The chief executive of Allied Domecq yesterday launched an attack on the euro as the group signalled that tough trading across the eurozone was holding back sales growth.
Philip Bowman took the gloss off strong full-year profits figures with a warning that economic conditions in a number of leading European countries are "still getting worse".
Only a strong performance in North America, where Sauza tequila and Stolichnaya vodka gained market share, offset the impact of "sluggish" German and French economies and a £20m hit from Spanish retailers cutting back in stock levels.
"I'm very bearish on Europe. I have always had a concern that if you introduced a single currency and removed two of the three economic levers - interest rates and exchange rates - leaving only fiscal rates to manage [individual countries'] economies there would be a considerable amount of pain," Mr Bowman said.
Although the group said trading in its current financial year was meeting expectations, shares in the Ballantine's whisky-to-Malibu rum company slid 4 per cent to 384.5p as investors focused on its bleak assessment of life in the eurozone. "Growth in the second half has slowed considerably in turnover terms and I think people are concerned about what that says about future growth," Nigel Davies, an analyst at JP Morgan, said.
Allied said a strong performance from seven of its nine top brands had helped absorb volume declines in Ballantine's and Beefeater gin, which suffered from Spanish destocking. The group, which also owns several wine makers, reported a 15 per cent fall in pre-tax profits to £483m for the year to 31 August. Stripping out exceptional charges, which include £48m of additional pension costs, underlying profits rose 9 per cent on sales up 2 per cent at £3.41bn.
In Europe, its trading profits were 20 per cent weaker, reflecting the hit from Spain and a higher marketing bill to support the launch of Tia Lusso, its new cream liqueur based on its Tia Maria brand, while it increased by 31 per cent in North America.
Allied said its decision to adopt the FRS 17 accounting standard for pensions this year would result in a charge of some £49m to its profit and loss account. The notional deficit in its pension schemes under FRS 17 was £405m on 31 August. It plans to open 1,000 new Dunkin' Donuts, Baskin-Robbins and Togo's outlets in 2004.Reuse content