National Milk Records plc

June 16, 2014 02:00 ET

Audited Final Results

                                                                                                      16 June 2014
                                             National Milk Records plc
                                             ('NMR' or 'the Company')
                                               Audited Final Results
National  Milk  Records  plc,  the ISDX-quoted leading supplier of dairy and livestock  services,  is  pleased  to
announce its results for the year ended 31 March 2014.

    *       Profit before taxation of GBP 1.2 million (2013 GBP 0.8 million)
    *       28%  increase in operating profit to GBP 893,000 - driven by operational savings resulting  from  the
            previous investment in Four Ashes site
    *       Positive year-end cash position and no borrowings
    *       Strengthened Board through appointment of operational personnel
    *       Continued focused on growth through the provision of significant products and services to existing 
            markets and to expand into new areas that build on competencies and customer interests

NMR Managing Director Andy Warne said, "These results highlight the enhanced financial position of the Company and
underline the solid nature of our business model.  Consolidating our facilities has improved the efficiency of the
business  and allowed us to repay our debt.  We have a strong market presence and are well-placed to continue  our
growth and deliver further value for shareholders."

Chairman's Statement

The financial year ended 31 March 2014 has been a year in which NMR has delivered the promised operational savings
resulting  from  the  previous  investment in our new site at Four Ashes. During the  year  our  operating  profit
increased  by 28% to GBP 893,000 (2013: GBP 698,000) and we have used our improved cash position to  pay  off  the
debt  of GBP 1,201,000 incurred in building the Four Ashes site and set up costs for Independent Milk Laboratories
in Ireland.  On 31 March 2014 the Group had GBP 1,443,000 (2013: GBP 1,303,000) of cash at the bank and no further
borrowings. The Group's Diluted Earnings per Share for the year ending 31 March 2014 has increased to  9.61  pence
per share from 4.65 pence per share for the year ended 31 March 2013.

This  strong  operating  performance is tempered by the worsening position of the defined benefit  pension  scheme
deficit before deferred tax asset which increases to GBP 8,252,000 (2013: GBP 6,774,000). The difference is caused
by  incorporating  the  detail of our actual individual pensioner experience rather than estimates  based  on  the
previous  triennial valuation and strengthening the longevity provisions. The NMR Board is acutely  aware  of  the
impact  the pension obligations have on the business and is working to mitigate the impact whilst recognising  the
Group's commitments to pensions and deferred pensioners.

In August 2013 our Vice Chairman, Mr Ian Smith, died following a short illness which kept him from the Board room.
I  would  like  to  acknowledge the contribution Ian made during his time on the Board. Trevor Lloyd,  who  is  an
existing Non-Executive director, has been elected by the Board as the new Vice Chairman. During the period we have
improved  the  balance  of Executive to Non-Executive Directors and have welcomed both  Mr  Ben  Bartlett  and  Mr
Jonathan  Davies to the Board. Both Ben and Jonathan join the Board from the current NMR organisation  where  they
have  been  senior  managers for a number of years. We also welcome Mr Mark Butcher, who joins  the  Board  as  an
Independent Non-Executive Director with a wealth of commercial experience. Mark has taken on the role of  Chairman
of  the Audit Committee previously held by Ian. We would like to thank Mrs Janina Marshall and Mrs Sandra Pope for
their  contribution to the NMR Board during their tenure as Non-Executive Directors. Biographies of  each  of  the
current  NMR  Directors  can  be  found on the NMR website at Whilst  the  reported  year  on  year
comparison of Board costs appears to have increased as a result of the replacement of two Non-Executive  Directors
with  two  Executive  Directors,  the new Directors were already members of the  Senior  Management  team  so  the
incremental impact of their directorships is not as significant as it may appear.

A  more  detailed analysis of our business performance is detailed in the Strategic Report. I would like to  thank
our shareholders for their continued support and all our employees for their hard work during the year.

Philip Kirkham

13 June 2014


To the members of National Milk Records Plc


This  Strategic Report has been prepared solely to provide additional information to shareholders  to  assess  the
Company's strategies and the potential for those strategies to succeed.

The  Strategic Report contains certain forward-looking statements.  These statements are made by the directors  in
good  faith  based on the information available to them up to the time of their approval of this report  and  such
statements should be treated with caution due to inherent uncertainties, including both economic and business risk
factors, underlying any such forward-looking information.

The directors, in preparing this Strategic Report, have complied with s414C of the Companies Act 2006.

This  Strategic  Report has been prepared for the Group as a whole and therefore gives greater emphasis  to  those
matters which are significant to National Milk Records Plc and its subsidiary undertakings when viewed as a whole.

The business model

The  principal activity of the group in the year under review was the provision of management information to dairy
farmers  via  National Milk Records (NMR) and the provision of milk payment testing services to  milk  buyers  via
National  Milk  Laboratories  (NML). Both these services have achieved relatively  high  market  shares  in  their
respective  UK  sectors. Single digit organic growth is planned by launching new services  to  existing  customers
along with development of new farmer customers in geographic territories where market share is relatively low such
as  Scotland and Northern Ireland. The advent of national control programmes for bovine diseases such  as  Johne's
and Bovine Viral Diarrhoea (BVD) create opportunities for both NMR and NML to develop new testing services.

Business Area          New services available in 2014/15
NMR                        *       Pregnancy testing
                           *       Energy balance monitoring
                           *       Individual cow Neospora testing

NML                        *       Every-day testing for farmers
                           *       Fatty acid profiling and energy balance monitoring
                           *       BVD testing by Polymerase Chain Reaction (PCR)
                           *       New range of tests for mastitis pathogens
                           *       Accredited BVD testing using ear tissue samples

The  Group  currently  also has two areas of significant potential revenue growth. Independent  Milk  Laboratories
(iML)  is  a  joint venture in Southern Ireland which replicates NML's payment testing services  in  a  market  of
comparable size to that of the UK.  National Livestock Records (NLR) is a wholly owned subsidiary which  currently
sells  identification  tags  to  dairy, beef and sheep farmers but is also engaged in  development  of  management
information  services to both the beef and sheep sectors. The combined turnover from iML and NLR is currently  GBP
1,209,000, just 6% of the Group's total. Improvement in turnover in both iML and NLR is likely to generate a  step
change in revenue growth. The business model of iML and NLR is largely Business to Business (B2B) in nature.

A fair review of the business

The  focus  of  activity in the previous two periods has been the investment in our new operational site  at  Four
Ashes  and  the  closure  of the three sites at Harrogate, Wolverhampton and Meaford.  Four  Ashes  is  now  fully
operational and operational savings have been delivered.  The Group's operating profit has increased by 28% to GBP
893,000  (2013:  GBP 698,000). Total turnover (including share of the joint venture) in the same period  has  been
largely  flat at GBP 19,212,000 (2013: GBP 18,828,000) although the mix of revenue has changed during the  period.
Revenue  in  both NMR and NML is increasing in line with our planned organic growth; however these  increases  are
masked by lower sales of heat detection systems which we believe was caused by macro-economic factors in the dairy
sector  resulting from poor cash flow in farming businesses during the first nine months of the period. We believe
the improving prospects for dairy farming businesses in 2014 will improve this situation.

Future developments

The  directors will continue to focus on the core business of the Company and its subsidiary undertakings,  whilst
looking to take advantage of new opportunities as they arise.   In general terms the Board believes overall market
dynamics  in  the  UK and Irish dairy sectors are favourable which will increase demand for its  products.  Global
demand for dairy products remains strong driven principally by new consumer demand from developing markets such as
China. This global consumer demand for dairy products will help support the milk price in the UK which adds  value
to  the  services  provided  by  the NMR Group. This value is further supported by  increased  awareness  of  food
provenance in the UK following the horse meat scandal.

The  NMR  Group  continues to build strategic relationships with food retailers, food suppliers  and  agricultural
bodies to strengthen its value proposition within the food chain. The consolidation process in the UK dairy sector
by  which  fewer  dairy farmers tend to have larger, more professionally managed herds creates  demand  for  NMR's
management  information services. This same consolidation process also creates an opportunity for NMR  to  broaden
its product range as other suppliers find a third party distribution channel is more efficient.

Strategy and objectives

NMR's  market share in the milk recording sector varies between geographic areas between 6% and 64% and  areas  of
lower  market share such as Scotland represent opportunities to grow. In areas of higher market share our strategy
is  to sell additional products to existing customers. Competition is active and challenging in the milk recording
sector as well as new product sectors such as heat detection. NMR seeks to differentiate its products by improving
service levels.

NML  has a 100% market share of the quality testing sector which covers any dairy farmer who sells milk to a third
party.  Competition in this sector is also challenging and there are a number of companies who have the capability
and  capacity  to  enter  the market. NML has a number of growth opportunities largely  based  on  increasing  the
frequency and depth of the quality testing suite of tests.

In  both sectors the Group has growth strategies as well as defensive strategies. The Group aims to extend  market
share  by  continually  providing useful and significant products, services and solutions to  markets  it  already
serves and to expand into new areas that build on the Group's competencies and customer interests.  The Group aims
to be influential in the markets in which it operates.

Key performance indicators

The  directors monitor the Group's progress against its strategic objectives and the financial performance of  the
Group's  operations on a regular basis. Details of the most significant key performance indicators (KPIs) used  by
the Group are as follows:

Turnover (growth)

NMR  views  change  in  the market as an opportunity to grow, and to use its profits and ability  to  develop  and
produce innovative products, services and solutions that satisfy emerging customer needs. Growth comes from taking
considered  risks, based on the state of the industry, but also in inducing change in the industry  in  which  NMR

For  the year ended 31 March 2014, Group turnover (including share of the joint venture) was GBP 19,212,000 (2013:
GBP  18,828,000), which represents a 2% increase on the previous year.  NMR has been focusing on  stabilising  its
traditional core business and developing new innovative products and services which should lead to turnover growth
over the next few years.


In  order to be successful, NMR needs to achieve sufficient profit to finance growth, create value for the Group's
shareholders and provide the resource needed to achieve any of the Group's other objectives.  For the  year  ended
31 March 2014, gross profit was GBP 6,383,000, equivalent to 34% gross margin. This was up 17% from the year ended
31  March  2013 (GBP 5,446,000, equivalent to 30% gross margin).  Operating profit was GBP 893,000 representing  a
28% increase on the previous year (2013: GBP 698,000).

Laboratory processing time

NMR  seeks  to  differentiate its products by improving service levels. An example of improving  service  is  that
during  2014 the average laboratory processing time for milk recording samples arriving in the laboratory was  5.5
hours, compared to 8.5 hours in 2013.

Principal risks and uncertainties

The  Group  operates  a  risk management system that evaluates and prioritises risks and  uncertainties.  This  is
principally a function of the Board of Directors lead by the Executive team with oversight by the Audit Committee.

There is a range of risks and uncertainties facing the Group.  The list below is not intended to be exhaustive and
focuses  on those specific risks and uncertainties that the directors believe could have a significant  impact  on
the Group's performance, as analysed by its key performance indicators.

Market conditions and competitive pressures

The  Group  operates in a number of different markets that are influenced by economic cycles, the  health  of  the
agricultural market, changes in government legislation and environmental factors.  These can all lead  to  changes
in profitability of our customers and demand patterns for our products and services.

Through an experienced management team, board oversight and commitment to developing products that are focused  on
customers' requirements, the Group addresses the risks of increased competition in developed and emerging  markets
by  protecting and growing market share and margins in increasingly price sensitive areas.  Where emerging markets
are  identified  a joint venture business model has been used after careful selection of appropriate  partners  to
reduce the risk associated with entering these new markets.


The  Group is exposed, along with others, to the risk of failure of a third party member of the Milk Pension  Fund
under  its  joint and several terms as well as exposure to costs that result from external factors  impacting  the
size of the pension deficit (e.g. mortality rates, investment values).

This  area  is  actively  managed  at  Board level with appropriate external advice  and  agreement  of  actuarial
valuations  and  deficit reduction plans with the pension trustees.  Investment strategies are  reviewed  and  the
joint and several liability in the Milk Pension Fund is regularly monitored by the Board of Directors.

The  Group's activities expose it to limited foreign currency exchange risks due to use of European suppliers  and
its joint venture based in Ireland.

The  Group's objective is to produce continuity of funding at a reasonable cost.  To do this it seeks  to  arrange
committed funding that matches the assets or working capital it is designed to fund.  Funding comes from a limited
number  of providers. The Group finances its operations by a mixture of short term overdrafts and finance  leases,
having  paid off its bank loan in the year.  It manages its interest rate risk primarily through the use of  fixed
rate  finance leases, matched against the assets being acquired.  It does, however, have a floating rate overdraft
facility  to manage day to day working capital requirements. The Group does not enter into speculative  derivative

The  Group's principal finance assets are bank balances, trade and other receivables. The Group's credit  risk  is
primarily  attributable to its trade receivables. The amounts presented in the balance sheet are net of allowances
for doubtful receivables. An allowance for impairment is made where there is an identified loss event which, based
on previous experience, is evidence of a reduction in the recoverability of cashflows.

The  credit risk on liquid funds is limited because the counterparties are banks with high credit-ratings assigned
by international credit-rating agencies.

The  Group  has  no  significant  concentration of credit risk, with  exposure  spread  over  a  large  number  of
counterparties and customers.

Other risks

The  risk  of  failure  to attract or retain skills and experience within the Executive and  Management  teams  is
managed  by external consultation on Executive and Senior Management pay levels led by the Remuneration  Committee
that also monitors senior management performance.

Business  continuity plans are in place for IT systems and all key locations to address the risks associated  with
loss of capability in these areas.


This report was approved by the Board of Directors on 13 June 2014 and signed on its behalf by:

Mr A J Warne

13 June 2014

Year ended 31 March 2014

                                                                                             2014             2013
                                                                                         GBP '000         GBP '000

Group and share of joint ventures                                                          19,212           18,828
Less: share of joint ventures' group turnover                                               (545)            (415)
                                                                                    _____________    _____________
                                                                                           18,667           18,413

Cost of sales                                                                            (12,284)         (12,967)
                                                                                    _____________    _____________
Gross profit                                                                                6,383            5,446

Administrative expenses                                                                   (5,490)          (4,748)
                                                                                    _____________    _____________
OPERATING PROFIT                                                                              893              698

Share of operating profit/(loss) in joint ventures                                             88             (11)

Profit on sale of tangible fixed assets                                                         -              243
Costs of fundamental restructuring of continuing operations                                     -            (246)
                                                                                    _____________    _____________
PROFIT ON ORDINARY ACTIVITIES BEFORE FINANCE CHARGES                                          981              684

Finance charges (net)                                                                         202              137
                                                                                    _____________    _____________
PROFIT ON ORDINARY ACTIVITIES BEFORE TAXATION                                               1,183              821

Tax on profit on ordinary activities                                                        (485)            (486)
                                                                                    _____________    _____________
PROFIT FOR THE FINANCIAL YEAR                                                                 698              335
                                                                                    _____________    _____________

Earnings per share expressed in pence per share (note 9)

Basic                                                                                        9.99             4.83
Diluted                                                                                      9.61             4.65
                                                                                    _____________    _____________

The profit and loss account has been prepared on the basis that all operations are continuing operations

Year ended 31 March 2014

                                                                                             2014             2013
                                                                                         GBP '000         GBP '000

PROFIT FOR THE FINANCIAL YEAR                                                                 698              335

Actuarial losses on pension scheme                                                        (1,858)          (2,097)
Movement on deferred tax relating to pension scheme                                           371              482
                                                                                    _____________    _____________
TOTAL RECOGNISED GAINS AND LOSSES FOR THE YEAR                                              (789)          (1,280)
                                                                                    _____________    _____________

At 31 March 2014

                                                                           2014                          2013
                                                              GBP '000      GBP '000         GBP '000     GBP '000
Goodwill                                                                           -                            31
Tangible assets                                                                3,185                         3,669
  Interest in joint venture
    Share of gross assets                                          270                            254
    Share of gross liabilities                                    (61)                          (133)
                                                         _____________                  _____________
                                                                                 209                           121
  Other investments                                                                5                             5
                                                                       _____________                 _____________
                                                                               3,399                         3,826

Stock                                                              244                            554
Debtors                                                          1,848                          1,821
Cash at bank and in hand                                         1,443                          1,303
                                                         _____________                  _____________
                                                                 3,535                          3,678
  WITHIN ONE YEAR                                              (2,763)                        (2,967)
                                                         _____________                  _____________
NET CURRENT ASSETS                                                               772                           711
                                                                       _____________                 _____________
TOTAL ASSETS LESS CURRENT LIABILITIES                                          4,171                         4,537

  AFTER ONE YEAR                                                               (452)                       (1,606)

PROVISIONS FOR LIABILITIES                                                     (342)                         (185)
                                                                       _____________                 _____________
NET ASSETS EXCLUDING PENSION LIABILITY                                         3,377                         2,746

PENSION LIABILITY                                                            (6,602)                       (5,216)
                                                                       _____________                 _____________
NET LIABILITIES                                                              (3,225)                       (2,470)
                                                                       _____________                 _____________

Called up share capital                                                          742                           735
Share premium                                                                     25                             -
Share option reserve                                                              22                            20
Profit and loss account                                                      (4,014)                       (3,225)
                                                                       _____________                 _____________
SHAREHOLDERS' DEFICIT                                                        (3,225)                       (2,470)
                                                                       _____________                 _____________

Year ended 31 March 2014

                                                                           2014                          2013
                                                              GBP '000      GBP '000         GBP '000     GBP '000

Net cash inflow from operating activities                                      1,989                         1,102

Return on investment and servicing of finance                     (61)                           (78)
Taxation                                                         (240)                           (25)
Capital expenditure and financial investment                     (188)                            773
Equity dividends                                                     -                          (147)
                                                         _____________                  _____________
                                                                               (489)                           523
                                                                       _____________                 _____________
Cash inflow before management
  of liquid resources and financing                                            1,500                         1,625

Financing                                                                    (1,360)                         (458)
                                                                       _____________                 _____________
Increase in cash in the year                                                     140                         1,167
                                                                       _____________                 _____________

Basic  earnings  per  share is calculated by dividing the earnings attributable to ordinary  shareholders  by  the
weighted average number of ordinary shares outstanding during the period.

Diluted  earnings  per  share is calculated using the weighted average number of shares  adjusted  to  assume  the
conversion of all dilutive potential ordinary shares.

The  shares  held  by the Employee Share Option Plan are deducted from total shares in arriving  at  the  weighted
average number of ordinary shares used in the earnings per share calculation.

Reconciliations are set out below.
                                                                                              average     Earnings
                                                                            Earnings           number    per share
                                                                            GBP '000        of shares        pence
Basic EPS
Earnings attributable to ordinary shareholders                                   698        6,989,779         9.99
Effect of dilutive securities
Options                                                                            -          270,000            -
                                                                       _____________    __________________________
Diluted EPS
Adjusted earning                                                                 698        7,259,779         9.61
                                                                       _____________    __________________________

                                                                                              average     Earnings
                                                                            Earnings           number    per share
                                                                            GBP '000        of shares        pence
Basic EPS
Earnings attributable to ordinary shareholders                                   335        6,938,780         4.83
Effect of dilutive securities
Options                                                                            -          270,000            -
                                                                       _____________    __________________________
Diluted EPS
Adjusted earning                                                                 335        7,208,780         4.65
                                                                       _____________    __________________________
There have been no other transactions involving ordinary shares or potential ordinary shares between the reporting
date and the date of completion of these financial statements.

Group                                                                                        2014             2013
                                                                                        GBP '000         GBP '000
At beginning of year                                                                      (2,470)          (1,051)
Shares issued during the year                                                                  32                -
Profit for the financial year                                                                 698              335
Dividends                                                                                       -            (147)
Share option charge                                                                             2                8
Other gains and losses recognised in the year                                             (1,487)          (1,615)
                                                                                  ______________   ______________
At end of year                                                                            (3,225)          (2,470)
                                                                                  __________ ___   ______________

Going concern basis

The  Group's  business activities together with the factors likely to affect its future development,  cash  flows,
liquidity, performance and position are set out in the Strategic report.

The  Group meets its day-to-day working capital requirements through £1,443,000 of cash at bank (2013: £1,303,000)
and an overdraft facility of £700,000 which is renewable on an annual basis in October.

The  pension scheme deficit puts the Group in a net liabilities position, however, a recovery plan was  agreed  in
relation to the Milk Pension Fund (note 28), fixing future pension contributions. These have been included  within
the Group's cash flow forecasts.

The  Group's  forecasts and projections, which allow for reasonable possible changes in trading performance,  show
that  the Group has adequate headroom against the committed facility across the forecast period. As a consequence,
the  directors believe that the Group is well placed to manage its business risks successfully despite the current
uncertain economic outlook.

After  making  enquiries,  the directors have a reasonable expectation that the Group and  Company  have  adequate
resources to continue in operational existence for the foreseeable future.  Thus, they continue to adopt the going
concern basis in preparing the financial statements.

General Information
The basis of preparation of this preliminary announcement is set out below.

The financial information in this announcement, which was approved by the Board of Directors on 13 June 2014, does
not constitute the Company's statutory accounts for the years ended 31 March 2014 or 31 March 2013, but is derived
from these accounts.

Statutory  accounts for the year ended 31 March 2013 have been delivered to the Registrar of Companies  and  those
for  the  year ended 31 March 2014 will be delivered following the Company's Annual General Meeting.  The auditors
have  reported on those accounts; their reports were unqualified, did not draw attention to any matters by way  of
emphasis without qualifying their report and did not contain statements under S498 (2) or (3) of the Companies Act

Whilst  the financial information included in this preliminary announcement has been completed in accordance  with
United  Kingdom  Accounting  Standards  (United Kingdom Generally Accepted  Accounting  Practice  'UKGAAP'),  this
announcement itself does not contain sufficient information to comply with UKGAAP.

The financial information has been prepared on the historical cost basis.

Copies  of  the  announcement can be obtained from the Company's registered office at Fox Talbot House,  Bellinger
Close, Chippenham, SN15 1BN

It  is intended that the full financial statements which comply with UKGAAP, or summary financial statements where
the shareholder has elected to receive Summary Financial statements will be posted to shareholders on 16 June 2014
and  will  be  available  to  members of the public at the registered office of the Company  from  that  date  and
available on the Company's website:

Contact Information

  • National Milk Records plc