Investment Column: Wiseman's milk won't go off even in recession


Robert Wiseman Dairies

Our view: hold for now

Share price: 331.8p (+4.1p)

The mood of investors towards Robert Wiseman Dairies soured markedly in September when it issued a nasty profits warning and pinned the blame on yet another price war between the supermarkets and in the independent grocery sector.

Yesterday, the milk producer, which counts Tesco, Sainsbury's and the Co-operative Group among its customers, reiterated that it faced a "period of intense competition" which will inevitably squeeze margins as it churned out a 2.7 per cent fall in pre-tax profits to £21m for the six months to 2 October.

The company, based in East Kilbride, also confirmed its September guidance that this competition would hit its second-half profits by £7m and, assuming no improvement in margins or volume gains, by about £16m in the financial year to March 2012. All of this leaves a taste like a bad pint of Wiseman's product on a hot day.

But despite this, the company, which supplies just under a third of Britain's milk, said it was committed to maintaining its existing volumes, suggesting that it is prepared to stand shoulder-to-shoulder with its rivals Dairy Crest and Arla on price.

This was demonstrated by Wiseman's turnover, which increased by 6.8 per cent to £452.8m over the half year, driven by sales volumes which were 8 per cent higher. In fact, Wiseman said it had agreed to supply Tesco with an additional 35 million litres of milk a year, which helped to move its shares up yesterday. So there is scope for volume gains to freshen performance.

Wiseman provided investors with some further cream by maintaining its interim dividend at 5.75p a share and cutting its net debt to £21.5m from £26.7m. To mitigate the impact of the price war on its margins, Wiseman is pushing ahead with a programme aimed at reducing costs and boosting the efficiency of the business.

Wiseman's shares trade on a rather modest multiple of 8.8 times 2011 forecast earnings, with the stock near a 12-month low after a recent battering. Life is not going to get much easier for the company anytime soon but with the shares so depressed we wouldn't be bailing out just yet. Whatever the general economic climate, people are unlikely to stop buying milk. So, on balance, there is a case for keeping hold of the shares for the moment.

Lonmin

Our view: hold

Share price: 1838p (+71p)

Investors in Lonmin must be pleased. The platinum producer's annual figures surpassed market hopes as prices and output recovered. Lonmin also met its annual sales target despite problems with a troublesome furnace, and reinstated its dividend, sending its shares higher on the day. Some analysts weren't convinced, however.

Panmure Gordon, for example, stuck to a bearish view, expressing its surprise at the dividend as net debt, at $357m (£222m), was higher than expected. Evolution was also wary of the stock, noting that 2011 was set to be a tough year as the problematic Number One furnace will be shut down during the first quarter.

Moreover, the broker pointed out that while costs had risen at a slower rate than South African inflation, Lonmin remained a high cost producer. We are inclined to plant our flag midway, agreeing that Lonmin still faces certain issues, but noting the prospect of further gains in platinum prices (although up 15 per cent this year to about $1,675 per ounce, they remain clear of the 2008 peak of $2,290) as the world economy continues its recovery from the recent slump.

That should help underpin Lonmin's performance and the share price, which, though ahead of its June low, remains below levels seen at the beginning of this year. This is no candidate for a sell, so keep holding.

News
John Travolta is a qualified airline captain and employed the pilot with his company, Alto
people'That was the lowest I’d ever felt'
Life and Style
healthIt isn’t greasy. It doesn’t smell. And moreover, it costs nothing
News
i100

Other places that have held independence referendums
Life and Style
fashion

Olympic diver has made his modelling debut for Adidas

PROMOTED VIDEO
Arts and Entertainment
Blossoming love: Colin Firth as Stanley and Emma Stone as Sophie, in 'Magic in the Moonlight'
film

Actors star in Woody Allen's 'Magic in the Moonlight'

News
peopleThe Times of India said actress should treat it as a 'compliment'
Arts and Entertainment
Maxine Peake plays Hamlet at Manchester's Royal Exchange
theatreReview: Maxine Peake brings emotional ferocity to Shakespeare's most starring part
News
news

Watch this commuter wage a one-man war against the Circle Line
News
We are phenomenally good at recognising faces; the study showed that humans have been selected to be unique and easily recognisable
science

Human faces unique 'because we don't recognise each other by smell'

Property
Home body: Badger stays safe indoors
lifeShould we feel guilty about keeping cats inside?
News
ebooksAn unforgettable anthology of contemporary reportage
Sport
Jonas Gutierrez (r) competes with Yaya Toure (l)
football

Newcastle winger reveals he has testicular cancer - and is losing his trademark long hair as a result

News
A male driver reverses his Vauxhall Astra from a tow truck
news

Man's attempt to avoid being impounded heavily criticised

Arts and Entertainment
US pop diva Jennifer Lopez sang “Happy Birthday” to Gurbanguly Berdimuhamedow, president of Turkmenistan
musicCorporate gigs become key source of musicians' income
Arts and Entertainment
While many films were released, few managed to match the success of James Bond blockbuster 'Skyfall'
filmsDaniel Craig believed to be donning skis as 007 for first time
Student
The Guildhall School of Music and Drama is to offer a BA degree in Performance and Creative Enterprise
student

Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

Recruitment Consultant - Soho - IT, Pharma, Public Sector

£20000 - £25000 per annum + OTE £35,000 first year: SThree: The SThree group i...

Sales Executive

£20 - 24k (Uncapped Commission - £35k Year 1 OTE): Guru Careers: We are seekin...

Payroll & Accounts Assistant

£20 - 24k + Benefits: Guru Careers: This is a great opportunity for an enthusi...

Day In a Page

Mystery of the Ground Zero wedding photo

A shot in the dark

Mystery of the wedding photo from Ground Zero
His life, the universe and everything

His life, the universe and everything

New biography sheds light on comic genius of Douglas Adams
Save us from small screen superheroes

Save us from small screen superheroes

Shows like Agents of S.H.I.E.L.D are little more than marketing tools
Reach for the skies

Reach for the skies

From pools to football pitches, rooftop living is looking up
These are the 12 best hotel spas in the UK

12 best hotel spas in the UK

Some hotels go all out on facilities; others stand out for the sheer quality of treatments
These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

Widespread fear of Isis is producing strange bedfellows

Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
Topshop goes part Athena poster, part last spring Prada

Topshop goes part Athena poster, part last spring Prada

Shoppers don't come to Topshop for the unique
How to make a Lego masterpiece

How to make a Lego masterpiece

Toy breaks out of the nursery and heads for the gallery
Meet the ‘Endies’ – city dwellers who are too poor to have fun

Meet the ‘Endies’ – city dwellers who are too poor to have fun

Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

Ian Paisley’s decision to make peace with his IRA enemies

His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

Exclusive extract from Janis Winehouse's poignant new memoir
Is this the role to win Cumberbatch an Oscar?

Is this the role to win Cumberbatch an Oscar?

The Imitation Game, film review
England and Roy Hodgson take a joint step towards redemption in Basel

England and Hodgson take a joint step towards redemption

Welbeck double puts England on the road to Euro 2016
Relatives fight over Vivian Maier’s rare photos

Relatives fight over Vivian Maier’s rare photos

Pictures removed from public view as courts decide ownership
‘Fashion has to be fun. It’s a big business, not a cure for cancer’

‘Fashion has to be fun. It’s a big business, not a cure for cancer’

Donatella Versace at New York Fashion Week