Robert Wiseman milks its position

Helped by its dominant market position in Scotland and lack of exposure to the declining doorstep milk delivery market, Robert Wiseman Dairies has proved to be one of the best performers in a difficult dairy sector. Its shares have doubled since 1994, a period when rivals such as Northern Foods have been distracted by rationalisation in their doorstep milk operations as the market struggles to cope with over-capacity.

Wiseman has managed to avoid the agony as it never had any significant doorstep operation in the first place. It has concentrated more on supermarket customers supplied through state of the art plants in Scotland, and more recently Manchester, as it attacks the market south of the border.

For shareholders, the question is whether the shares have run far enough. Yesterday's full-year results were the first since its hawkish acquisition of pounds 4.8m worth of assets from the Scottish Pride business, which collapsed into receivership in February.

Pre-tax profits were 37.5 per cent ahead at pounds 11.9m. This was after a pounds 360,000 charge for re-organisation costs relating to the Scottish Pride deal completed in March, just a couple of weeks before the company's year end.

Volumes were ahead due to new supermarket business and the additional volumes from Scottish Pride. The company has also acquired a further 7.4 acres of land at the Manchester plant site to develop the production facilities.

On the down side, operating margins were cut from 7 per cent to 6.6 per cent due to pressure on bulk cream and liquid milk prices. The better news is that raw milk input prices are easing.

Robert Wiseman ought to be one of the beneficiaries of the expected shake- out in the dairy sector as buying prices should fall and selling prices rise. But the shares - unchanged at 196.5p yesterday - have had such a good run that they now trade on a forward rating of more than 14, a substantial premium to rivals Unigate and Northern Foods. A bit too expensive for now.