Dairy herd monitoring business NMR, in which thousands of milk producers have a stake, says it is on track for future profitability despite slipping well into the red during the last financial year.
Figures released on 17 November for the year ending 31 March, 2005, show a loss of almost 1.7m, compared with a profit of 561,000 in 2004.
But managing director Andy Warne said: “The results do look awful, but that is because of exceptional costs.”
Mr Warne said the firm’s board had written off about 1.3m of its investment in subsidiary Smartronics, which measures tyre performance using radio frequency identification systems.
Even though new customers were in the pipeline, it was not realistic to expect a return on the money in the short term, he said.
But Mr Warne was still confident that the RFID business would pay eventually, especially if EU plans to introduce compulsory electronically readable tagging of all livestock by 2008 were enforced.
This could generate 3m-5m annually for NMR subsidiary Smartstock, he said.
A further 412,000 was written off due to exceptional administrative expenses, including early retirements.
But turnover at NMR’s core business – sampling and analysing individual cow performance – rose from 11.2m to 13.1m.
This followed the acquisition of Scottish Milk Laboratories and the payment testing division of Direct Laboratories, said Mr Warne.
And even though the exodus from the dairy sector was likely to continue, said Mr Warne, he was upbeat about future profitability.
“The customers left in the industry have good economies of scale, good yields and are developing into sustainable businesses.
They are the ones that need our type of service.”
But shareholder apathy might hold the business back, said Mr Warne.
Most of the business’s 26,000 shareholders were farmers who received their shares after the break up of the Residual Milk Marketing Board.
The average holding is worth only 30 and many did not even know they had the shares, said Mr Warne.
Trading NMR shares, listed on an offshoot of the junior OFEX exchange, was difficult and, at 57p, their value was languishing at levels well below the company’s worth, said Mr Warne.
A buy-back scheme last year encouraged 1200 shareholders to sell their shares and another is planned.
Mr Warne said if this did not produce enough liquidity a compulsory scheme might have to be considered.