Investment Column: Clark still has much to prove

Matthew Clark seems to have had too many plates in the air last year, at least as far as the City is concerned. While investors' attention was diverted by the pounds 275m acquisition of Taunton Cider, which doubled the size of the group, few were watching what was happening in the drinks wholesaling business. News yesterday that profits at the Freetraders offshoot, the UK's biggest drinks wholesaler, halved last year to pounds 2.7m wrongfooted the City.

But the main problem with Clark as far as the market is concerned is its continuing devotion to an unfashionable acquisition-led strategy. The group has spent at least pounds 470m over the last three years on brands and businesses ranging from Gaymers, the cider maker, to wine group Grants of St James. That makes yesterday's figures hard to interpret. Reported losses of pounds 11.3m were replaced by profits of pounds 17.2m in the year to April, but stripping out a swathe of exceptional items and disposal losses, underlying profits rose from pounds 21.4m to pounds 42.3m, including acquisitions.

Clark will have to use this year to convince investors it can successfully grow its new businesses. Thus far, rationalisation is costing more than expected. It spent pounds 15.2m last year on sorting out Gaymer and Taunton and pounds 9.9m on Freetraders. Cost savings in the cider business should accelerate from pounds 9m last year to pounds 13m in 1996-97, but Clark also needs to show that it can build brands.

The distractions of the bid meant that Clark lost market share in cider and it remains to be seen whether its promotion-led marketing strategy can hold its own against bigger rivals Bulmer. Meanwhile, doubts will remain about Freetraders.

Clark has seen discounts on beer narrow sharply as the big brewers punish the independents who are encroaching on their traditional distribution business. Its two biggest customers alone cost pounds 3.35m last year. Cost savings will offset most of that in the current year and a wholesale clear- out of Freetraders' management should sharpen its approach.

Long term, Clark is well positioned in high growth areas of the drinks market, but it still has something to prove. Profits of pounds 71m this year would put the shares, down 17p at 743p, on a forward multiple of 14. Hold.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA special investigation by Andy McSmith
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Software Development Manager

£40000 - £50000 per annum: Recruitment Genius: This is an exciting opportunity...

Ashdown Group: Product Manager - (Product Marketing, Financial Services)

£30000 - £35000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...

Recruitment Genius: Compliance Assistant

£13000 per annum: Recruitment Genius: This Pension Specialist was established ...

Ashdown Group: Market Research Executive

£23000 - £26000 per annum + Benefits: Ashdown Group: Market Research Executive...

Day In a Page

Isis hostage crisis: The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power

Isis hostage crisis

The prisoner swap has only one purpose for the militants - recognition its Islamic State exists and that foreign nations acknowledge its power, says Robert Fisk
Missing salvage expert who found $50m of sunken treasure before disappearing, tracked down at last

The runaway buccaneers and the ship full of gold

Salvage expert Tommy Thompson found sunken treasure worth millions. Then he vanished... until now
Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Homeless Veterans appeal: ‘If you’re hard on the world you are hard on yourself’

Maverick artist Grayson Perry backs our campaign
Assisted Dying Bill: I want to be able to decide about my own death - I want to have control of my life

Assisted Dying Bill: 'I want control of my life'

This week the Assisted Dying Bill is debated in the Lords. Virginia Ironside, who has already made plans for her own self-deliverance, argues that it's time we allowed people a humane, compassionate death
Move over, kale - cabbage is the new rising star

Cabbage is king again

Sophie Morris banishes thoughts of soggy school dinners and turns over a new leaf
11 best winter skin treats

Give your moisturiser a helping hand: 11 best winter skin treats

Get an extra boost of nourishment from one of these hard-working products
Paul Scholes column: The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him

Paul Scholes column

The more Jose Mourinho attempts to influence match officials, the more they are likely to ignore him
Frank Warren column: No cigar, but pots of money: here come the Cubans

Frank Warren's Ringside

No cigar, but pots of money: here come the Cubans
Isis hostage crisis: Militant group stands strong as its numerous enemies fail to find a common plan to defeat it

Isis stands strong as its numerous enemies fail to find a common plan to defeat it

The jihadis are being squeezed militarily and economically, but there is no sign of an implosion, says Patrick Cockburn
Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action

Virtual reality: Seeing is believing

Virtual reality thrusts viewers into the frontline of global events - and puts film-goers at the heart of the action
Homeless Veterans appeal: MP says Coalition ‘not doing enough’

Homeless Veterans appeal

MP says Coalition ‘not doing enough’ to help
Larry David, Steve Coogan and other comedians share stories of depression in new documentary

Comedians share stories of depression

The director of the new documentary, Kevin Pollak, tells Jessica Barrett how he got them to talk
Has The Archers lost the plot with it's spicy storylines?

Has The Archers lost the plot?

A growing number of listeners are voicing their discontent over the rural soap's spicy storylines; so loudly that even the BBC's director-general seems worried, says Simon Kelner
English Heritage adds 14 post-war office buildings to its protected lists

14 office buildings added to protected lists

Christopher Beanland explores the underrated appeal of these palaces of pen-pushing
Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Human skull discovery in Israel proves humans lived side-by-side with Neanderthals

Scientists unearthed the cranial fragments from Manot Cave in West Galilee