Profits dip fails to dent Wiseman growth plans

ROBERT Wiseman Dairies has announced two new capital projects and increased its full-year dividend, but warned that its profit margins are set to fall.

The East Kilbride-based group yesterday reported an 8.6 per cent fall in adjusted operating profit to £35.1 million for the year to 4 April. It said the decline came after its margins were eroded in the first half as it delayed reducing the price it pays to farmers for milk after the price it is paid by retailers fell.

Despite this, the group increased its total dividend by 1p to 15p a share yesterday. Chairman Alan Wiseman, whose father founded the company, said overall the results were "satisfactory" after the FTSE 250 company increased margins from 1.74p per litre (ppl) in the first half of the year to 2.55ppl in the second.

But the group warned margins were likely to fall again this year to around the 2.17ppl level because of "pressure on costs and ongoing competitive pressures". With Wiseman losing part of its business with Tesco this year, it faces pressure in the short term before contracts with the Co-Operative Group boost volumes from August.

Shares opened 6 per cent lower, but recovered to close up 0.75p at 355.75p.

Despite the pressures on margins, Wiseman is pushing ahead with two substantial projects, including an expansion at its newest factory in Somerset. It is spending £7.5m increasing the capacity at its Bridgwater factory by 50 per cent to 375 million litres a year from 2010.

The factory was designed with the option to expand capacity in two stages to 500 million litres.

A spokesman said the plant had already eased the pressure and provided headroom for growth at its factories in the Midlands, Manchester and Scotland. "We're slightly ahead of where we thought we would be at Bridgwater and we're pleased to get to the this phase to spend some more money getting to the next stage."

Wiseman also unveiled plans for a new £9.7m depot in Amesbury in Wiltshire. It is expected to be completed late in 2009 and will be used to service Wiseman's customers in London and the south-east of England.

The group continued to pick up contracts, announcing that it will supply Cappers, a wholesale business owned by Spar, with around 15 million litres of milk a year from June. The contract was picked up from Dairy Farmers of Britain, the troubled English co-operative that recently lost a large chunk of its business with the Co-Operative Group, with most of that work passed to Wiseman.