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
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
Arts and Entertainment
Under the skin: Sarah Kane in May 1998
theatreThe story behind a new season of Sarah Kane plays
Arts and Entertainment
Preening: Johnny Depp in 'Mortdecai'
filmMortdecai becomes actor's fifth consecutive box office bomb
Sport
Bradford City's reward for their memorable win over Chelsea is a trip to face either Sunderland or Fulham (Getty)
football
News
Lars Andersen took up archery in his mid thirties
video
Voices
Focus E15 Mothers led a protest to highlight the lack of affordable housing in London
voicesLondon’s housing crisis amounts to an abuse of human rights, says Grace Dent
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

Ashdown Group: Client Services Manager - Relationship Management - London

£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...

Recruitment Genius: Credit Controller / Customer Service

£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...

Guru Careers: In-House / Internal Recruiter

£25 - 28k + Bonus: Guru Careers: An In-house / Internal Recruiter is needed to...

Recruitment Genius: Tax Assistant

Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

Day In a Page

Woman who was sent to three Nazi death camps describes how she escaped the gas chamber

Auschwitz liberation 70th anniversary

Woman sent to three Nazi death camps describes surviving gas chamber
DSK, Dodo the Pimp, and the Carlton Hotel

The inside track on France's trial of the year

Dominique Strauss-Kahn, Dodo the Pimp, and the Carlton Hotel:
As provocative now as they ever were

Sarah Kane season

Why her plays are as provocative now as when they were written
Murder of Japanese hostage has grim echoes of a killing in Iraq 11 years ago

Murder of Japanese hostage has grim echoes of another killing

Japanese mood was against what was seen as irresponsible trips to a vicious war zone
Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore
'I'm gay, and plan to fight military homophobia'

'I'm gay, and plan to fight military homophobia'

Army general planning to come out
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea