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The investment column: Glenmorangie


THERE WAS nothing watered down about distiller 's annual results statement, which caused downgrades in City forecasts for profits next year.

The shares were unmoved at 597.5p, having steadily fallen from a high of pounds 10.15 in 1997. They took a tumble in March after the company revealed it had overestimated stock levels needed to satisfy its markets.

is focusing on building its core brand, which is growing sales worldwide. The group has lifted advertising spend to pounds 8.7m. It will no longer supply whisky to other blended whisky producers - if the marketing drive pays off it will need the stocks for its own brand.

But income will continue to come from supplying whisky to others' own brands. 's presence in a handful of regional blended whiskey markets worldwide will keep overheads down.

This all makes sense, but 's top brand takes 10 years to mature so the real upside is some way off. Things will get worse before they get better. The industry is braced for bad news when the future of duty free is resolved.

Sales last year fell pounds 3.5m to pounds 45m, with pre-tax profits down pounds 1.4m at pounds 7.3m. Earnings per share fell 13 per cent to 38.5p. Earnings growth is not expected to return until 2001.

Housebroker Credit Suisse First Boston has dropped its forecast for 1999 pre-tax profits by pounds 1.1m to pounds 6.5m. Forecast earnings per share are 34.3p, giving a forward p/e of 17. But that is not especially cheap given the hefty investment that lies ahead and the continuing concerns over duty free.