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Matthew Clark explains it all: The Investment Column

The gamblers who snapped up Matthew Clark shares last week at 258p got their reward yesterday after the cider maker moved on to the front foot with a sensible recovery strategy following the disaster of last year's profit warning. Another 28p jump left the shares at 331.5p, well below the 801p at which they peaked last May but a handsome profit for the short-term traders.

Investors had every reason to expect a pretty full explanation of what went wrong and what Clark planned to do about it, which broadly speaking they got. The chief executive, Peter Aikens, has effectively been given a chance to dig the company out of the hole he dumped it in.

The problems that led to a 26 per cent decline in earnings per share during the six months to October have been pretty well documented. Clark's main premium bottled cider, Diamond White, experienced a slump in sales starting in the autumn of 1995 thanks to under-investment in marketing and increased competition from alcoholic "soft" drinks.

Blackthorn, its mainstream brand, lost market share due to lack of promotion and a price war which savaged the off-trade. Customer service was allowed to drift and management lost touch with what was going on in the subsidiaries.

The solutions sound a lot less dramatic than the problems, but are the right moves none the less. Diamond White will spend pounds 2m trying to regain the fickle attention of its target market of 18 to 24-year-old women.

A truce has been called with Bulmer in the price war and Blackthorn is to be relaunched with the lion's share of a new pounds 8-10m above-the-line advertising budget. If it sounds as if Clark has brought in expensive consultants simply to tell it how to run a branded marketing operation, that's because it has.

The question for investors is whether Clark can bounce back. The most optimistic analysts are pencilling in profits for the full year of pounds 46m, to give earnings per share of 35.6p and a prospective price/earnings ratio of nine.

The promise of a maintained final dividend after the interim payout was held projects a yield of 9 per cent. By most measures the shares look good value but until fine words are translated into profitable action this remains a punter's stock.