Robert Wiseman Dairies has produced a higher than expected first-half profit, up more than 41 per cent to £17.1 million during the half.

Its shares rose nearly 3 per cent higher to 452p in early trading following the result and confirmation of key organic milk contracts.

The performance was bolstered by a mixture of higher dairy prices, new contracts and acquisitions, property disposals and operational efficiencies.

However, Wiseman cautioned that "plastics and energy costs remain a concern".

Commenting on the results, Robert Wiseman, the chief executive, said: "Following a difficult period which included major supermarket contract changes and exceptional inflationary costs, the group has demonstrated that margins are slowly recovering and that we are heading in the right direction.

"'The development of our new dairy, a significant increase in our share of the organics market, and good relationships with our customers, leaves us in a confident mood about our future prospects," Mr Wiseman said.

Sales volumes for the first half were up 3 per cent to 708.7 million litres while turnover was up nearly 4 per cent to £291.9 million.

During the period, Wiseman signed new supply contracts with Sainsbury's and Somerfield. Today, it also confirmed that it had signed lucrative organic milk agreements with Tesco and Horizon Organic Dairy which will raise its share of the growing organic market. .

Wiseman, which has benefited from higher international cream prices in recent months, raised the price it pays dairy farmers for milk by 0.4p to 18.78p at the start of this month.

The group has faced a challenging year. The Financial Services Authority cleared the company of any wrongdoing over a £2.2 million share sale but Wiseman could face a £21 million fine after the business, along with five other Scottish dairies, was provisionally found guilty of price fixing between 2000 and 2003.

Wiseman has pledged to vigorously defend itself against the findings and will lodge a response to the Office of Fair Trading's findings in the next few weeks. The regulator's provisional findings have prompted Leeds-based rival Arla to lodge a £15 million claim against Wiseman.

The dairy company made an £0.8 million profit on the disposal of land in Durham during the half. It also benefited from the start of a supply agreement with One Stop, a chain of 500 convenience stores, in June.

Wiseman lifted its interim dividend by 25 per cent to 3p per share.

The group said its £46 million Bridgwater dairy development, which will provide the platform for its growth in the organic milk market, was on track for completion in 2007. Its Milk Link liquid milk acquisition had been fully integrated and was performing well, the company added.

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