Wiseman confident of recovery from a year of difficulty

Published on Thursday 3 July 2008 21:50

ROBERT Wiseman Dairies' chairman has admitted that 2008 has been one of the hardest years in the firm's history, but the company relieved the City yesterday, saying it was on track to meet market forecasts.

At yesterday's annual general meeting, Alan Wiseman said sales volumes in the first three months of the new financial year had been "satisfactory" at about 2 per cent ahead of the same period last year.

Since Wiseman's annual results in May, its shares have dived after a warning about pressures from rising oil and packaging costs, which, while being passed on to customers, were squeezing margins.

Wiseman said yesterday the trend had continued. "Diesel and (plastic] costs have continued to rise … and this is being compounded by substantial increases in electricity and gas costs," he said.

"It is clear there will be a need for the company to seek an increase in our selling prices from customers to recover the cost increases we are incurring."

The East Kilbride-based firm appeared optimistic it could put the recent difficulties behind it and recover its margins.

"I can say that the last few months have been amongst the most difficult we have ever faced as a business," Wiseman said.

"However, we are confident that, with a robust balance sheet, the most modern and efficient network of dairies and distribution centres in the UK, and the support of our customers, we can rebuild margins back to acceptable levels."

Wiseman was confident results would be "in line with expectations". House-broker Investec is forecasting that normalised pre-tax profits will fall by about 20 per cent to 30.5 million, on turnover up 10 per cent at 802m.

The company had positive news on the customer base, with supplies resuming to 131 Netto stores in England and Wales. The discount supermarket chain had dumped Wiseman last October.

Wiseman also began supplying the Martin McColl convenience stores last month.

The group's latest plant, at Bridgwater in Somerset, had been well-received by customers and the company was expecting significant haulage savings from this month, Wiseman added.

While all of the resolutions at the meeting were passed, shareholders holding about five million shares voted against the company's executive bonus plan.

Under the plan, the group's remuneration committee elected to ignore the impact of a 6m fine from the Office of Fair Trading as part of a price-fixing investigation, after deciding it was a "one-off exceptional charge".

In 2005, Wiseman had ignored a 4m credit which would have boosted bonuses at the time, it said.

Pensions & Investment Research Consultants, the influential corporate governance body, advised its members to abstain on the vote. Despite around one in seven votes being cast against the plan, the scheme was still approved.

Analysts were relieved that there was no more negative news on costs and generally rate the company a "buy". However, shares dipped 6.25p to 321p.