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| Share Name | Share Symbol | Market | Stock Type |
|---|---|---|---|
| Robert Wiseman | RWD | London | Ordinary Share |
| Price Change | Price Change % | Share Price | Last Trade
|
|
|---|---|---|---|---|
| 0.00 | 0.00% | 389.75 | 01:00:00 |
| Open Price | Low Price | High Price | Close Price | Previous Close |
|---|---|---|---|---|
| 389.75 | 389.75 |
| Top Posts |
|---|
Posted at 20/1/2012 15:55 by ygor705 I was expecting developments here but this is not quite what I was anticipating. One things for sure, the British housewife better kiss goodbye to low cost milk because it's definitely going to be syphoned off into higher-margin manufactured product that will probably be exported to emerging markets in the Far East. It will take time, but it will happen. The only thing that surprises me is that yet again the UK Government sits on its hands whilst an excellent UK company disappears into foreign ownership. RWD is an oligopoly and its control should not be allowed to pass into foreign ownership. The politicians have their eye off the ball....again! |
Posted at 16/1/2012 20:05 by aston girl jazz319- I am asking myself the very same question! After a fair amount of research I only bought into RWD 2 weeks ago- obviously very happy to have such a return so quickly but what I was looking for was long term dividend stock.... as a starting point I'm going to look into Molins (Mlin)so all thoughts welcome, AG |
Posted at 14/1/2012 20:02 by asagi Their shareholding is not over 50%. You can see here:It must be 'serious' or things wouldn't have gone this far. Be interesting to see the newspapers tomorrow, I expect to see some figures bandied around. Asagi (long RWD) |
Posted at 14/1/2012 11:44 by asagi Surely they could NOT go hostile given the size of the Wisemans' personal shareholdings. They would walk away if the Wisemans do not accept.Asagi (long RWD) |
Posted at 14/1/2012 10:49 by asagi Scotsman article quotes a Numis analyst, Charles Hall:"The rationale looks to me that they think it is a cheap asset, they know the industry and they have the ability to do a deal," added Hall, who suggested a price of around 350/360p-a-share may be enough to secure support from the Wiseman family. That's the only price I can find and I agree with Mr Hall's inferred rationale - RWD was dirt cheap before this approach. The fact things have got this far must tell us the Wiseman's are seriously considering the approach. Asagi (long RWD) |
Posted at 14/1/2012 10:35 by haywards26 In the above article one analyst is suggesting a price of around 3.50-3.60 would perhaps be enough to seal the deal. Pure conjecture but that seems reasonable to me. Taking into account the tough trading conditions and reduced profitability RWD are experiencing. |
Posted at 13/1/2012 12:11 by randomwalker startling move todayThe price of dried milk as a commodity has been rising sharply, but the future for RWD must involve either creating premium brands or being bought by a company with premium products that can use RWD's milk. |
Posted at 15/11/2011 10:03 by spob Robert Wiseman cleans up spilt milkBy John Hughman, 14 November 2011Robert Wiseman 's half-year results contained few surprises, with profits continuing to fall as a result of rising input costs and the intensely competitive liquid milk market that led it to warn on profits several times over the past year. It's an environment that management described as "the toughest in any of our recollections" and broker Peel Hunt estimates that profit per litre has halved to 1.14p over the year. Given the pressures the dairy producer faces - including three increases in the prices paid to dairy farmers since March - the focus has been on driving efficiencies and reducing costs. Increased volumes are also going some way towards mitigating the margin impact of higher input costs - in August it began supplying 100 per cent of the Co-op's branded milk, and was also awarded an exclusive contract to supply Tesco's organic milk. Wiseman also revealed a £2m investment in a new joint venture with New Zealand's A2 Corp, which produces milk aimed at those with mild dairy intolerance. Wiseman aims to launch a similar product in the UK next summer which, despite commanding a huge price premium, is Australia's fastest growing grocery line. Numis Securities expects full-year pre-tax profits of £21.7m and EPS of 22.6p (2011: £35.8m/37.3p). ROBERT WISEMAN DAIRIES (RWD) ORD PRICE: 286p MARKET VALUE: £202m TOUCH: 285-287p 12-MONTH HIGH: 372p LOW: 272p DIVIDEND YIELD: 6.3% PE RATIO: 8 NET ASSET VALUE: 236p NET DEBT: 17% Half-year to 1 Oct Turnover (£m) Pre-tax profit (£m) Earnings per share (p) Dividend per share (p) 2010 453 20.2 21.8 5.75 2011 458 11.8 17.8 5.75 % change +1 -42 -18 - Ex-div: 2 Feb Payment: 28 Dec IC VIEW: Wiseman's strong financial position means its dividend looks safe and the A2 deal could add meaningful volumes. But dairy market difficulties are unlikely to ease any time soon so, for now, the shares are fairly priced. Last IC view: Fairly, 328p, 17 May 2011 |
Posted at 02/10/2011 11:57 by ygor705 This share interests me. RWD now have 40% of the UK liquid milk market and it operates very efficiently. To me, this may mean that the supermarkets are getting close to the point where they cannot do without them .....a view perhaps supported by the recent price increase announcement. The balance sheet also looks strong.The negative side of the RWD equation are the cost pressures in an inflationary environment and its ability to pass these on to the customer via an unforgiving supermarket environment. The market is undoubtedly reacting to this issue. The interesting variable for me is what is happening in the international milk products market. Butter prices are sky high and there is an increasing demand for cheese from China. The old Milk Marketing Board always maintained a milk processing capacity to turn excess milk capacity into butter or cheese and then sell it into the EU under intervention rules. A slightly modified opportunity appears to be opening up for RWD in international markets and I'm watching for an announcement of some capex spend on basic butter and cheese processing capacity. The balance sheet can stand it. The share price is at a 5 year (at least) low and the yield is 6% plus. Maybe not time to rush in but certainly one to buy on weakness. |
Posted at 26/7/2011 13:47 by masurenguy Stuck between a rock and a hard place: Robert Wiseman DariesIntroduction Robert Wiseman procures, processes and distributes milk in the UK. It claims to supply 1/3rd of milk consumed in the UK, can supply milk to 100% of postcodes in Great Britain and holds a market share of roughly 40%. The share price took a 30% hit back in September 2010 and hasn't really recovered since. RWD has been already been looked at by Cautious Bull, UK Value Investor and Mark Carter. As with most value situations the reasons are quite legitimate as the company has seen its margins come under severe pressure. The reasons for this are probably quite involved so we will leave this discussion till later. What is worth mentioning at this stage is that since 1996 the company has grown revenue in every year. Any problems have always expressed themselves through margins and, more specifically, within the cost of goods line. Indeed, since 1996 revenue CAGR has been 12.9% but COGS CAGR has been 13.3% but this trend of faster COGS growth only emerged after 2008. As value investors, we have to pick carefully through lots of companies separating those that are fundamentally broken from those that are experiencing some cyclical trouble . With RWD, the situation may or may not be cyclical but it is certainly the most threatening period since the company's flotation in 1994. What this means for valuing the company is that we have to take quite pragmatic fashion. Historical statements are relevant but we will have to take a closer look at industry factors. Often this is difficult but we have a wide range of useful data available on the internet and Parliamentary inquires by DEFRA give us some insights into what people in the industry are thinking about. Operating Metrics From the above tables, we can see that, apart from a blip in 2009, the past five years have been tremendously good for RWD. What we notice is that the company relies on turning its operating assets over lots of times on very thin margins. In terms of operating assets, we see that the company has increased assets by £20m in the past five years but revenues have grown by some £300m. What is interesting is that we would expect the processing part of RWD's business to be fairly capital intensive, it involves machines and factories after all, so we would expect operating assets to trace movements in revenues fairly closely. What we find looking at the historical PPE turns is that this has broadly happened as revenue per dollar of PPE has grown from around £2.50 in 2001 to nearly £4 in 2011. However, this trend has slowed significantly in the past five years. Instead, the improvement in net operating asset utilization has come from its growing creditor balances. If revenue growth resumes there will probably quite a large improvement in NOA turns. Looking to margins, we can see that these have slid slightly in the last year. The competitive position of RWD is quite complicated as it stands between the retailer and producer. As we can see though, the most important trend has been that big increase in COGS since 2007. The most important of these recent trends are the increasing prices of raw materials such as fuel and resin used in packaging, a price war by retailers and rising operating costs for farmers. The competitive dynamics are slightly more complex than this but this is the basic outline of the situation. We also see that the company has worked on taking S&D costs out of the business and these are now at all time lows although this has had very little impact compared to the move in COGS. The company is also committed to being environmental sustainable. Usually, I am fairly skeptical of these programs as they seem to have little effect on the underlying business. For RWD, this appears to be quite different as the environmental program seems to be focused on taking significant costs out of the business. Financial Condition From the second table, we can see that net debt has fallen to around £5m and the EBIT/Interest expense multiple is at 35x, well above the three year average of 29x. I think reducing this was probably a pretty good use of cash as having a lot of debt while the industry goes through a potentially difficult period isn't too helpful. The dividend has also been pretty generous in the past five years. I think this is perhaps slightly less fortunate as some of this cash may be needed to invest in margins if pricing continues to be difficult. Recent Trends/Competitive Position On first glance, the industry seems quite simple. RWD buys the milk from farmers, the milk is processed, it is sold to supermarkets. However, the industry is slightly more complicated than that. First, I will discuss what how the industry structured, what this means for the competitive positions of the groups involved and, particularly, for the processors. I will follow this with discussing some of the more recent trends in the industry and then ask how RWD fits into these trends. The most important factor in defining industry structure is probably the use of "direct supply" contracts. These are contracts between a producer and either a processor or a processor/retailer duo. The contract locks a producer into receiving a certain price for milk over a fixed period of time (usually 12 months but RWD offers 3 months). These contracts make up the majority of supply for processors however, some milk is supplied by the three producer co-operatives: First Milk, Milk Link and United Dairy Farmers. The prevalence of "direct supply" contracts obviously introduces a significant amount of rigidity in the industry. Farmers will be stuck with a price for a certain length of time while they could be facing volatile raw material costs. For processors and retailers the situation is slightly more favorable. Processors gain some certainty about margins and capacity however, they still face rising raw materials (fuel and resin) and are vulnerable to pressure from retailers. Retailers began making these contracts directly with farmers in 2004 to secure their supplies for milk. Retailers usually have to pay a premium of around a penny on each litre to secure these contracts. Out of all groups, they probably have the most to gain. One exception to this trend though appears to be Tesco's Sustainable Dairy Group who pay prices that move with changes in the farmer's cost of production. My rough look at the industry suggests that most farmers have direct supply contracts with processors. So the main effect of these arrangements is that we get pretty volatile margins for most of the participants. Recently, farmers have come under pressure with the rising price of raw materials (cows, feed, fuel and fertilizer) and it seems to be consensus that farmers are currently selling below their cost of production. The EU Commission recently proposed changes to the system of contracts to try to ease the pressure on farmers and DEFRA is currently collecting evidence from the main industry bodies about these proposals. So processors stand in the middle of this trying to make money from the spread between farmgate and retail prices. This can be extremely challenging as the factors determining these two prices are often completely different. In the first table, we see the farmgate, processing and retail prices since 2005. The gross margin for processors has stayed quite constant over the period moving from 30ppl to around 40ppl in April 2010. What is more noticeable is the increase in retailer gross margin from 40ppl to 60ppl towards the end of the period. Interestingly, the margins continued to increase after the supermarkets/process The trends in production and consumption are somewhat harder to come by. From my reading about the industry, it appears that production over the past five years or so hasn't been too good however, there has been some recovery at the start of this year. The data would suggest the same, production through the start of the year has been up quite a bit from production in the previous two. However, I am not too sure about the interpretation of some of the data. Consumption is also quite tricky. DEFRA publishes consumption based on per person per week however, the raw data isn't included. DEFRA's figures show that consumption of milk per person per week has been declining slowly for quite a while. We see that retailers cut the price of milk massively in mid-late 2010 and farmgate prices have slowly crept up with the large increases in the cost of production. When discounting, retailers often focus on the everyday items to draw custom in and this appears to be what has happened here. As mentioned earlier, the pressures on farmers have been through, substantially, all the raw materials they use in production. For processors, this means a far slimmer margin as they buy at a higher price and sell at a lower one. It wouldn't be surprising, looking at the above table, that margins had slimmed to around 15ppl which is far lower than any data I have going back to 1999. Focusing on RWD and its position in the industry we can see from the table above that its probably the industry leader with around 40% of the share of volume amongst major retailers. At the DEFRA inquiry, RWD stated that its market share of the liquid milk market was around 31%. As mentioned already, RWD is suffering from the increase in resin and fuel costs. The company also highlights the fairly flat bulk cream prices. Whilst Arla and Dairy Crest utilize the "leftovers" of the milk processing operations to make butter and cheese, RWD sells most of it on (it does produce small amounts of cream). Interestingly, MP Neil Parish questioned this strategy in the DEFRA inquiry asking if the company had any plans to extend beyond liquid milk and the company representatives affirmed the strategy of sticking with processing liquid milk. Another factor the company highlights is the prices it offers farmers. The company offers the shortest resignation period and highlights the low levels of actual resignations. In the written evidence to the DEFRA committee it uses a fourteen year average of farmgate prices to compare itself to other companies which is perhaps slightly misleading as the market dynamics have changed considerably since then. Dairyco published a league table of all farmgate prices under aligned (i.e with a supermarket which offer the premiums) and standard contracts. These tables suggest a slightly less favorable picture (and compared to slide 12 in the recent trading update) with its standard price being under Arla by 0.02ppl and 1ppl or so below smaller operations like Wyke. Its aligned contracts are certainly competitive but the Tesco Sustainable Dairy Group contract leads at 29.72ppl. The company argued at the DEFRA inquiry that basing contract price on farmer's cost of production (as in TSDG contracts) wasn't realistic as the prices for each industry participant was determined by different factors. Whilst this certainly is true for farmgate and retail prices it is less convincing for processors which are, to a certain extent, stuck with the spread. However, I think RWD's claim that they run their business on a mutual trust with farmers and that this works appears to be a legitimate claim. My view of RWD's position is that it has built its relationship carefully with farmers, it has concentrated on what it does best and I think that although the current times appear difficult the company seems to have an effective strategy to maintain its position. It has certainly shown good faith by investing in margins over the last few years and this should build up some goodwill with its customers and suppliers. The most important recent event though has been the decision of supermarkets to price more competitively and if this continues it may make RWD's position difficult as it doesn't have much of a fallback strategy and supermarkets have been aggressive in securing supply. Valuation The two tables above show RWD's historical valuation and we see that RWD is pretty much right at the bottom of the range since 2004 (the blue broken line is the current valuation). This is a fairly good sign but can be explained by that fact that processor margins are probably at all time lows. Looking to my usual model, I am again going to have to over-ride it and input some more creative scenarios for the margin figures. Margins are going to be the focus of this analysis and I am going to assume in all cases revenue growth of 4% over the next five years, constant net debt and the same growth in net operating assets as the past five years. Whilst these figures probably aren't accurate, they are conservative which should be important in preventing any serious errors. Base Case Margins fall to 1.5% and add 25bps every year over the next five years. Worst Case Margins fall to 1% and add 25 bps every year over the next five years. Best Case Margins fall to 1.5% and add 100bps for the next three years until they reach the high of 4% (the high of the past five years) and stay at 4% in the last year. Conclusion The milk industry is a tough and competitive industry to be involved in. However, it is interesting that most sides in the current Parliamentary inquiry still relished the competitive challenge and transparency in the industry at the moment (especially relative to the old Milk Marketing Boards). Processors are, at the moment, stuck between a rock and a hard place being pushed both by producers, who are probably selling slightly under cost (some suggest around 29ppl) and retailers, who have been engaged in something of a price war since the end of last year. However, these factors, although damaging, are cyclical. RWD is a concentrated operation that has built up enough market share and goodwill with its suppliers and customers to weather this period. It has focused on taking fixed costs out of the business meaning if COGS improves margins will spring back quickly, it has worked to push its creditors meaning NOA turns will spring if revenue growth improves only slightly and it has reduced debt. The latest price figures suggest that RWD is probably still getting squeezed which means caution should still be exercised but pressure may ease up with the seasonal trends in consumption later on in the year. This positive view is obviously interesting considering that RWD is undervalued, at most, in the base case scenario by around 15%. However, what I see going forward is fairly limited downside and a significant upside if things improve slightly. At this stage, risk has to be limited as the situation with margins still is uncertain but the potential for good gains is definitely present. |
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