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A great British story February 2018 1 Disc iscla laim imer This - - PowerPoint PPT Presentation

A great British story February 2018 1 Disc iscla laim imer This presentation has been prepared by National Milk Records plc ("the " Company ") and is for information purposes only. This presentation does not constitute an


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A great British story

February 2018

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Disc iscla laim imer

This presentation has been prepared by National Milk Records plc ("the "Company") and is for information purposes only. This presentation does not constitute an

  • ffering document or an offer of transferable securities to the public in the UK. This presentation is not intended to provide the basis for any credit or other evaluation of

any securities of the Company and should not be considered as a recommendation, invitation or inducement that any investor should subscribe for, dispose of or purchase any such securities or enter into any other transaction with the Company or any other person. The merits and suitability of any investment action in relation to securities should be considered carefully and involve, among other things, an assessment of the legal, tax, accounting, regulatory, financial, credit and other related aspects of such securities. This presentation is not a financial promotion, and nor has it been approved as such, for the purposes of section 21 of the Financial Services and Markets Act 2000 (‘‘FSMA’’). Reliance on the contents of this presentation for the purpose of engaging in any investment activity may expose you to a significant risk

  • f losing all of the property or other assets invested. If you are in any doubt about the contents of this document or the action you should take, you are

recommended to seek your own financial advice immediately from an appropriately authorised stockbroker, bank manager, solicitor, accountant or other independent financial adviser who, if you are taking advice in the United Kingdom, is duly authorised under the FSMA. This document may not be distributed, published, reproduced or otherwise made available to any other person, in whole or in part, for any purposes whatsoever. In particular, it should not be distributed to or otherwise made available to persons with addresses in Canada, Australia, Japan, the Republic of South Africa, the Republic of Ireland or the United States, its territories or possessions or in any other jurisdiction outside of the United Kingdom where such distribution or availability may lead to a breach of any law or regulatory requirements. The distribution of this document in other jurisdictions may be restricted by law, and persons into whose possession this document come should inform themselves about, and observe, any such restrictions. Any failure to comply with these restrictions may constitute a violation of the laws of the relevant jurisdiction. All views expressed in this presentation are based on financial, economic, market and other conditions prevailing as of the date of this presentation. The Company does not undertake to provide access to any additional information or to update any future projections, management targets, estimates or assessment of future prospects or any other forward-looking statements to reflect events that occur or circumstances that arise after the date of this presentation, or to correct any inaccuracies in this presentation which may become apparent. Past performance is not indicative of future results and forward-looking statements are not guarantees of future performance. No representation or warranty (express or implied) of any nature is given nor is any responsibility or liability of any kind accepted by the Company or any of its directors,

  • fficers, employees, advisers, representatives or other agents, with respect to the truthfulness, completeness or accuracy of any information, projection, representation or

warranty (expressed or implied), omissions, errors or misstatements in this presentation, or any other written or oral statement provided. In particular, no responsibility or liability is or will be accepted and no representation or warranty is or is authorised to be given as to the accuracy, reliability or reasonableness of any forward-looking statement, including any future projections, management targets, estimates or assessments of future prospects contained in this presentation, or of any assumption or estimate on the basis of which they have been given (which may be subject to significant business, economic or competitive uncertainties and contingencies beyond the control of the management of the Company). You should not place any reliance on forward-looking statements. Any such forward-looking statements have not been independently audited, examined or otherwise reviewed or verified and nothing in this presentation should be construed as a profit forecast. By accepting this document you will be taken to have warranted, represented and undertaken to the Company that: (a) you have read, agree to and will comply with the terms of this disclaimer; and (b) you will conduct your own analyses or other verification of the data set out in this document and will bear the responsibility for all or any costs incurred in doing so. You shall not use this presentation or the information contained herein in any manner detrimental to the Company.

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  • Leading UK agri-business operating in the dairy and livestock

data information services sector

  • Spun out of the Milk Marketing Board after its dissolution

in 1997

  • Supplies testing and analysis services along the supply chain to

maximise the production and quality of milk

  • Yield
  • Volume
  • Quality
  • Hygiene
  • Exited the Milk Pension Fund in June 2017
  • Clear, defined growth strategy
  • Strong and proven Board of Directors
  • Ability to grow in a recovering market

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An in introductio ion to NMR plc lc

  • Health
  • Adulterants
  • Genomics
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Operatin ing Se Sectors

GeneTracker

Genomics testing to optimise farmers herds and product.

National Milk Records

Leading supplier of milk recording services to diary farms. Provides management information on a cow’s performance.

National Milk Laboratories

Provides payment and quality testing for major milk processors and retailers.

Independent Milk Laboratories

Joint Venture with Progressive Genetics based in Ireland.

Nordic Star

Development business building service provision in the red meat sector.

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Co Corp rporate Overvie iew

29.70% 19.80% 13.90% 10% 6.60% 20% WCM LIC Utilico Genus plc High Net Worths Other

Nex Exchange Ordinary shares in issue NMRP 21,239,702 Share Price Market Cap. 92.5p (as of 20/02/18) £19.6 million (as of 20/02/18) Major Shareholders Share Price Graph

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Board of Dir irectors

Trevor Lloyd – Chairman

Trevor has over 10 years experience as a non-executive director on various dairy industry boards and is a partner in a dairy farming business, currently milking 380 cows in North Wales. He was appointed by the Minister for Farming to serve on the Milk Development Council from 2003-2007 and then Dairy Co. from 2006-2009 and was also Chairman of MDCel. He has extensive experience of agricultural politics serving for 15 years in various industry organisations including the National NFU Dairy Board, Welsh NFU Dairy Board and the NFU Welsh Council. Trevor is currently a regional director of the NFU Mutual Insurance Society Ltd.

Andy Warne – Managing Director

Andy joined NMR as the Managing Director in 2002 and at the same time joined the Milk Pension Fund acting as a Trustee. He acted as the Chairman of the Milk Pension Fund between 2009 and 2013. Andy’s previous managerial roles include the European Managing Director of TNT Container Logistics and Managing Director of Arca Systems UK. Andy graduated with a BSC in Applied Biology. Whilst at NMR Andy has managed the process by which the business has restructured to focus on its core competence in milk recording and built a new business offering based on payment testing.

Mark Frankcom – Finance Director

Mark joined NMR in September 2016. He qualified as an accountant in 1993, and has experience across a broad range of industries, including FMCG, telecoms and motor trade. In 2005 Mark joined Milk Link as a Director of Finance, having senior responsibility for financial stewardship and restructuring during a time of critical changes in the UK dairy

  • industry. More recently Mark has been co-owner and Managing Director of an award-winning micro-brewery. In 2008 Mark was admitted as a fellow of the institute of

management accountants becoming FCMA.

Philip Kirkham – Non-Executive Director

Philip has 35 years experience as a non-executive director in the agricultural sector. He is currently a non- executive director of the Wynnstay group Plc, an AIM listed diverse agricultural and retail supply business, Meadow Quality Ltd, a multi-species livestock marketing organisation and chairman of M & R Kirkham & Sons Ltd, a dairy farming business based in the West Midlands. He has been past non-executive chairman of Avoncroft Cattle Breeders Ltd and WQC.

Mike Gallacher – Non-Executive Director

Mike was CEO of First Milk Limited, the UK’s largest Dairy Cooperative, and Managing Director of Mars Petcare, part of Mars Inc. He also worked in regional leadership positions in both Asia Pacific and Europe. Mr Gallacher holds an honours degree in Economics and attended the Royal Military Academy Sandhurst, serving for eight years as a

  • Captain. Mike holds postgraduate qualifications from Cranfield University and Henley Management College.

Mark Butcher – Non-Executive Director

Mark has over 20 years experience working in the City, he was an executive director of GPG (UK) Holdings plc as well as a non-executive director for a number of public and private companies. He has wide experience in international accounting, corporate finance and banking transactions and has served on the Boards of Autologic Holdings plc, Newbury Racecourse plc and Nationwide Accident Repair Services plc. He graduated with a Bachelor of Commerce degree from the University of Cape Town and qualified as a Chartered Accountant in South Africa.

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Operatin ing Se Sectors

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Natio ional l Mil ilk k Records (N (NMR)

  • Provides testing and information services on an individual cow's performance
  • Through Assisted Recording, DIY Recording, DIY Yields and/or Essential Sampling
  • NMR test 50% of British farms and the data provides farmers the support to make informed decisions covering
  • Milk quality
  • Yield
  • Fertility
  • Disease
  • NMRs recording services reach the cows which produce 60% of the UK's milk
  • Supplies aggregated data to over 35 dairy industry bodies including
  • Milk buyers
  • AHDB Dairy
  • Breed societies
  • Retailers such as Tesco, Sainsbury and Marks and Spencer
  • Informs food provenance schemes
  • Continuous record management

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Natio ional l Mil ilk La Laboratorie ies (N (NML) L)

  • Receives bulk milk samples from 98% of UK diary farms for every collection of milk made by the milk

buyer

  • Established distribution network
  • Barrier to entry for potential competitors
  • Provides payment and quality testing for all major milk buyers
  • 100% of processors
  • Tests for fats, proteins and cleanliness
  • Informs payment to farmer
  • Works in partnership with NMR to help inform farmers on the health of UK diary herds
  • Hygiene, health and animal welfare
  • Provides assurance to the market
  • Runs national statutory testing programmes on behalf of DEFRA and the Foods Standards Agency

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In Independent Mil ilk La Laboratorie ies (iM iML)

  • Joint Venture with Progressive Genetics in Ireland
  • Testing up and down the supply chain
  • Same business model as NML and NMR
  • Provides BVD testing for the Irish national BVD eradication programme as well other disease testing, including

Johne’s

  • Developing market
  • Most payment testing in the south is done ’in-house’
  • The concept of independent testing at accredited labs will gain traction

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Nordic ic St Star

  • A key player in the animal identification market
  • Tagging for cattle, pigs, sheep, goats and deer
  • Supplies tags to various buying groups throughout the UK
  • Utilises knowledge from the milk sector to build service provision in the red meat sector
  • Tag and Test
  • Works with NML to test for BVD
  • Data provides the ability to improve efficiencies, traceability and food provenance
  • Considerable value can be added in these areas
  • Opportunity for growth
  • Commissioned by the Welsh Assembly Government to build a sheep EID database for the Supply

Chain Efficiency project, TAG

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GeneTracker

  • Genomics testing is used to speed up the genetic progress of herds
  • Identifies genetic potential of animals from an early age
  • Farmers can use to optimise their herd and product
  • Uses non-hair, non-tag sampling system
  • Reduces hassle
  • Reduces cross contamination
  • Improves welfare and accuracy
  • Sample subjected to genotype processing
  • Genomic evaluation data determine
  • Production
  • Health
  • Fertility
  • PLI
  • Type trait
  • Although widely used in America, there is no established market in the EU
  • One million tests sold in America
  • Opportunity for significant growth
  • Potential UK market of up to 200,000 tests

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Mil ilk Pensio ion Fund Exi xit

  • Transformational strategic move
  • Exited a multi-employer defined benefit pension fund
  • NMR plc withdrew from the Milk Pension Fund in June 2017 which consisted of:
  • £10.13 million cash payment to the Trustees of the Fund
  • Payment of £4.68 million to Genus, satisfied in cash and by the issue of 2,120,000 shares in

NMR, in return for Genus assuming NMR’s liabilities to the Fund

  • Sale of NMR plc’s subsidiary, Inimex, to Genus
  • Entering in to a collaboration agreement with Genus
  • The cash elements were met by a £7.33 million equity raise, from existing resources and from a

new bank facility

  • Contributions for the coming nine years were expected to be £10.2 million
  • The exit has removed the possible obligation to contribute to the Fund up to 2076
  • Opens a platform to grow the business
  • Focus on commercial and strategic development
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Th The Growth St Strategy

  • NMR has a clear and defined growth strategy
  • Mathematical business model with modest gearing and capital growth

projecting a market capitalisation of £60 million – based on 10 times EBITDA multiple

  • Deliver a sustainable EBITDA of between £3 million to £3.5 million, based

largely on existing propositions, and a dividend yield of 2%

  • Organic growth / M&A
  • Ability to grow service offering and customer base using a

cash-generating and four cell model to evaluate targets

  • Existing services / new services to existing customers
  • Existing services / new services to new customers
  • Key drivers for growth
  • Anti-microbial and health/disease testing
  • Genomics
  • Data analytics
  • Testing in the beef sector
  • To help deliver this growth, NMR will implement an investment programme in

its staff and operations, including upgrades to:

  • IT infrastructure
  • Equipment
  • Internal capabilities
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Mark rket Outlo look

  • Recovering market
  • Opportunity to develop and increase service offering
  • A measured increase in famers’ confidence
  • Non-seasonal
  • Consistent demand
  • Cannot import liquid milk from overseas
  • Supermarkets highest grossing Stock Kept Unit (grocery item) is liquid milk
  • Brexit
  • The UK’s exit from the European Union will have a limited impact on the liquid milk market
  • Not seen by management as a negative
  • Access to funding for the sector is already limited in the Single Market
  • NMR to continue to implement its growth strategy
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NMR plc lc Fina inancia ials ls

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A Fina inancia ial l Overv rvie iew

Key Fundamentals

  • Cost to farmer is typically £15 per cow per annum
  • The average cow produces £2,500 worth of milk per annum and milk recording enables a

potential 10% increase in production

  • Non-recorded herds tend to produce 30% less milk
  • One million bulk milk tests carried out per annum for processors
  • Supermarkets do not pay NMR directly for milk testing services
  • Supermarkets are increasingly asking its suppliers to milk record, to test for hygiene, health

and provenance

  • Testing services and results are provided to the milk processors who manage the direct supply

milk pools on behalf of the retailers

Interim Results

  • Maiden set of results following pension fund exit
  • Approximately £1 million cash saving per annum
  • Revenue of £10.5 million
  • EBITDA of £1.2 million
  • Operating Profit of £1.0 million
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Fin inancia ial l Su Summary ry

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6ME 6ME 6ME £'000 31-Dec-17 30-Jun-17 31-Dec-16 Turnover 10,532 10,474 9,875 EBITDA 1,187 965 673 Adjusted EBITDA (*) 1,187 1,037 845 Adjusted EBITDA % 11.3% 10.3% 9.0% EPS (pence) 3.7

  • 140.9

4.9 Net Assets 1,043 270 2,558 Net Debt

  • 3,311
  • 4,130

1,809 Net Debt: EBITDA (times) 1.4 2.0

  • 1.1

(*) Adjusted EBITDA and Adjusted EBITDA % exclude earnings and revenues for Inimex Genetics and so compare on a like-for- like basis

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Ba Bala lance Sh Sheet

As at 31-Dec-17 As at 31-Dec-16 Var As at 30-Jun-17 £'000 £'000 £'000 £'000 Non-Current Assets 3,461 3,686

  • 225

3,427 Current Assets 5,372 5,731

  • 359

5,381 Total Assets 8,833 9,417

  • 584

8,808 Current Liabilities

  • 4,219
  • 3,497
  • 723
  • 4,934

Non-Current Liabilities

  • 3,571
  • 3,362
  • 208
  • 3,604

Total Liabilities

  • 7,790
  • 6,859
  • 931
  • 8,538

Net Assets 1,043 2,558

  • 1,515

270 Funded by Share Capital & Reserves 9,377 852 8,525 9,377 Profit and Loss Account

  • 8,334

1,706

  • 10,039
  • 9,107

Shareholders' funds 1,043 2,558

  • 1,515

270

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Ca Cash Flo low

6ME 31-Dec-17 6ME 31-Dec-16 Var 15ME 30-Jun-17 £'000 £'000 £'000 £'000 Cash from operations before Milk Pension Fund 1,085 600 485 (9,581) Milk Pension Fund payments / settlements

  • (457)

457 (3,500) 1,085 143 942 (13,081) Cash flows from investing activities (198) (295) 97 (977) Cash flows from financing activities (582) (110) (472) 12,112 Net increase in cash and cash equivalents 305 (263) 567 (1,946) Cash at beginning of period 459 2,645

  • 2,405

Cash at end of period 764 2,383 567 459

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In Investment Ca Case

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In Investment Ca Case

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Strong management team Platform for growth

Exit from Milk Pension Fund

Improving market outlook

Increasing customer confidence

Market leading UK Agri-business

Trusted and longstanding brand Reliable, steady income streams

Clear, defined growth strategy

Organic growth M&A Increasing services & customer base

Limited susceptibility to UK exit from European Union

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Co Contacts

Andy Warne, Managing Director +44 (0) 7970 009 141 andreww@nmr.co.uk Mark Frankcom, Finance Director +44 (0) 7458 002 444 markf@nmr.co.uk Peterhouse Corporate Finance Limited Mark Anwyl Duncan Vasey +44 (0) 20 7469 0930 Blytheweigh (Financial PR) Megan Ray Rachael Brooks +44 (0) 20 7138 3204

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