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
ebooksA celebration of British elections
  • Get to the point
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

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

iJobs Job Widget
iJobs Money & Business

Ashdown Group: Editor-in-chief - Financial Services - City, London

£60000 - £70000 per annum + benefits : Ashdown Group: A highly successful, glo...

Ashdown Group: Junior Application Support Analyst - Fluent German Speaker

£25000 - £30000 per annum + benefits: Ashdown Group: A global leader operating...

Guru Careers: Management Accountant

£27 - 35k + Bonus + Benefits: Guru Careers: A Management Accountant is needed ...

Guru Careers: Project Manager / Business Analyst

£40-50k + Benefits.: Guru Careers: A Project Manager / Business Analyst is nee...

Day In a Page

General Election 2015: Ed Miliband's unlikely journey from hapless geek to heart-throb

Miliband's unlikely journey from hapless geek to heart-throb

He was meant to be Labour's biggest handicap - but has become almost an asset
General Election 2015: A guide to the smaller parties, from the the National Health Action Party to the Church of the Militant Elvis Party

On the margins

From Militant Elvis to Women's Equality: a guide to the underdogs standing in the election
Amr Darrag: Ex-Muslim Brotherhood minister in exile still believes Egypt's military regime can be replaced with 'moderate' Islamic rule

'This is the battle of young Egypt for the future of our country'

Ex-Muslim Brotherhood minister Amr Darrag still believes the opposition can rid Egypt of its military regime and replace it with 'moderate' Islamic rule, he tells Robert Fisk
Why patients must rely less on doctors: Improving our own health is the 'blockbuster drug of the century'

Why patients must rely less on doctors

Improving our own health is the 'blockbuster drug of the century'
Sarah Lucas is the perfect artist to represent Britain at the Venice Biennale

Flesh in Venice

Sarah Lucas has filled the British pavilion at the Venice Biennale with slinky cats and casts of her female friends' private parts. It makes you proud to be a woman, says Karen Wright
11 best anti-ageing day creams

11 best anti-ageing day creams

Slow down the ageing process with one of these high-performance, hardworking anti-agers
Juventus 2 Real Madrid 1: Five things we learnt, including Iker Casillas is past it and Carlos Tevez remains effective

Juventus vs Real Madrid

Five things we learnt from the Italian's Champions League first leg win over the Spanish giants
Ashes 2015: Test series looks a lost cause for England... whoever takes over as ECB director of cricket

Ashes series looks a lost cause for England...

Whoever takes over as ECB director of cricket, says Stephen Brenkley
Fishing for votes with Nigel Farage: The Ukip leader shows how he can work an audience as he casts his line to the disaffected of Grimsby

Fishing is on Nigel Farage's mind

Ukip leader casts a line to the disaffected
Who is bombing whom in the Middle East? It's amazing they don't all hit each other

Who is bombing whom in the Middle East?

Robert Fisk untangles the countries and factions
China's influence on fashion: At the top of the game both creatively and commercially

China's influence on fashion

At the top of the game both creatively and commercially
Lord O’Donnell: Former cabinet secretary on the election and life away from the levers of power

The man known as GOD has a reputation for getting the job done

Lord O'Donnell's three principles of rule
Rainbow shades: It's all bright on the night

Rainbow shades

It's all bright on the night
'It was first time I had ever tasted chocolate. I kept a piece, and when Amsterdam was liberated, I gave it to the first Allied soldier I saw'

Bread from heaven

Dutch survivors thank RAF for World War II drop that saved millions
Britain will be 'run for the wealthy and powerful' if Tories retain power - Labour

How 'the Axe' helped Labour

UK will be 'run for the wealthy and powerful' if Tories retain power