Investment: Wiseman makes progress

ROBERT WISEMAN Dairies has a problem. The Scottish-based dairy group already has 80 per cent of the milk market north of the border and would love to expand further in England. It has opened a Manchester bottling plant and is keen to attack the London market.

Herein lies the problem. Robert Wiseman cannot push the button on building a new plant without guaranteed business with the major supermarket groups. But it is hesitant about adding more volume to an industry which has long been plagued by overcapacity as this tends to damage not just supplier prices, but retail prices too.

So, while Wiseman says it would like to be operational in London by 2001, it may need to concentrate on organic growth or try to link up with another dairy group as part of the sector's painfully slow consolidation.

This said, the business is making good progress. Yesterday's half-year figures showed a 6.5 per cent rise in pre-tax profits to pounds 9.1m. Margins rose from 3.1p to 3.2p per litre and the doorstep milk delivery business, which is in long-term decline across the country, accounts for just 7 per cent of turnover. New contracts with Tesco and Asda will add volume, although at low margins.

The shares closed 3p higher at 186.5p yesterday. Assuming full-year profits of pounds 19m, this places the shares on a forward multiple of 12. That is close to their low point since they came to the market in 1994 but, given uncertainty in the industry, the shares are only a hold.