The Investment Column; The spirits are lagging at Allied

This was a dismal performance from Allied Domecq but the market had been fully briefed and, in the event, investors shrugged off a 24 per cent fall in pre-tax profits from pounds 416m to pounds 317m and the shares fell only 5p to 497p.

That will come as cold comfort, however, to anyone in the stock for any length of time. They have underperformed the market by 20 per cent over the past year, 30 per cent over three and a depressing 40 per cent since 1991.

It is little wonder that investors have pinned so much hope on new chairman Sir Christopher Hogg, the wunderkind of Courtaulds and Reuters and one of the founding fathers of what many see as Allied's best road to salvation, demerger.

For a market obsessed by the mantra of focus, Allied is a totally unacceptable mish-mash of interests, with a portfolio of mainly second-string spirits brands competing for management attention with an illogical, if better placed, retailing side, taking in managed pubs, Victoria Wine off-licences, Baskin Robbins and Dunkin Donuts.

Whether the company has the chutzpah to take the radical steps required to create a rational group, however, is unclear. While Sir Christopher is seen as a catch for Allied, City analysts will tell you privately of their doubts over the quality of the rest of the top management. They are at least on notice that they need to shape up or ship out.

Certainly the group has a patchy record, even disregarding the difficult markets in which it currently trades. It plainly overpaid for Pedro Domecq, the ill-fated Spanish/Mexican drinks business that continues to suffer from high Latin American inflation and the collapse in value of the peso. And it can fairly be questioned for the price it achieved in the recent sale of a clutch of former Lyons food businesses.

The challenges facing Allied are rather more simple to enumerate than to overcome. It must try and push through price rises in the spirits arm where a 1 per cent improvement would add pounds 27m to trading profits; it must focus on its leading brands - Ballantine, Kahlua, Beefeater and Sauza; it must make inroads into the pounds 350m of its cost base over which it has some control; finally it must bring to fruition the long overdue exit from the Carlsberg Tetley brewing venture.

Looking further ahead, though, shareholder value is only likely to be created by focusing on what it is good at, retailing, and getting shot of the spirits arm it is struggling to make a success of. On the basis of some analysts calculations such a deal might put a value of maybe 670p on the shares.

In the meantime, forecasts of about pounds 604m in the year to August and pounds 689m next time put the shares on a prospective price/earnings ratio of 14 falling to 12. With a same again 24p dividend likely, the shares yield 6 per cent, which puts a solid floor under the price. Good value.

Suggested Topics
News
people'It can last and it's terrifying'
Sport
Danny Welbeck's Manchester United future is in doubt
footballStriker in talks over £17m move from Manchester United
Sport
Louis van Gaal, Radamel Falcao, Arturo Vidal, Mats Hummels and Javier Hernandez
footballFalcao, Hernandez, Welbeck and every deal live as it happens
Sport
footballFeaturing Bart Simpson
PROMOTED VIDEO
News
Kelly Brook
peopleA spokesperson said the support group was 'extremely disappointed'
News
The five geckos were launched into space to find out about the effects of weightlessness on the creatures’ sex lives
i100
Sport
Andy Murray celebrates a shot while playing Jo-Wilfried Tsonga
TennisWin sets up blockbuster US Open quarter-final against Djokovic
Life and Style
techIf those brochure kitchens look a little too perfect to be true, well, that’s probably because they are
Arts and Entertainment
Alex Kapranos of Franz Ferdinand performs live
music Pro-independence show to take place four days before vote
News
ebooksAn unforgettable anthology of contemporary reportage
News
news Video - hailed as 'most original' since Benedict Cumberbatch's
News
i100
Life and Style
The longer David Sedaris had his Fitbit, the further afield his walks took him through the West Sussex countryside
lifeDavid Sedaris: What I learnt from my fitness tracker about the world
Arts and Entertainment
Word master: Self holds up a copy of his novel ‘Umbrella’
boksUnlike 'talented mediocrity' George Orwell, you must approach this writer dictionary in hand
News
i100
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

SQL Implementation Consultant (VB,C#, SQL, Java, Eclipse, integ

£40000 - £50000 per annum + benefits+bonus+package: Harrington Starr: SQL Impl...

Head of IT (Windows, Server, VMware, SAN, Fidessa, Equities)

£85000 per annum: Harrington Starr: Head of IT (Windows, Server, VMware, SAN, ...

Technical Software Consultant (Excel, VBA, SQL, JAVA, Oracle)

£40000 - £50000 per annum: Harrington Starr: You will not be expected to hav...

SQL DBA/Developer

£500 per day: Harrington Starr: SQL DBA/Developer SQL, C#, VBA, Data Warehousi...

Day In a Page

Alexander Fury: The designer names to look for at fashion week this season

The big names to look for this fashion week

This week, designers begin to show their spring 2015 collections in New York
Will Self: 'I like Orwell's writing as much as the next talented mediocrity'

'I like Orwell's writing as much as the next talented mediocrity'

Will Self takes aim at Orwell's rules for writing plain English
Meet Afghanistan's middle-class paint-ballers

Meet Afghanistan's middle-class paint-ballers

Toy guns proving a popular diversion in a country flooded with the real thing
Al Pacino wows Venice

Al Pacino wows Venice

Ham among the brilliance as actor premieres two films at festival
Neil Lawson Baker interview: ‘I’ve gained so much from art. It’s only right to give something back’.

Neil Lawson Baker interview

‘I’ve gained so much from art. It’s only right to give something back’.
The other Mugabe who is lining up for the Zimbabwean presidency

The other Mugabe who is lining up for the Zimbabwean presidency

Wife of President Robert Mugabe appears to have her sights set on succeeding her husband
The model of a gadget launch: Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed

The model for a gadget launch

Cultivate an atmosphere of mystery and excitement to sell stuff people didn't realise they needed
Alice Roberts: She's done pretty well, for a boffin without a beard

She's done pretty well, for a boffin without a beard

Alice Roberts talks about her new book on evolution - and why her early TV work drew flak from (mostly male) colleagues
Get well soon, Joan Rivers - an inspiration, whether she likes it or not

Get well soon, Joan Rivers

She is awful. But she's also wonderful, not in spite of but because of the fact she's forever saying appalling things, argues Ellen E Jones
Doctor Who Into the Dalek review: A classic sci-fi adventure with all the spectacle of a blockbuster

A fresh take on an old foe

Doctor Who Into the Dalek more than compensated for last week's nonsensical offering
Fashion walks away from the celebrity runway show

Fashion walks away from the celebrity runway show

As the collections start, fashion editor Alexander Fury finds video and the internet are proving more attractive
Meet the stars of TV's Wolf Hall... and it's not the cast of the Tudor trilogy

Meet the stars of TV's Wolf Hall...

... and it's not the cast of the Tudor trilogy
Weekend at the Asylum: Europe's biggest steampunk convention heads to Lincoln

Europe's biggest steampunk convention

Jake Wallis Simons discovers how Victorian ray guns and the martial art of biscuit dunking are precisely what the 21st century needs
Don't swallow the tripe – a user's guide to weasel words

Don't swallow the tripe – a user's guide to weasel words

Lying is dangerous and unnecessary. A new book explains the strategies needed to avoid it. John Rentoul on the art of 'uncommunication'
Daddy, who was Richard Attenborough? Was the beloved thespian the last of the cross-generation stars?

Daddy, who was Richard Attenborough?

The atomisation of culture means that few of those we regard as stars are universally loved any more, says DJ Taylor