The world’s second largest wine and spirits company Allied Domecq Plc reported up beat forecasts and first half profits at the top end of expectations, helping to shrug off concerns after a profit warning in February.
Allied posted underlying pre-tax profits of £256m (US$405m) for the six months to February 28, slightly above forecasts of £240-254m.
Organic volumes in wines and spirit rose 4% and its core eight brands saw volumes up 8%. Total volumes, including acquisitions were up 16%.
Philip Bowman, chief executive, said: “This was an excellent performance delivering brand growth at the high end of our expectations. Strong trading in the US, Asia Pacific and Latin America has enabled us to absorb the negative impact of those items we announced at our AGM in February, namely increased pension costs, foreign exchange translation and the changed buying patterns of wholesalers in Spain.
Although Allied’s shares were the biggest riser in the FTSE 100 this morning, some analysts were less convinced, pointing out that the company only achieved results at the top end of expectations downgraded since the February profit warning.
But Bowman said: “The robust strength in the trading performance reflects the strategic choices and investment made in the past three years. The brand portfolio is now better oriented towards more rapidly growing categories such as vodka, rum, cream liqueurs and premium wine. Our brand growth has been driven by our continued commitment to enhance our marketing capabilities including cutting edge innovation.
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“Our acquisition strategy over the last three years has greatly enhanced
the growth profile of the business through acquisition and partnerships. The
integration of Jinro Ballantines in South Korea, Stolichnaya in the US and our
premium wine business has helped to grow organic volumes by 4%. Malibu is now fully integrated and performing well ahead of expectations.
The company is still being criticised for its lack of scale compared to rival Diageo and Bowman said in an interview afterwards that Allied continued to have an open mind about linking with a partner. “Clearly we keep an eye on developments,” he said.
However, finance director Graham Hetherington was quoted as saying that it was unlikely to buy Australia’s Southcorp.
Looking forward Bowman said: “There are significant challenges confronting all businesses operating in today’s uncertain environment. However, while there are uncertainties, we believe we are on track to meet current market expectations.”
