Hogg misses a golden opportunity at Allied Domecq; The Investment Column

Sir Christopher Hogg has missed a golden opportunity to stamp his authority on Allied Domecq, a business crying out for a firm hand on the tiller. The City would have settled for either the clean slate that demerger would have represented or a management clear-out or both, but in the end it was offered only a management-speak palliative (translation: we have done a duff job and now we're trying harder). The shares closed 14p lower at 454p.

Sir Christopher gave a sensible justification for shunning demerger, which he neatly described as the "seductive option" given the weight of investor backing for the idea. It would have cost a fortune in fees, he said, and caused serious tax headaches, especially for the spirits arm which earns most of its profits overseas and would fall short on UK earnings to offset its advance corporation tax liability.

What he didn't say explicitly, but almost certainly believes is that the current management is not up to the dual challenge of steering a steady trading course through turbulent conditions while preparing Allied for the big split. And of course if anyone knows what it takes to break up a large corporation it is Sir Christopher, who did the job with such resounding success at Courtaulds.

What he did say yesterday, but sotto voce in case anyone actually heard, was that he was not prepared to stand up and sell either business to investors as an independent entity. Neither the Ballantines, Teachers and Beefeater spirits business, nor the Big Steak Pubs to Baskin Robbins and Dunkin Donuts retail arm are credible businesses on their own. Quite an indictment, but a refreshingly honest appraisal of the company he has inherited.

Results for the 12 months to August yesterday confirmed the difficulties facing the group. Even stripping out the change of year-end and the one- off costs of finally extricating itself from brewing that distorted the figures in the table, underlying profits were 11 per cent lower than a year previously, hit mainly by a 580,000-case destocking by US wholesalers.

Spirits will continue to struggle against flat volumes around the world with prices moving in line with low inflation at best, and worryingly Allied appears to be coping less well with this trading backdrop than Guinness or GrandMet.

Retailing is well enough run, but it enjoys a less than exciting portfolio of brands including the unmemorable likes of Mr Q's and Wacky Warehouses and is being left standing by the really sharp operators like Whitbread.

On the basis of forecast profits of about pounds 620m, the shares trade on a prospective price/earnings ratio of 12 and offer a dividend yield of more than 6.5 per cent. Given the long uphill slog ahead, that is not a harsh rating and the shares, which have underperformed the market by 40 per cent over the past three years, are no more than fairly priced.

Suggested Topics
Start your day with The Independent, sign up for daily news emails
Sport
Tim Sherwood raises his hand after the 1-0 victory over Stoke
footballFormer Tottenham boss leads list of candidates to replace Neil Warnock
Arts and Entertainment
L to R: Hawkeye (Jeremy Renner), Captain America (Chris Evans) & Black Widow (Scarlett Johansson) in Avengers Assemble
film
News
Nigel Farage celebrates with a pint after early local election results in the Hoy and Helmet pub in South Benfleet in Essex
peopleHe has shaped British politics 'for good or ill'
News
news
PROMOTED VIDEO
News
i100
Travel
Suite dreams: the JW Marriott in Venice
travelChic new hotels in 2015
Arts and Entertainment
Sink the Pink's 2013 New Year's Eve party
musicFour of Britain's top DJs give their verdict on how to party into 2015
Sport
Yaya Sanogo, Mats Hummels, Troy Deeney and Adnan Januzaj
footballMost Premier League sides are after a striker, but here's a full run down of the ins and outs that could happen over the next month
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
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

Selby Jennings: VP/SVP Credit Quant- NY- Investment Bank

Not specified: Selby Jennings: VP/SVP Credit Quant Top tier investment bank i...

Selby Jennings: Quantitative Research | Equity | New York

Not specified: Selby Jennings: Quantitative Research | Global Equity | New Yor...

Selby Jennings: SVP Model Validation

Not specified: Selby Jennings: SVP Model Validation This top tiered investment...

Selby Jennings: Oil Operations

Highly Competitive: Selby Jennings: Our client, a leading European Oil trading...

Day In a Page

Aren’t you glad you didn’t say that? The worst wince-and-look-away quotes of the year

Aren’t you glad you didn’t say that?

The worst wince-and-look-away quotes of the year
Hollande's vanity project is on a high-speed track to the middle of nowhere

Vanity project on a high-speed track to nowhere

France’s TGV network has become mired in controversy
Sports Quiz of the Year

Sports Quiz of the Year

So, how closely were you paying attention during 2014?
Alexander Armstrong on insulting Mary Berry, his love of 'Bargain Hunt', and life as a llama farmer

Alexander Armstrong on insulting Mary Berry and his love of 'Bargain Hunt'

From Armstrong and Miller to Pointless
Sanchez helps Gunners hold on after Giroud's moment of madness

Sanchez helps Gunners hold on

Olivier Giroud's moment of madness nearly costs them
A Christmas without hope: Fears grow in Gaza that the conflict with Israel will soon reignite

Christmas without hope

Gaza fears grow that conflict with Israel will soon reignite
After 150 years, you can finally visit the grisliest museum in the country

The 'Black Museum'

After 150 years, you can finally visit Britain's grisliest museum
No ho-ho-hos with Nick Frost's badass Santa

No ho-ho-hos with Nick Frost's badass Santa

Doctor Who Christmas Special TV review
Chilly Christmas: Swimmers take festive dip for charity

Chilly Christmas

Swimmers dive into freezing British waters for charity
Veterans' hostel 'overwhelmed by kindness' for festive dinner

Homeless Veterans appeal

In 2010, Sgt Gary Jamieson stepped on an IED in Afghanistan and lost his legs and an arm. He reveals what, and who, helped him to make a remarkable recovery
Isis in Iraq: Yazidi girls killing themselves to escape rape and imprisonment by militants

'Jilan killed herself in the bathroom. She cut her wrists and hanged herself'

Yazidi girls killing themselves to escape rape and imprisonment
Ed Balls interview: 'If I think about the deficit when I'm playing the piano, it all goes wrong'

Ed Balls interview

'If I think about the deficit when I'm playing the piano, it all goes wrong'
He's behind you, dude!

US stars in UK panto

From David Hasselhoff to Jerry Hall
Grace Dent's Christmas Quiz: What are you – a festive curmudgeon or top of the tree?

Grace Dent's Christmas Quiz

What are you – a festive curmudgeon or top of the tree?
Nasa planning to build cloud cities in airships above Venus

Nasa planning to build cloud cities in airships above Venus

Planet’s surface is inhospitable to humans but 30 miles above it is almost perfect