors propose no interim dividend (2021: nil).

Investment

The Company's investment in fixed assets continues with £1.92m recorded in the year ended 30 June 2022, and a further £1.067m in the first half of the new financial year. Key investments in tangible assets totalling £0.44m in the first half of the year included a new Bactoscan machine for milk testing and an additional liquid handling platform.

Investment in intangible assets of £631,000 is primarily associated with the development of the platform to support genomics testing and GenoCells licence for NMR's plans to launch GenoCells in the US market.

Cash flow and Debt

Overall net debt has decreased to £0.9m (2021: £1.1m), after an increased dividend payment to shareholders totalling £0.42m (2021: £0.31m).

A further £150,000 has been repaid of the £0.75m loan taken under the Coronavirus Business Interruption Loan Scheme together with £486,000 repaid of the bank loan taken in June 2017 which is due to be fully repaid by December 2024.

Key Personnel

NMR's managing director, Andy Warne, is currently undergoing a period of cancer treatment. Finance Director Mark Frankcom has assumed operational control of NMR on an interim basis with the full support of the rest of the Board and Executive Leadership Team.

Outlook

Trading for the first half the financial year has been positive with many sectors of the business continuing to perform well. Significant input inflation has affected costs and NMR has increased prices for its services, across the board, to maintain margins. The employment market is also creating pressure on wages and NMR remains determined to secure the talent it requires in a competitive market. Cash generation remains strong and the Company will continue to invest in its key strategic priorities alongside revenue investments such as marketing campaigns for GenoCells.

Across the UK dairy industry, milk prices have declined from their peak, although remain c.50% above the average over recent years, with many reductions already announced for deliveries in the first quarter of 2023. Inflation has led to a scenario where marginal decision making for farmers carries more risk: higher costs for investment and higher input costs are making the need for robust data insights becoming ever more important. Furthermore, maximising the efficiency of a herd is the single most direct route for the dairy industry supply chain to achieve its sustainability objectives.

About NMR

NMR is the leading agri-tech 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 1.8 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.

NMR plc - Consolidated Statement of Comprehensive Income

NMR plc - Consolidated Balance Sheet

NMR plc - Group Statement of Cash Flows

**ENDS**