Rosy with cider at strong Bulmer

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The Independent Online
Conflicting messages continue to cloud the cider industry. A protracted price war among dozens of producers of economy brands remains a depressant but cider is the only fragment of the drinks sector that can happily look forward to real growth in consumption beyond the end of the decade and some producers are thriving.

That was made clear by another strong set of full-year figures from HP Bulmer, which appeared to shrug off the heavy toll on premium brands that a price war at the bottom end of a sector normally takes.

Bulmer is clearly more adept at dovetailing financial strength with a tightly focused marketing strategy than its competitors, including Taunton Cider, its main rival, which reported last week.

Although Bulmer is barred from making acquisitions due to its dominant market share of 45 per cent, it can comfortably afford to maintain a powerful marketing drive to further strengthen the position of its leading brands. Marketing expenditure in the year to April was pounds 21.5m, equal to 86 per cent of pre-tax profits of pounds 25m, which were at the top end of analysts' expectations and a 16.3 per cent improvement on the previous year.

The outlook for Bulmer is clouded by a final tranche of 100 or so redundancies that will throw up a pounds 2m-plus exceptional charge this year and peg headline pre-tax profits at about last year's level.

Analysts expect the underlying improvement in earnings per share to be around 7 per cent, however, to 32p. They also forecast dividends to rise from 12p to 12.8p, giving a yield on the shares, up 7p to 457p yesterday, of 3.5 per cent.

The share price is fair value for the moment, but becomes more attractive in 1996/97 on earnings projections of 35p, cutting the p/e to 13.