Restructuring hits Allied for six

Results slide 21% as profits collapse at Carlsberg Tetley and Domecq
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Deputy City Editor

A pounds 90m restructuring charge and pounds 51m of other exceptionals knocked a gaping hole in otherwise flat profits from Allied Domecq, the food and drinks giant whose brands include Tetley beer, Dunkin' Donuts and a range of spirits from Beefeater gin to Courvoisier.

Most of the pounds 60m restructuring charge is to be spent at Carlsberg Tetley, the joint venture brewer, where profits collapsed in the year to August from pounds 75m to pounds 47m. The fall in brewing, declining profits from the old Lyons food business, which is being disposed of, and the write-offs contributed to a 21 per cent fall in profits from pounds 628m to pounds 494m.

Excluding the exceptional restructuring charges, earnings per share slipped from 38.2p to 37.7p and a final dividend of 11.8p was paid which, added to last May's 15.8p payout, gave a full-year total of 23.6p, up 6 per cent. Allied's shares, which have underperformed the rest of the market by 40 per cent over the past four years, closed unchanged at 493p.

Tony Hales, chief executive, admitted the Carlsberg Tetley joint venture had had a difficult start, but said he believed the corner had been turned. He refused to comment on rumours that Allied was looking to pull out of the brewing tie-up completely and had appointed Goldman Sachs to seek a buyer for its stake.

Last year's acquisition, Domecq, also struggled during the period to cope with a slump in demand in Mexico, one of its big markets, and the collapse in the value of the peso which led to a reduction in profits from that country from pounds 60m to pounds 48m. Had the current exchange rate been used throughout the period, those profits would have slumped even further to pounds 23m.

Mr Hales painted a gloomy picture of prospects for the dominant spirits business where the large markets of Europe and North America are experiencing slow volume growth and little or no price improvement.

Growth in the retail segment was stronger with revenue from food sales in the managed pub estate up 12 per cent and drink sales 5 per cent higher.

Investment Column, page 23