Still milk­ing it

Finweek English Edition - - INVESTMENT - SIMON BROWN

RE­CENT RE­SULTS FROM Clover showed a de­crease in prof­its as new prod­uct lines, mar­ket­ing ex­penses and in­creased ex­penses (such as fuel) hurt the bot­tom line. Op­er­at­ing mar­gins came in at 4.3% down from 5.1% pre­vi­ously but the com­pany is still tar­get­ing 6.5% as a min­i­mum.

The com­pany re­mains in a strong po­si­tion and con­tin­ues to align it­self with con­sumer­fac­ing prod­ucts. This in­cludes the ac­qui­si­tion of The Juice Co and the more re­cently an­nounced deal with Nestlé to dis­trib­ute, mar­ket and sell bot­tled min­eral water un­der Nestlé’s Pure Life, Valvita and Schoonspruit brands and iced tea un­der the Nestea brand.

This has long been one of the main at­trac­tions of Clover – it de­liv­ers strongly branded, mostly cold per­ish­able con­sumer prod­ucts to lit­er­ally thou­sands of stores ev­ery day, and adding new prod­ucts is easy and highly prof­itable for it. Last, its pref­er­ence shares ex­pire in June this year and will be paid out (not con­verted) and this will free up fur­ther cash f low in the com­pany, say­ing it will re­visit the div­i­dend pol­icy for or­di­nary share­hold­ers and an in­crease from the 25% pay-out ra­tio is likely.

*The writer holds shares in Clover.

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