City seethes as warning hits Matthew Clark

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The Independent Online
Institutional investors were left seething yesterday after an unexpected profits warning from Matthew Clark sent shares in the cider maker and drinks group into a tailspin.

The company, which only last month raised hackles in the City with a controversial relocation package for its chief executive, Peter Aikens, blamed soaring sales of the new breed of alcoholic "soft" drinks for a slump in demand for its Diamond White and K cider brands and Babycham.

Shares in the company, Britain's second-largest cider business, plunged 33 per cent to 431p as analysts reined in their forecasts for the year to next April. Expectations that the company would make up to pounds 70m were slashed to about pounds 50m, causing hectic trading in the stock of more than 10 times the usual daily volume.

More than 4.6 million shares changed hands compared with average dealings over the past three months of under 400,000.

One analyst complained: "They said they had no idea that this was happening in early July when they announced results. I have to say that is unreasonable. You just don't get that sort of swing round for a drinks company. I don't think management knows what is going on or how to solve the problem."

Another broker said: "This was really quite a shock ... almost every broker in London was a buyer of this stock and everyone had a tight range in expectations. We're going to see some pretty hefty downgrades this week."

Peter Huntley, business development director at Matthew Clark, said volumes of the company's three big brands were 35 per cent down in the financial year to date which started in May after a 60 per cent decline in July and August.

He said: "Whilst it is too early to assess the impact on the full-year performance, current estimates indicate that the above factors will materially affect the results."

Analysts said it was difficult to measure the size of the alco-pop market, which includes drinks such as Bass's Hoopers Hooch and Merrydown's Two Dogs, because it had continued to grow at an accelerating pace since the new drinks were introduced last year. Mr Huntley estimated the alco-pop market at more than twice the size of the premium cider market.

The alco-pops, particularly popular with female and young drinkers, have unleashed a controversy over whether they encourage under-age drinking.

Drinks industry leaders agreed in January to a voluntary code of practice to try to prevent promoting the drinks to under-age drinkers or linking their consumption with sexual prowess, drugs or violence.

Clark also blamed increased sales of cheaper cider brands which had taken up most of the growth in the cider market and put pressure on the higher- priced premium brands.

That news wiped 21p, or 4 per cent, off shares in HP Bulmer, the market's biggest player. Merrydown, which makes both cider and an alco-pop, Two Dogs, closed 1p lower at 115.5p.

Until recently, Matthew Clark, which under Mr Aikens had grown rapidly through acquisition, remained relatively sanguine about the threat of alcoholic soft drinks, but analysts were yesterday scornful of the company's over-confidence. Charles Winston of BZW said: "Matthew Clark has been saying to everyone and anyone that we should not worry about alco-pops. What we discovered today is that is just not happening."

The profits warning is the second serious embarrassment for the company this summer. Last month it was at the centre of a furore over a controversial pounds 430,000 relocation package paid to its chief executive, Peter Aikens, after the company moved its headquarters from Guildford to Bristol.

The package raised eyebrows among institutional investors and prompted one large fund to sell its entire holding. It was estimated that the package represented pounds 4,000 for each of the 105 miles Mr Aikens had moved westwards.

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