National Milk Records (NMRP) – Bullish full year results

National Milk Records (NMRP) – Bullish full year results

Further to Part 1 of my article on National Milk Records (NMRP), the company has today released its full year results for the year ended 30 June 2018.

A useful update from MD Andy Warne courtesy of the ‘Core Finance’ YouTube channel is provided at this link.

This is the company’s first set of full year numbers since exiting the Milk Pension Fund (MPF); the comparative numbers for 2017 covered a 15-month period.


  • Turnover is up circa 10% at £21.4 million (2017 – £19.5 million)
  • Operating profit is up circa 72% at £1.9 million (2017 – £1.1 million)
  • Net income of £1.83 million giving diluted EPS of 8.6p (2017 – loss)
  • Introduction of a 2.5p dividend (yielding circa 2.3% and covered 3.5 x)
  • Shareholders Equity / NAV – £2.4 million

This is a great set of results which has benefitted from management focusing on what their customers want and delivering new/enhanced services, an example being their screening services for Johne’s disease which has seen the number of herds screened rise by 28% from 2017.

Cash Cow

As highlighted in Part 1, the NMR core business of Milk Recording and Testing is very cash generative; some of this cash being channelled back into the business to improve its IT and laboratory equipment upgrades as well as funding new services.  Cash flow from operations (CFO) in 2018 was a very healthy £2.8 million.

Earnings Quality

One of the attractions for me when investing in NMRP was a chunky gross profit margin which, at over 50%, is nicely above my own preference of 40%+. Operating profit margins are also reasonably healthy at circa 9% but the operational gearing of the business should see this margin move strongly into double figures going forward.

Other signs of the very high quality of earnings are:

  • ROE: 75%
  • ROIC: 34%
  • ROCE: 33%

Lots to like here and the introduction of a dividend gives some flavour to the confidence of the management in the earnings stream.

Balance Sheet Strength

Given the 2017 fund raise to exit the MPF, the balance sheet is decent with net assets growing to £2.44 million (2017 – £0.55 million), cash of £1.55 million, freehold property and a strong current ratio of 1.43.

Whilst the company has some debt (circa £3 million) in the form of bank loans (some of which were to fund the MPF exit), these are being paid down quickly with £1 million in repayments during 2018.

Whilst total debt/equity is still high at around 3x, net debt (financial debt with interest being paid) / equity is only 0.7 which I am perfectly comfortable with and the balance sheet is only going to improve further moving into 2019.


With net earnings of £1.8 million giving EPS of 8.6p, the historic PE sits at around 12. With no broker forecasts, investors must take a stab at 2019 earnings. With operating leverage of around 6x, a 1% increase in sales = 6% increase in operating profit, so assuming a modest 8% increase in turnover for 2019 could see operating profit well in excess of £2.5m putting the PE down into single figures.

Although Price / Book  is very lofty at 9.4x this is not really a fair metric given the low starting base of shareholders equity due to the MPF exit.

Sales in 2018 of £21.4 million of gives a Price/Sales ratio of around 1.1x.

Overall, hardly challenging metrics for an increasingly data-driven business in growth mode with strong free cash flow to fund it.


I previously highlighted the duopolistic nature of the NMR business and its long-standing integral connection with the dairy industry. This is going to stand it in very good stead as a trusted supplier of new services as it continues to invest and grow and whilst risks are always present, investors will be looking to the Board to leverage the positive market outlook.

I am pleased to see that that NMR will be presenting at the upcoming Mello London event being held on 26th / 27th November 2018 at the Clayton Hotel, Chiswick. A great chance to meet the management!


At the time of publication, the author holds a long position in NMRP.

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