CITY TALK: Squeeze on cider gives investors sore heads

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The Independent Online
Sobriety is a terrible thing, at least if you happen to be a shareholder in cider firms Matthew Clark or HP Bulmer. Investors were left clutching their heads after both companies announced disappointing results last week. The problem seems to be that cider drinking has had one of its periodic falls from favour.

Yet any decline in fondness for cider masks an incontrovertible fact: we are a nation awash on a sea of booze. This Christmas, we are expected to knock back more than ever, as we celebrate the festive occasion.

Cider is a drink that has enjoyed a spectacular boom. In 1981 we drank 50 million gallons of the stuff - in 1996, 112.6m gallons. There has been some slippage, and companies must fight to hang on to their market share, but there is no sign that cider's day is over. Investors may have to wait for Bulmer's to recover, but the company is a leading brand. Hang on to the shares.

In the aftermath of Chris Evans's shock purchase of Virgin Radio - discussed on page 3 - investors' concern is how Capital can come out of this. Despite losing Virgin, the MMC is investigating Capital's proposed takeover of the station. This may seem academic, but it could teach important lessons. For a start, it will signal the extent to which the authorities will allow further consolidation in the industry. The report, which may take another three months to see the light of day, will rule on the defunct Virgin- Capital deal. As well as the implications for stations in the metropolis, it could well discuss the future for radio in the regions.

It's too soon to say that Capital has messed up. With its restaurant side coming on strongly, the outlook remains positive. The shares remain a buy.

Noises coming out of the property market indicate a sector which is back in rude good health. The Canary Wharf development in east London is expanding - there are plans to build a 200,000 sq ft building. Richard Ellis, a firm of chartered surveyors, reports that West End office space is showing rental growth of 18.7 per cent a year. It sounds suspiciously like a sell signal to me.

Friday saw shares in General Industries listed on the AIM, and immediately went to a 9.5p premium over its 25p listing price. The company has been formed to offer finance to growing businesses, wishing to see their own shares listed on a stock market. Richard Wollenberg, the chairman, is also chairman and chief executive of The Cardiff Property plc, as well as having a City background in bids and deals. GI raised pounds 1m in new funds, giving it a similar market capitalisation at the placing price.

The absence of well-tried routes for companies, somewhere past the stage of awkward adolescence, but before they become mature companies, is well documented. Perhaps Mr Wollenberg could be on to a winner - as well as a much-needed source of funding for companies, after they have outgrown the scope of the local bank manager, but before they can satisfy the criteria of large City investors.

Stores group Asda is due to post its interim results on Thursday, and the City is anticipating a strong set of figures, helped by the move into higher-margin businesses such as clothing. In its last set of 12- month figures, Asda reported a 16 per cent rise in pre-tax profits, to pounds 354m. This time around, a similar rate is expected to lead to full-year profits just under pounds 400m.

Much of the improvement comes from the rolling out of the market hall concept, which is now available in 26 per cent of the stores, with 80 per cent to be converted, despite shares this year going from 130p to 173p. There is the added spice of a possible merger with Safeway, and shares in both companies have risen on renewed rumours.

RICHARD PHILLIPS

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