SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR 21 April, 2005
ALLIED DOMECQ PLC
(Exact name of Registrant as specified in its Charter)
ALLIED DOMECQ PLC
(Translation of Registrant's name into English)
The Pavilions
Bridgwater Road
Bedminster Down
Bristol BS13 8AR
England
(Address of Registrant's principal executive offices)
Indicate by check mark whether the registrant files or will file
annual reports under cover Form 20-F or Form 40-F.
Form 20-F [X] Form 40-F [ ]
Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the
Securities Exchange Act of 1934.
Yes [ ] No [X]
If "Yes" is marked, indicate below the file number assigned to
the registrant in connection with Rule 12g3-2(b): 82- _____
Exhibit Index
Exhibit No. Description
Exhibit No. 1 Intermin Results announcement dated 21 April, 2005
Page 1
ALLIED DOMECQ REPORTS STRONG EARNINGS GROWTH
Allied Domecq PLC delivered 12% normalised earnings per share growth at constant
exchange rates, or 7% growth at reported rates, for the first six months of its
financial year. The strong result was generated by good profit growth from the
core spirits brands, a 14% increase in trading profit from our premium wine
brands and a 36% growth in trading profit in the Quick Service Restaurants
division, Dunkin' Brands.
FINANCIAL HIGHLIGHTS
Growth at
constant
Growth currency
2005 2004 % %
. Group turnover (pound) 1,700m (pound) 1,704m 0 3
. Group trading profit (pound) 349m (pound) 337m 4 9
. Group profit before tax (pound) 285m (pound) 266m 7 13
. Normalised earnings per share 19.2p 18.0p 7 12
. Dividend 6.5p 5.83p 11
. Net cash flow from operating activities (pound) 225m (pound) 244m
. Free cash flow (after dividends) (pound) 42m (pound) 38m
Figures are stated before goodwill and exceptional items.
BUSINESS HIGHLIGHTS
Figures here and in the Operating and Financial Review are stated before
goodwill and exceptional items and comparative information is based on constant
exchange rates unless otherwise specified.
Spirits & Wine Core spirits brands
. Net turnover up 1% . Volumes up 2%
. Marketing spend up 1% . Net turnover up 2%
. Net brand contribution up 2% . Marketing spend up 6%
. Trading profit up 6% . Net brand contribution up 3%
Premium wine Quick Service Restaurants
. Volumes up 2% . Distribution points up 6%
. Net turnover up 5% . System-wide sales up 15%
. Marketing spend up 11% . QSR turnover up 28%
. Trading profit up 14% . Trading profit up 36%
Delivering improved efficiencies and cash flow
. Good operational leverage - Spirits & Wine trading margin up over 110
basis points
. Efficiency improvements - Spirits & Wine overheads reduced by 2%
. Sustained cash generation - (pound)42m free cash flow ((pound)149m before
dividends)
. Net debt reduction - Further (pound)118m reduction
Page 1
Philip Bowman, Chief Executive, said:
"We achieved strong earnings growth in spite of tough trading conditions in many
markets. Our performance was led by good growth in the core spirits brands,
strong trading in our premium wine brands and another excellent result from
Quick Service Restaurants."
"Our core brands continued to benefit from increased marketing investment and
innovation as we optimised our investment focus on the core brands and growth
markets. Malibu, Maker's Mark, Sauza and Stolichnaya have performed particularly
well. We experienced particularly strong growth in the US which has driven
trading profit growth of 14% in North America. In spite of more challenging
conditions across Western Europe, our focus on reducing costs and optimising our
marketing investment delivered trading profit growth of 3% across Europe. In
addition, we have significantly strengthened our spirits portfolio with the
addition of the distribution rights for Stolichnaya in markets outside the US.
This premium vodka fills a portfolio gap and provides us with an important
opportunity over the medium term. An improved performance in South Korea and
good trading in markets including Greater China delivered turnover and profit
growth in Asia Pacific. We remain on track to meet our return on investment
targets for wine. Our focus on value improvement in the premium wine brands is
delivering tangible results with profits up 14%. We have continued to see
excellent profit growth at the Quick Service Restaurants division, Dunkin'
Brands, up 36%, driven by strong same store sales growth and new store openings.
Across all our businesses, we have continued to see improved operational
leverage."
OPERATIONAL HIGHLIGHTS
PORTFOLIO
. Stolichnaya distribution agreement enhances portfolio strength
. Increased investment in core brand marketing
. Refreshed marketing initiatives across several core brands
. Innovation in new flavours for Malibu and Tia Maria
. Greater growth momentum behind core UK and US premium wine markets
. Innovation, same store sales and new store openings drive profit growth
at QSR
PRESENCE
. Roll-out of our selection of 'partner of choice' distributors in the US
nears completion
. Benefiting from efficiencies in distribution in challenging Western
European markets
. Improving distribution strength in emerging markets, e.g. China and
Eastern Europe
. Geographic expansion of QSR into Charlotte, Cleveland, Tampa and
Cincinnati
PEOPLE
. Strengthened management team with new appointments
. Restructured operations to deliver efficient ways of working
For further information:
Media enquiries:
Anthony Cardew, Cardew Group +44 (0) 20 7930 0777
Investor enquiries:
Graham Hetherington, Chief Financial Officer +44 (0) 20 7009 3910
Peter Durman, Director, Group Investor Relations +44 (0) 7771 974817
Internet:
Corporate information can be accessed from the website at www.allieddomecq.com.
Page 2
Presentation material:
The results presentation will be available on the corporate website from 09.00
(UK time) on Thursday 21 April 2005.
Presentation webcast/audio broadcast:
A live webcast of the presentation to analysts will be available on the investor
relations section of www.allieddomecq.com at 09.30 (UK time) on Thursday 21
April. A recording of the webcast will be available from around 14.00 (UK time).
A live audio broadcast of the presentation and question and answer session will
also be available. The presentation can be accessed by dialling:
UK: 0800 358 5269
US/Canada: 1 888 495 6452
France: 01 70 99 34 33
Germany: 069 58 99 90 708
International: +44 (0) 20 7190 1598
Conference call:
A conference call will be held for analysts and investors at 16.00 (UK time) on
Thursday 21 April. The call can be accessed by dialling:
UK: 0800 358 5269
US/Canada: 1 888 328 4274
France: 01 70 99 34 33
Germany: 069 58 99 90 708
International: +44 (0) 20 7190 1598
A recording of the conference call will be available from around 17.00 (UK time)
today until 28 April 2005. Call the following numbers to listen to the
recording:
UK/Europe: +44 (0) 20 7154 2833 Access code: 3278212#
US/Canada: 1 800 406 7325 Access code: 3278212#
Photography:
Original high resolution photographs are available to the media free of charge
at www.newscast.co.uk +44 (0) 20 7608 1000.
Cautionary statement regarding forward-looking information Some statements in
this press release contain "forward-looking" statements as defined in Section
21E of the United States Securities Exchange Act of 1934. They represent our
expectations for our business, and involve risks and uncertainties. You can
identify these statements by the use of words such as "believes", "expects",
"may", "will", "should", "intends", "plans", "anticipates", "estimates" or other
similar words. We have based these forward-looking statements on our current
expectations and projections about future events. We believe that our
expectations and assumptions with respect to these forward-looking statements
are reasonable. However, because these forward-looking statements involve known
and unknown risks, uncertainties and other factors which are in some cases
beyond our control, our actual results or performance may differ materially from
those expressed or implied by such forward-looking statements.
Explanatory notes
Comparative information in the Operating and Financial Review is based on
constant exchange rates. Net turnover is turnover after deducting excise duties.
Profit and normalised earnings are stated before goodwill and exceptional items.
Volumes are quoted in nine litre cases unless otherwise specified.
Brands
All brands mentioned in this press release are trademarks and are registered and
/or otherwise protected in accordance with applicable law.
OPERATING AND FINANCIAL REVIEW
Summary
At constant currency, normalised earnings per share have grown by 12% and
reported normalised earnings per share have increased by 7% to 19.2p. The three
key drivers have been:
Page 3
. The growth of the core brands, which contributed the majority of the
incremental Spirits & Wine gross profit;
. The good profit growth of the premium wine brands; and
. The strong growth in Quick Service Restaurants.
From a geographic perspective, the growth in Spirits & Wine profit has been
driven by good trading in North America and strong value growth in the premium
wine portfolio in the US and UK. We also made progress in key markets in Latin
America and Asia Pacific. Tough trading conditions in Western Europe constrained
volume and turnover growth but careful cost management helped to deliver
improved profits. The Quick Service Restaurants business has delivered double
digit profit growth by pursuing their strategy of driving same store sales
growth and new store openings.
At constant exchange rates, Group turnover grew 3% to (pound)1,700m while it
remained flat at reported currencies. This was driven by both Spirits & Wine and
Quick Service Restaurants. At constant exchange rates, Spirits & Wine turnover
grew (pound)21m (1%) to (pound)1,577m. The Quick Service Restaurants business,
Dunkin' Brands, increased turnover by (pound)27m (28%) to (pound)123m.
At constant currency, normalised profit before tax increased by 13%. Reported
profit before tax increased 7% to (pound)285m which reflects an adverse foreign
currency translation and transaction movement of (pound)14m as a result of
restating the profit for the prior period at this year's rates.
The Directors have declared an interim dividend of 6.5p per share, an increase
of 11%.
Business drivers
Our strategy is delivering good growth in the core spirits and premium wine
brands and from Quick Service Restaurants. We focus on three areas to drive
competitive advantage and sustainable future growth:
. Portfolio: By building and innovating our brand portfolio through
effective marketing, we will retain consumers who enjoy our brands,
and attract and excite new consumers to win greater market share.
. Presence: Through prioritising, developing and extending our
geographic presence, we will establish strong positions in key markets
across the world.
. People: By developing our people, harnessing their talents and being
an 'employer of choice', we will attract and retain the best people to
deliver our business goals.
Our increased investment in these areas, particularly advertising and promotion,
over the past five years is driving robust brand growth and strong financial
results.
SPIRITS & WINE
2005 2004 Growth
. Volume (9L cases) 35.7m 36.0m (1)%
. Net turnover (pound) 1,236m (pound) 1,224m 1%
. Gross profit (pound) 743m (pound) 729m 2%
. Advertising and promotion (pound) 217m (pound) 215m 1%
. Trading profit (pound) 298m (pound) 281m 6%
Spirits & Wine net turnover has increased through the growth of our core spirits
brands and premium wine brands. Net turnover grew 1% while volumes fell by 1%,
reflecting two percentage points of price and mix improvement. The core brands
and premium wines are the key drivers of the gross profit improvement. Gross
profit increased by (pound)14m, or 2%, reflecting price and mix improvements
((pound)11m) and a lower cost of goods ((pound)9m) which have been partly offset
by reduced volumes of non-core brands ((pound)6m). As a result, trading profit
grew (pound)17m or 6%. We successfully reduced overheads by 2% through a range
of cost saving initiatives that we began last year.
Page 4
Marketing investment: During the period, we increased our investment in
advertising and promotion by 1% in line with net turnover growth. We also
increased the investment focus on the core brands and growth markets directing
more behind the core brands including new campaigns and innovation. This
reflects the increasingly rigorous way in which we allocate investment between
brands and markets. Our investment in the core brands increased by 6% on a
like-for-like basis while we reduced our investment in the local market leaders
by 14% and other Spirits & Wine brands by 12%. The increased marketing
investment in the core brands has been directly behind selected brand market
combinations, particularly Malibu in the US and UK, Beefeater in the US and
Spain, Courvoisier in the US, Stolichnaya in the US, Ballantine's in Spain,
Canadian Club in the US and Sauza in Mexico. As a result, we have increased our
investment in quality brand building programmes behind the core brands in key
markets. We have continued to invest in innovation opportunities but with a
different phasing from last year. The first half of last year included the
launch costs of Kuya in the US and the Christmas spend on Tia Lusso in the UK.
The focused approach to our investment allocation is helping us to achieve a
greater impact from our marketing spend.
Brand review
We manage the Spirits & Wine portfolio as four groups: core brands, local market
leaders, premium wine and other Spirits & Wine brands.
The growth in gross profit was driven primarily by the growth of the core brands
with their premium positioning and correspondingly higher margins. The average
gross profit per case of the core brands is more than twice that of the rest of
the portfolio. Therefore we continue to direct our investment and resources to
drive core brand growth.
The core brands grew both volumes and net turnover by 2%. We increased marketing
spend by 6% and net brand contribution increased by 3%. With the agreement to
distribute Stolichnaya in markets in the European Union, Latin America, Asia
Pacific and Africa, Stolichnaya has become a core brand reflecting its
increasingly international presence in our portfolio. It replaces Tia Maria
which now joins the local market leaders reflecting its strength in a more
limited range of markets including the UK, Spain and Argentina. Under the
previous definition, core brand volumes grew 1% with net turnover up 1% and the
local market leader brand volumes declined by 3% and net turnover remained flat
on last year.
Spirits & Wine volume and net turnover growth
Net
Volume Volume turnover
million growth growth
9L cases % %
Core brands
Ballantine's 2.8 (4) (1)
Beefeater 1.0 (9) (3)
Canadian Club 1.3 5 (1)
Courvoisier 0.7 4 0
Kahlua 1.6 (4) (3)
Maker's Mark 0.3 15 19
Malibu 1.5 10 14
Sauza 1.6 15 3
Stolichnaya 1.0 3 5
Core brands 11.8 2 2
Core brands (previous
definition) 11.1 1 1
Local market leaders 5.4 (4) (3)
Local market leaders (previous
definition) 6.2 (3) 0
Premium wine 8.0 2 5
Other Spirits & Wine brands
Other spirits 6.6 (1) 5
Other wine 3.9 (9) (13)
Other Spirits & Wine total 10.5 (4) (1)
Total 35.7 (1) 1
Page 5
The growth of the core brands was led by Maker's Mark, Malibu, Sauza and
Stolichnaya. Price increases on Maker's Mark helped to grow net turnover by 19%
while volumes were up 15%. Similarly, price increases on Malibu in the US helped
to grow net turnover by 14% ahead of volumes up 10%. Sauza volumes grew 15%
while net turnover was up 3%. The price/mix dilution reflects price decreases in
Mexico following declines in raw material costs. Stolichnaya grew volumes by 3%
and a price increase in the US helped to grow net turnover by 5%. The tough
trading conditions in Europe and our focus on value creation held back the
volume performance of Ballantine's and Beefeater but a price increase for both
brands in Spain supported a better performance in net turnover. Ballantine's
volumes fell 4%, particularly as a result of tough conditions in Europe, but net
turnover fell by only 1%. Beefeater volumes fell by 9% with net turnover down by
3% driven by volume declines in the UK and Asia. We saw good growth in
Beefeater's core markets of Spain and the US. Canadian Club volumes grew 5% but
net turnover declined by 1% reflecting negative mix in the US and mix dilution
from the growth of ready-to-drinks in Australia. Courvoisier grew volumes 4%
with flat turnover as a result of negative product and market mix. We have seen
stronger growth of the lower marques such as VS and good growth in some emerging
markets including Mexico and China. Kahlua volumes fell by 4% and net turnover
by 3% reflecting lower ready-to-drink sales in North America.
Our strategy for the local market leader brands is to provide important local
scale to support the development of the core brands in key markets. As part of
this, they are important contributors to overall profit and cash generation.
Among the local market leader brands, the growth in volumes of Whisky DYC and
Centenario in Spain and the recovery of volume growth in Imperial in South Korea
were offset by volume declines in the Mexican brandies, Fundador in the
Philippines and Teacher's and Tia Maria in the UK. As a result, overall local
market leader volumes declined by 4% while net turnover declined by 3%. We
reduced our marketing investment particularly behind Tia Lusso in the UK and
Imperial in South Korea so that we maintained net brand contribution in line
with last year.
The premium wine brands grew volumes by 2% and continued to deliver price and
mix improvements with net turnover up by 5%. Marketing spend increased by 11%
and trading profit increased by 14%.
The net turnover of the other Spirits & Wine brands declined by 1% with volumes
down by 4%. In line with our strategy to prioritise our marketing investment on
the core brands, we reduced spend on the other Spirits & Wine brands by 12%. Net
brand contribution remained flat.
Market review - Spirits & Wine
The key geographic drivers are the strong growth in core brand volumes in North
America which delivered good turnover and profit growth, improved trading in
Asia Pacific, and good value growth in the premium wine portfolio. These good
results were in part offset by volume and turnover declines in some Western
European markets principally as a result of unfavourable macro-economic
conditions which have depressed consumption trends. However, a focus on cost
management has helped to grow European profits in spite of these trading
conditions.
The regional performance of our business is reviewed below.
North America
Growth
. Volumes (9L cases) 1%
. Net turnover 4%
. Advertising and promotion 6%
. Trading profit 14%
Page 6
Strong trading in our North American business delivered trading profit growth of
14% to (pound)103m after advertising and promotion grew 6%. Net turnover
increased by 4% to (pound)318m with volumes up 1%.
The strong performance in North America was driven by continued good trading in
our US business. US volumes grew 3% and, with price and mix improvements, net
turnover increased by 5%. This was driven by the core brands with volumes up 4%
and the benefit of the price increases that we implemented during last financial
year on Malibu, Maker's Mark and Stolichnaya. Our business has continued to
benefit from the premium positioning of our core brand portfolio, successful
innovation and the benefits of our partnership approach with US distributors.
However, trading conditions in Canada were tougher, particularly with the strike
by the Liquor Board in Quebec, which caused volumes in Canada to fall by 4% in
the short term.
Malibu saw very strong growth in the US with volumes up 25% and net turnover up
31% supported by the successful launch of the new flavours, mango and pineapple.
We have extended this to include passion fruit in April 2005 to capitalise on
the fast-growth in flavoured rums. Malibu also increased its share of the rum
category while we also benefited from a price increase implemented towards the
end of last year. Kahlua has continued to deliver positive consumption trends in
the US with an increased share of the cordials category. Volumes of the base
Kahlua brand grew 1% with net turnover up 2%. The "Everyday Exotic" campaign is
working well and we launched a new flavour in the "Drinks-To-Go" range with a
Kahlua Vanilla White Russian.
Sauza grew volumes by 3% with good growth on Hornitos and Conmemorativo. A new
brand extension, Sauza Hacienda, will be launched in late April 2005 to extend
the brand's appeal and to provide an offering across the key brand categories.
Maker's Mark continued to grow strongly and benefited from last year's price
increase. It grew market share to an all-time high with volumes up 14% and net
turnover up 20%.
We increased the price on Stolichnaya which has constrained volume growth in the
short term to 1% and delivered net turnover growth of 4% within the competitive
premium imported vodka category. The pressure on volumes was in part due to a
temporary delisting with a key customer as a result of the price increase.
Beefeater in the US grew volumes by 4% and net turnover by 5% reflecting a more
focused approach to promotional activity and the benefit of a new advertising
campaign called "This Is Gin".
We are continuing to work on the revitalisation programme for Canadian Club with
a new advertising programme and a tie-in with poker, which is one of the fastest
growing sports in the US. Canadian Club volumes fell 1% in the period.
Courvoisier volumes grew 1% driven particularly by the stronger growth of the VS
marque.
We have continued to pursue our "First Choice Supplier" strategy with US
distributors following the signing of additional performance-based contracts in
six new States. Almost all of our Open State volume (excluding the Franchise
States) is now covered by these new contracts which are long-term partnerships
based on sustainability, mutual benefit and clear incentives. In addition, we
have also seen market share gains in the Control States as we continue to
benefit from focus we have placed on growing our brand portfolio in these
States.
Europe
Growth
. Volumes (9L cases) (6)%
. Net turnover (5)%
. Advertising and promotion (3)%
. Trading profit 3%
Trading profit grew 3% to (pound)67m reflecting profit growth in Spain and a
continued focus on cost management and marketing effectiveness. Volumes fell by
6% and net turnover declined by 5% to (pound)367m as a result of the tough
trading environment in many Western European markets. Overheads were reduced by
6% through cost savings
Page 7
initiatives and new distribution arrangements we introduced last year. We
continued to focus on marketing effectiveness with a 3% increase on our core
brands in Europe although our overall advertising and promotion spend reduced by
3% as we reallocated resources to higher growth markets such as the US. We also
increased prices on several key brands across Europe as we sought to optimise
our price positions and to leverage our brand equity and premium positioning.
Our focus on value creation in Spain with price increases across a number of
brands held volumes flat but grew net turnover by 2%. Ballantine's volumes
declined by 2% with flat net turnover reflecting a price increase. However,
Ballantine's continued to grow its share of the Scotch whisky category even
though we increased prices on 1 September. We continued to invest strongly
behind the brand with a range of activities to support the "Go Play" campaign.
Volumes for Beefeater grew 3% while net turnover grew 6% also reflecting the
benefit of a price increase. Beefeater consolidated its market leadership of the
category by value with further share gains. Malibu grew volumes 17% and
continued to gain share. We have run television and radio advertising in
conjunction with around 600 on-trade promotion events. Whisky DYC volumes
increased by 4% while net turnover grew 5% reflecting the consistent marketing
behind the "DYC Une" campaign. Centenario volumes grew 1% in the competitive
brandy category.
The challenging trading environment in the UK caused volumes to fall by 8% and
net turnover to decline by 6%. Despite this, Courvoisier continued to perform
well with volumes up 4%, consolidating its leadership of the cognac category. A
new advertising campaign, "Earn It", was launched to reinforce its premium
positioning. Malibu also performed well with volumes up 7% as it continued to
gain share in both the on- and off-trade. Volumes of the Tia Maria mother brand
grew 4% reflecting a refocusing of investment behind the new campaign, "A Dark
Spirit", and a concentration on its heartland markets in the UK. However,
volumes for the overall Tia Maria trademark declined by 21% as Tia Lusso
continued to face aggressive competitive activity. The trial launch of Tia Maria
Orange in the UK at Christmas also worked well and will be extended throughout
the summer. Teacher's volumes declined by 11% with net turnover down 9%
reflecting the competitive nature of the declining blended Scotch category. We
have also seen volume declines in our fortified wines as a result of strong
competition and discounting in the category.
Many other markets in Western Europe, such as France and Germany, have
experienced sluggish economies, high unemployment and slower consumer spending.
Our sales in France were distorted in the period by the government-imposed price
decrease on 1 September. Ballantine's continued to perform well in both the on
and off-trade. The launch of Malibu Mango in France helped a good overall
performance for Malibu. In Germany, the trading environment remains competitive,
particularly on price. We increased the price on Ballantine's in order to
maintain its consistent premium positioning across Europe. The price increase,
coupled with the challenging trading conditions in Germany, caused Ballantine's
volumes to decline by 22%. Kuemmerling volumes fell 4% following a price
increase. We increased our investment in a new TV campaign for Kuemmerling and
we also benefited from the launch of Kuemmerling Orange last April.
We continue to make good progress in a number of markets in Central and Eastern
Europe. We have market leadership in several markets such as Romania, Bulgaria,
Hungary, Bosnia, and Serbia among others. Our strategy to improve distribution
and brand presence is delivering results. For example, Ballantine's grew volumes
64% in Romania and 61% in Poland. In Russia, we have also improved our
distribution presence and increased brand awareness through a consumer trial
programme for our core brands. As a result, Ballantine's and Sauza both grew
share in Russia.
Latin America
Growth
. Volumes (9L cases) 2%
. Net turnover 3%
. Advertising and promotion 7%
. Trading profit 4%
Trading profit grew 4% to (pound)29m while net turnover grew 3% to (pound)122m.
Volumes grew
Page 8
2%. These results were driven by a good performance from the core brands, with
volumes up 21% driven by Sauza, and good growth in the domestic Argentine wine
portfolio. A 4% decline in the volumes of the Mexican brandies held back the
performance of the overall region.
Our Mexican business represents about three quarters of our sales in Latin
America and is the leading spirits business in Mexico. We continued to increase
our focus on the core brands as we shifted our investment away from the local
brands. Sauza performed well with volumes up 32%. It grew its share in both
volume and value as we increased our marketing investment by 16% behind a wide
range of brand-building activities. This was part of an overall increase of 35%
across all the core brands which also helped to drive growth in Ballantine's,
Courvoisier and Malibu. The domestic brandy category continues to be affected by
the illegal spirits market in Mexico. However, we made good progress with
Presidente with volumes up 1% but pressure on Don Pedro and Anejo Los Reyes held
back overall performance of the Mexican brandies. We have continued to work with
the Mexican government on initiatives to address the illegal spirits market.
In Argentina, we remain the leading spirits and wine company with a good trading
performance. Volumes grew 15% and net turnover 25% driven principally by the
Argentine wine portfolio. The domestic Argentine wine portfolio helped to grow
our domestic wine volumes by 21% and net turnover by 34%. In Brazil, we have
increased our market share with good growth in our Latin American wines and with
Teacher's growing volumes by 42%. We have also made good progress with
Ballantine's in other markets such as Chile, Columbia Ecuador and Venezuela with
excellent growth.
Asia Pacific
Growth
. Volumes (9L cases) 5%
. Net turnover 5%
. Advertising and promotion 0%
. Trading profit 3%
An improved performance in South Korea and good trading in our other smaller
markets, such as Greater China and India, have delivered turnover and profit
growth in Asia Pacific. Volumes grew 5% with net turnover also up 5% to
(pound)120m. Trading profit grew 3% to (pound)32m. Advertising and promotion was
held flat as a result of reduced investment in South Korea which reflects
regulatory restrictions on marketing, and the new brand launch costs incurred
last year. At the same time, we continued to invest strongly in Greater China,
Australia and the Philippines.
The economy in South Korea continues to be held back by the household debt
difficulties. As a result, the whisky category has continued to decline but our
business has continued to grow its market share to an all-time high. Volumes in
South Korea grew 2% with net turnover up 6% with good growth coming particularly
from the deluxe premium Scotch whisky category with Imperial 17 year old. The
launch of Imperial 17 year old during last year has delivered a significant mix
benefit with Imperial's overall net turnover up 12% against volumes up 1%.
Ballantines volumes were up 10% driven by the aged varieties, particularly
Ballantine's Master's and Ballantine's 12 year old.
In Australasia, the Canadian Club ready-to-drinks continue to deliver positive
consumption trends. We have also recently launched a Ballantine's and Cola
ready-to-drink to broaden our offering. In the Philippines, we remain the
leading imported spirits company and we continued to grow share in a difficult
trading environment. Fundador has maintained its position as the largest
international spirits brand but incurred volume declines of 14% as a result of
increasing competition from low-priced Spanish imports and significantly
increased excise duties. We also saw strong growth in India and Thailand.
We have continued to make good progress with our business in Greater China with
volumes up 45% and net turnover up 53% from a small base. This has been
supported by a significant increase in marketing investment. In Greater China,
the Ballantine's range grew rapidly: Ballantine's 12 year old grew volumes by
80% while Ballantine's 17 year old grew by 46%. We also saw strong growth in the
Chinese duty free channel. Ballantine's was supported by an integrated
Page 9
above-the-line campaign using TV, print and billboards in China's six largest
cities. Courvoisier also benefited from growth in the more premium categories of
VSOP and XO with overall volumes up 54%. We are beginning to seed other core
brands into the Chinese market as we build brand presence and distribution
strength.
Premium Wine
Growth
. Volumes (9L cases) 2%
. Net turnover 5%
. Advertising and promotion 11%
. Trading profit 14%
The premium wine brands have delivered a very strong performance with trading
profit up 14% to (pound)58m. Volumes grew 2% and continued price/mix improvement
supported net turnover growth of 5% to (pound)268m. Advertising and promotion
increased 11% primarily behind Clos du Bois in the US. Our consistent delivery
of trading profit growth and improved capital efficiency is driving increased
returns and we remain on track to meet our stated return on investment targets.
These strong results demonstrate the resilience of our business model which
continues to benefit from its coherent spread of wine assets and distribution
around the world and the effective execution of our premium wine strategy.
Our premium-priced wines ((pound)5 or US$7 retail price and above) represent
around 60% of the portfolio by volume but around 90% of the portfolio by value.
Our strategy is to shift the mix of our wine portfolio towards these more
premium categories and away from the value category. During the period, our
premium-priced wines grew volumes by 11% compared with the value category which
saw volume declines of 11%. The top ten premium wine brand market combinations,
which account for nearly half of all wine profits, performed particularly
strongly with volumes up 18%.
Our US wine business has performed strongly with volumes up 7% reflecting growth
across a number of brands. Our largest US brand, Clos du Bois, continues to be
the key growth driver with volumes up 15% and net turnover up 17%. Mumm Cuvee
Napa also experienced overall strong growth with volumes up 26% and the addition
of the Gary Farrell icon wines into the portfolio has helped to improve the
credibility and breadth of our US domestic portfolio. The importance of our
imported wine portfolio into the US market continues to grow, particularly from
New Zealand and Spain. For example, we have increased the volumes of New Zealand
imported wines by 39% and their net turnover by 40% as we have built
distribution. Spanish imports increased volumes by 25% and net turnover by 46%.
Our Champagne volumes were held back in the US as a result of price increases
that we implemented as part of our long-term strategy to maximise value
creation.
The UK wine business delivered strong growth with volumes up 26% with the key
drivers being New Zealand and Spanish wines. New Zealand wine volumes grew by
60% with contribution from across the portfolio but helped particularly by the
increased supply of Marlborough Sauvignon Blanc following the shortage of the
2003 vintage. Spanish volumes grew by 27% giving us leadership of the Rioja
category in the UK with our leading Rioja, Campo Viejo, increasing volumes by
40%. We also continue to successfully execute our Champagne strategy in the UK
where we increased prices to reflect its premium positioning and limited
availability. As a result, volumes declined by 29% in line with our plans. For
example, pricing on our flagship brand, Mumm Cordon Rouge, increased by 9%. At
the sametime, we saw improved product and channel mix for our Champagne brands.
The domestic wine market in New Zealand remains challenging with strong
competition from Australian imports caused partly by the relative strength of
the New Zealand dollar against the Australian dollar. As a result, volumes
declined by 2% but with flat net turnover. Importantly, however, we continue to
see growth in our premium brands. For example, the Montana range grew volumes by
9% and Lindauer increased volumes by 2%. We have also continued to restructure
our sales and marketing operations in New Zealand and Australia to improve our
portfolio and channel strategies in those markets. There are encouraging early
signs with net brand contribution up in Australia by 48%.
Page 10
However, the business continues to develop its export potential with a 29%
growth in its wine exports.
In Spain, the domestic market remains highly competitive with strong price
competition in each of the major trade channels. We continue to shift our focus
from low value table wines to premium branded wines and hence overall volumes
declined 5% and turnover dropped by 2%. However, we are experiencing increasing
success in our premium portfolio where we have seen strong growth. For example,
volumes of super-premium wines grew by 22% and Campo Viejo grew by 4%.
Our global wine capital management programme continues to maintain a tight focus
on capital employed and once again there has been no growth in our capital base
and we have seen strong cash generation.
Duty Free
Our Duty Free business has slowed reflecting an aggressive competitive
environment, particularly in North America and in Europe. In Europe, the trading
conditions have been difficult with a decline in spirits purchasing in the
travel retail market reflecting the impact of EU accession. There have also been
declines in ferry passenger numbers in the Baltic and English Channel. However,
consumption trends in the Asian Duty Free business remain strong and
Ballantine's aged whisky continues to perform well.
QUICK SERVICE RESTAURANTS
. Distribution points up 6%
. Number of combination stores up 19%
. System-wide sales growth of 15%
. Trading profit up 36% to (pound)45m
Our Quick Service Restaurants division, Dunkin' Brands, had an excellent start
to the year with strong growth in turnover and profit. Turnover increased by
(pound)27m, or 28%, to (pound)123m. This reflects a review of lease accounting
which resulted in an (pound)11m uplift to correct the accounting treatment of
rental income in prior years. There was no impact on trading profit because the
uplift in rental income was offset by a similar increase in rental expense.
Underlying turnover grew by (pound)16m, or 17%, driven largely by global
system-wide sales growth of 15%. Gross profit grew 29% to support trading profit
up 36% to (pound)45m. The main drivers of trading profit growth are the
continued growth in same store sales and the contribution from new stores.
Distribution points increased by 6% with new store openings both in the US and
internationally.
Dunkin' Donuts is the key growth driver of this division with a 15% increase in
global system-wide sales. This reflects US same store sales up 8.1% and an 8%
increase in global distribution points. The same store sales growth outpaced the
rate of 5.1% for the overall US industry and continues to be driven by
innovation and excellent marketing. These activities have resulted in a higher
customer count and an improved average ticket value, up 6%. The increase in
ticket value is helped by the continued focus on higher margin products such as
beverages, particularly the espresso range of coffee products. We have launched
a range of the new breakfast sandwiches which have proved popular. The product
range has also been extended to include reduced carbohydrate bagels and
croissants. We have also introduced a 'stored value card' which allows customers
to load cash onto a card for purchases: the cards have been used as gifts and
many customers have adopted them as a convenient alternative to cash.
Baskin-Robbins grew global system-wide sales by 17%. This was driven by same
store sales growth up 1.3% and an increase in new store openings of 5%. Same
store sales growth was supported by an increase in the average ticket value as a
result of improved product mix. The mini-cake range performed well with
marketing programmes running through November, December and for Valentine's Day.
The new store format that we trialled in California has seen strong growth with
an 11% increase in same store sales. The key innovations for the new store
concept are a beverage bar, a new cake display and the introduction of a new
soft-serve ice cream to which customers can add their own toppings.
Baskin-Robbins is also launching a new iced fruit beverage, Bold Breeze, in time
for the summer season and is testing a new range of frozen custard products.
Page 11
Encouragingly, Togo's has delivered an improved performance with US same store
sales up 0.6% in spite of the difficult economic conditions in California and
the competitive environment. System-wide sales grew 4%. This improvement is a
reflection of the recently reformatted stores and the increased focus on
operational excellence. Some 90% of Togo's stores have now been converted to the
new store format. We have also closed some underperforming stores which has
caused distribution points to reduce by 5%. Togo's has also continued to
introduce a wide range of new sandwich formats including a daily special.
Multi-branded stores, which combine the Dunkin' Donuts and Baskin-Robbins
restaurants in one location, increased by 19% to over 1,400 store locations.
This is a key driver of new store openings and is supported by the brands'
complementary day-part offering and brings significant benefits to our
franchisees through improved scale and operating efficiencies, along with
increased choice for consumers.
BRITANNIA SOFT DRINKS
The Group's share of Britannia's profits for the period was (pound)6m (2004:
(pound)7m). This decline reflects Britannia's increased investment in existing
and new brand extensions, investment in IT and business infrastructure and
increased pension costs. Allied Domecq and the other shareholders of Britannia
Soft Drinks Limited have agreed subject, inter alia, to market conditions, to
consider an initial public offering of Britannia Soft Drinks, between 1 January
2005 and 31 December 2008. Allied Domecq has a 23.75% share of Britannia Soft
Drinks Limited.
TAXATION
The normalised tax charge for the year is anticipated to be 24%, in line with
last year.
GOODWILL AND EXCEPTIONAL ITEMS
Goodwill amortisation totalled (pound)20m (2004: (pound)20m). The exceptional
items include profits on asset disposals ((pound)14m) which is offset by costs
incurred in restructuring the Spirits & Wine business ((pound)6m). The disposals
relate principally to property assets within the premium wine business. The
restructuring programme began last year and delivered savings in the period of
(pound)8m. This programme is reducing the overlap between central, regional and
market-focused functions which is allowing us to be leaner and more responsive
in order to speed up decision making and reinforce accountability throughout the
business. As part of this, we are also introducing more efficient routes to
market, particularly in Europe.
CASH FLOW
Net cash flow from operating activities was (pound)225m (2004: (pound)244m) and
free cash flow after dividends was (pound)42m (2004: (pound)38m). Compared to
last year, the key drivers of free cash flow have been inflows from fixed asset
disposals net of capital expenditure ((pound)26m) and reduced finance charges
((pound)12m). This was offset by cash outflows relating to an increased dividend
((pound)11m), an increase in maturing inventory ((pound)22m) to support future
growth in premium wine and tequila, and higher cash tax ((pound)3m).
Net debt decreased by (pound)118m during the period from (pound)1,941m to
(pound)1,823m which includes a favourable currency translation impact on our
borrowings of (pound)46m largely as a result of the weakening US dollar. Net
debt reduction resulting from cash flows was (pound)72m.
At 28 February 2005, EV gearing (net debt as a percentage of market
capitalisation plus net debt) was 24% (2004: 30%). Interest cover based on
EBITDA was 6.1 times and cover based on EBITA was 5.5 times.
FOREIGN EXCHANGE
We do not hedge the impact of foreign exchange movements on the translation of
our overseas earnings. As a result, our prior year trading profit restated at
2005 exchange rates is reduced by (pound)16m, primarily as a result of the
weakening US dollar and Mexican peso. We anticipate, based on current exchange
rates and the transaction hedge contracts in place, that trading profit will be
adversely affected for the full year by (pound)30m, including around (pound)15m
from currency exposures on transactions.
Page 12
PENSIONS
The profit and loss charge under FRS 17 was (pound)25m (2004: (pound)26m), with
a (pound)16m (2004: (pound)16m) charge within trading profit and a (pound)9m
(2004: (pound)10m) impact within finance charges. The expected charge for the
full year is around (pound)51m, being (pound)32m within trading profit and
(pound)19m within finance charges.
INTERNATIONAL FINANCIAL REPORTING STANDARDS
Allied Domecq will report under the International Financial Reporting Standards
(IFRS) for the financial year commencing 1 September 2005 along with a restated
comparative for the year ending 31 August 2005.
The Group has not yet determined the full effects of adopting IFRS and further
detail will be provided around the time of our year end results. The first year
of comparative data will be the financial year ended 31 August 2005 with an
opening balance sheet at 1 September 2004. We have prepared this balance sheet,
which remains subject to audit agreement. We have also developed an unaudited
restatement of earnings for the financial year to 31 August 2004 to assess the
likely profit and loss account of the adoption of IFRS.
The balance sheet would be increased by around (pound)1.6bn, principally as a
result of additional brands and goodwill being capitalised on the balance sheet.
Whilst basic earnings are broadly unaffected, there would be some adjustments to
specific lines of the profit and loss account. Based on these unaudited
restatements, the key areas of difference which have so far been confirmed are
described below.
IFRS 3 - Business combinations: We are planning to restate acquisitions dating
back to 1986. The net effect after adjusting for the additional deferred tax
liability is expected to be around (pound)1.5bn. Brands and goodwill will be
subject to an annual impairment test. The elimination of goodwill amortisation
under IFRS compared to the current treatment under UK GAAP would benefit
reported basic earnings by (pound)40m each year.
IAS 41 - Agriculture: Agricultural assets, both in the ground and harvested,
will now be recorded on a fair value basis rather than at cost. As a result, we
anticipate that the balance sheet for 31 August 2004 would be increased by
around (pound)50m net of tax, and the impact on the profit and loss account for
the same year would not be material.
IAS 39 - Financial instruments: We will adopt IAS 39 in full and propose to
achieve hedge accounting wherever practicable from 1 September 2005. We are not
affected by the EU 'carve-outs' from the original standard. No restatement of
comparatives is required on transition to this standard. On 1 September 2005,
the balance sheet will be restated to reflect derivative contracts at fair
value, with the corresponding adjustment to reserves. We believe that following
the actions we are taking to achieve hedge accounting, the impact of this
standard on the profit and loss account will not be material.
IFRS 2 Share-based payments: We estimate the additional charge to the profit and
loss account for the year to 31 August 2004 would have been (pound)12m.
IAS 10 Post balance sheet events: Dividends are accrued under IFRS as a
liability in the period in which they are approved. As a result, the profit and
loss account for each financial year will only reflect the interim dividend for
that year and the final dividend for the previous year. The net effect of this
adjustment would have been an (pound)11m benefit to the profit and loss in the
year ended 31 August 2004 and a (pound)104m uplift in our opening balance sheet.
IAS 12 Taxation: We are still evaluating the effect of tax on earnings as this
is influenced by a number of different standards. Further guidance will be given
when we publish our full year accounts this year.
CONSTANT EXCHANGE RATE REPORTING
The following tables provide a reconciliation between the 2004 reported results
and those shown at constant exchange rates in the Operating and Financial
Review.
Page 13
2004 2005
Growth
Reported Foreign At 2005 Reported at 2005
2004 exchange exchange 2005 exchange
GROUP (pound)m (pound)m (pound)m (pound)m %
Turnover 1,704 (52) 1,652 1,700 3
Trading profit 337 (16) 321 349 9
Finance charges (71) 2 (69) (64) (7)
Profit before tax 266 (14) 252 285 13
Taxation (64) 4 (60) (68) 13
Minority interests (8) - (8) (9) 15
Earnings 194 (10) 184 208 13
Weighted average number of
ordinary shares (millions) 1,075 - 1,075 1,083 -
Normalised earnings per
share (pence) 18.0 (0.9) 17.1 19.2 12
2004 2005
Growth
Reported Foreign At 2005 Reported at 2005
2004 exchange exchange 2005 exchange
SPIRITS & WINE (pound)m (pound)m (pound)m (pound)m %
Turnover 1,600 (44) 1,556 1,577 1
Duty (337) 5 (332) (341) 3
Net turnover 1,263 (39) 1,224 1,236 1
Advertising & promotion (225) 10 (215) (217) 1
Trading profit 296 (15) 281 298 6
Geographical Analysis - Group turnover and trading profit In line with previous
statements, the trading profits of the regions shown in this review are on a
management reporting basis at constant exchange rates, rather than on a
statutory basis at each year's actual exchange rates, as shown in note 3 to the
accounts. The table below shows the foreign exchange effect of restating last
year's reported trading profit for each region at this year's actual exchange
rates. "Others" in the table includes Global Operations (including profit from
the sale of bulk whisky), stand-alone Duty Free operations and central costs not
allocated to the sales and marketing regions. The profit decline in "Others"
principally reflects a decline in stand-alone Duty Free profits and the
additional costs associated with the implementation of the requirements of the
Sarbanes-Oxley Act of 2002 and International Financial Reporting Standards.
Page 14
Geographical Analysis - Group net turnover
2004 2005
Growth
*Actual Foreign At 2005 Reported at 2005
2004 exchange exchange 2005 exchange
(pound)m (pound)m (pound)m (pound)m %
North America 325 (20) 305 318 4
Europe 390 (4) 386 367 (5)
Latin America 132 (14) 118 122 3
Asia Pacific 115 (1) 114 120 5
Premium Wine 262 (6) 256 268 5
Others 39 6 45 41 (9)
Spirits & Wine 1,263 (39) 1,224 1,236 1
QSR 104 (8) 96 123 28
Group total 1,367 (47) 1,320 1,359 3
*Actual 2004 net turnover includes a reclassification of (pound)18m from Latin
America into Others relating to the Mexican operating unit. This year the
management responsibility for the spirits operating unit moved from Latin
America to Global Operations. Reported net turnover in 2004 for Latin America
was (pound)150m and Others was (pound)21m. Trading profit was not affected.
Geographical Analysis - Group trading profit
2004 2005
Growth
Reported Foreign At 2005 Reported at 2005
2004 exchange exchange 2005 exchange
(pound)m (pound)m (pound)m (pound)m %
North America 99 (9) 90 103 14
Europe 64 1 65 67 3
Latin America 33 (5) 28 29 4
Asia Pacific 33 (2) 31 32 3
Premium Wine 52 (1) 51 58 14
Others 15 1 16 9 (44)
Spirits & Wine 296 (15) 281 298 6
QSR 34 (1) 33 45 36
Britannia 7 - 7 6 (14)
Group total 337 (16) 321 349 9
Page 15
Group profit and loss account
Six months to 28 February 2005
Six months to 28 February 2005 Six months to 29 February 2004
Before Before
goodwill Goodwill goodwill Goodwill
and and and and
exceptional exceptional exceptional exceptional
items items Total items items Total
Note (pound)m (pound)m (pound)m (pound)m (pound)m (pound)m
Turnover 2 1,700 - 1,700 1,704 - 1,704
Operating costs - goodwill
amortisation - (20) (20) - (20) (20)
- other (1,361) (6) (1,367) (1,377) (12) (1,389)
Operating profit from
continuing activities 339 (26) 313 327 (32) 295
Share of operating profits
of associated undertakings 10 - 10 10 - 10
Trading profit on ordinary
activities before finance
charges 2 349 (26) 323 337 (32) 305
Profit on disposal of fixed assets
in continuing activities - 14 14 - - -
Profit on ordinary activities
before finance charges 349 (12) 337 337 (32) 305
Interest payable (55) - (55) (61) - (61)
Other finance charges (9) - (9) (10) - (10)
Profit on ordinary activities
before taxation 285 (12) 273 266 (32) 234
Taxation 5 (68) 3 (65) (64) 5 (59)
Profit on ordinary activities
after taxation 217 (9) 208 202 (27) 175
Minority interests - equity and non-equity (9) - (9) (8) - (8)
Profit earned for Ordinary
Shareholders for the period 4 208 (9) 199 194 (27) 167
Ordinary dividends 6 (71) (63)
Retained profit 128 104
Earnings per Ordinary Share:
- basic 4 18.4p 15.5p
- diluted 4 18.2p 15.5p
- normalised 4 19.2p 18.0p
Page 16
The above figures comprise the unaudited results for the six months to 28
February 2005 and 29 February 2004, all of which relate to continuing
operations.
Group balance sheet
At 28 February 2005
28 February 31 August 29 February
2005 2004 2004
Note (pound)m (pound)m (pound)m
Fixed assets
Intangible assets 1,212 1,234 1,251
Tangible assets 884 921 893
Investments and loans 14 21 22
Investments in associates 72 73 79
Total fixed assets 2,182 2,249 2,245
Current assets
Stocks 1,372 1,343 1,341
Debtors 660 636 618
Cash at bank and in hand 10 127 129 140
Total current assets 2,159 2,108 2,099
Creditors (due within one year)
Short-term borrowings 10 (487) (378) (599)
Dividends (71) (104) (63)
Other creditors (922) (984) (900)
Total current liabilities (1,480) (1,466) (1,562)
Net current assets 679 642 537
Total assets less current liabilities 2,861 2,891 2,782
Creditors (due after more than one year)
Loan capital 10 (1,463) (1,692) (1,657)
Other creditors (51) (43) (46)
Total creditors due after more than one year (1,514) (1,735) (1,703)
Provisions for liabilities and charges (182) (179) (168)
Net assets excluding pension and
post-retirement liabilities 1,165 977 911
Pension and post-retirement liabilities
(net of deferred taxation) (372) (387) (392)
Net assets including pension and
post-retirement liabilities 793 590 519
Capital and reserves
Called up share capital 277 277 277
Share premium account 165 165 165
Merger reserve (823) (823) (823)
Shares held in employee trusts (88) (112) (122)
Profit and loss account 1,177 1,003 946
Shareholders' funds - equity 7 708 510 443
Minority interests - equity and non-equity 85 80 76
793 590 519
Page 17
Group cash flow information
Six months to 28 February 2005
Six months to Six months to
28 February 29 February
Reconciliation of operating profit 2005 2004
to net cash inflow from operating activities Note (pound)m (pound)m
Operating profit 313 295
Goodwill amortisation 20 20
Exceptional operating costs 5 2
Depreciation 41 38
Increase in stocks (45) (23)
(Increase)/decrease in debtors (16) 20
Decrease in creditors (72) (80)
Expenditure against provisions for reorganisation
and restructuring costs (13) (18)
Other items (8) (10)
Net cash inflow from operating activities 225 244
Group cash flow statement
Net cash inflow from operating activities 225 244
Dividends received from associated undertakings 8 9
Returns on investments and servicing of finance 8 (41) (53)
Taxation paid 8 (47) (44)
Capital expenditure and financial investment 8 7 (25)
Equity dividends paid (104) (93)
Cash inflow before use of liquid resources and financing 48 38
Management of liquid resources (21) (22)
Financing 8 4 4
Increase in cash in the period 10 31 20
Reconciliation of net cash flow
to movement in net debt
Increase in cash in the period 31 20
Increase in liquid resources 21 22
Decrease in loan capital 20 3
Movement in net debt resulting from cash flows 72 45
Exchange adjustments 46 251
Movement in net debt during the period 118 296
Opening net debt (1,941) (2,412)
Closing net debt 10 (1,823) (2,116)
Page 18
Notes to the accounts
1. Basis of preparation
These interim statements, which are unaudited, comply with relevant accounting
standards. The accounting policies have been applied on a basis consistent with
those applied in the 2004 Annual Report and Accounts. The 2004 Annual Report and
Accounts were prepared in accordance with accounting principles generally
accepted in the United Kingdom (UK GAAP) and have been reported on by the
Group's auditor and filed with the Registrar of Companies. The report of the
auditor was unqualified and did not contain a statement under section 237 (2) or
(3) of the Companies Act 1985.
The periods to 28 February 2005 and 29 February 2004 are regarded as distinct
financial periods for accounting purposes with the exception of taxation where
the periods are allocated an appropriate proportion of the expected total annual
charge.
These interim financial statements were approved by the Board on 20 April 2005.
2. Activity analysis
Six months to 28 February 2005 Six months to 29 February 2004
Trading Trading
Turnover profit * Turnover profit *
(pound)m (pound)m (pound)m (pound)m
Spirits & Wine 1,577 298 1,600 296
QSR 123 45 104 34
Britannia - 6 - 7
1,700 349 1,704 337
* Trading profit above is before goodwill and exceptional items. Goodwill and
exceptional items for the six months to 28 February 2005 is a loss of (pound)12m
(2004: loss - (pound)32m) and relates wholly to Spirits & Wine activities for
both periods.
Page 19
During the period the Group has reviewed its lease accounting and as a result
the QSR turnover for the six months to 28 February 2005 includes an (pound)11m
uplift to correct the accounting treatment of rental income in prior years.
There was no impact on trading profit because the uplift in rental income was
offset by a similar increase in rental expense.
3. Geographical analysis
Six months to 28 February 2005 Six months to 29 February 2004
Trading Trading
Turnover profit * Turnover profit *
By country of destination (pound)m (pound)m (pound)m (pound)m
Europe 707 110 735 109
Americas 732 187 719 175
Rest of World 261 52 250 53
1,700 349 1,704 337
* Trading profit above is before goodwill and exceptional items. Goodwill and
exceptional items for the six months to 28 February 2005 relate to Europe (loss
- (pound)9m) (2004: loss - (pound)19m), Americas (loss - (pound)3m) (2004: loss
- (pound)3m) and Rest of World (nil) (2004: loss - (pound)10m).
Notes to the accounts
3. Geographical analysis(continued)
Six months to 28 February Six months to 29 February
2005 2004
Trading Trading
Turnover profit * Turnover profit *
By country of (pound)m (pound)m (pound)m (pound)m
operation
Europe 1,119 130 1,141 133
Americas 913 195 861 173
Rest of World 210 24 193 31
2,242 349 2,195 337
Turnover with Group
companies (542) - (491) -
1,700 349 1,704 337
* Trading profit above is before goodwill and exceptional items. Goodwill and
exceptional items for the six months to 28 February 2005 relate to Europe (loss
- (pound)9m) (2004: loss - (pound)19m), Americas (loss - (pound)3m) (2004: loss
- (pound)3m) and Rest of World (nil) (2004: loss - (pound)10m).
Page 20
4. Reconciliation to normalised earnings
Six months to Six months to
28 February 29 February
2005 2004
(pound)m (pound)m
Earnings as reported 199 167
Adjustments for exceptional items net of tax (10) 9
Adjustments for goodwill amortisation net of tax 19 18
Normalised earnings 208 194
Average number of shares Millions Millions
Weighted average Ordinary Shares in issue
during the period 1,107 1,107
Weighted average Ordinary Shares owned by the
Allied Domecq employee trusts* (24) (32)
Weighted average Ordinary Shares used in
earnings per share calculation 1,083 1,075
Normalised earnings per Ordinary Share 19.2p 18.0p
* Includes American Depositary Shares representing underlying Ordinary Shares.
Basic earnings per share of 18.4p (2004: 15.5p) has been calculated on earnings
of (pound)199m (2004:(pound)167m) divided by the average number of shares of
1,083m (2004: 1,075m).
Diluted earnings per share of 18.2p (2004: 15.5p) has been calculated on
earnings of (pound)199m (2004:(pound)167m) and, after including the effect of
all dilutive potential Ordinary Shares, the average number of shares of 1,092m
(2004: 1,079m).
Notes to the accounts
5. Taxation
The (pound)65m (2004:(pound)59m) total taxation charge for the six months to 28
February 2005 comprises UK taxation of (pound)6m (2004:(pound)7m), overseas
taxation of (pound)55m (2004:(pound)49m) and taxation on the profits of
associated undertakings of (pound)4m (2004:(pound)3m).
Page 21
Deferred tax assets of (pound)39m at 31 August 2004 have not been recognised due
to the degree of uncertainty over the utilisation of the underlying tax losses
and deductions in certain tax jurisdictions.
6. Ordinary dividends
The Board has declared an interim dividend of 6.5p per ordinary share (2004:
5.83p) payable on 8 July 2005. Dividends on American Depositary Shares are
payable on 15 July 2005.
7. Reconciliation of movements in Shareholders' funds
Six months to Six months to
28 February 29 February
2005 2004
(pound)m (pound)m
Profit earned for Ordinary Shareholders in
the period 199 167
Currency translation differences on foreign
currency net investments 43 126
Taxation on translation differences (6) (32)
Actuarial gains on net pension liabilities 9 1
Total recognised gains and losses relating to
the period 245 262
Movement on shares in employee trusts 24 7
Ordinary dividends (71) (63)
Net movement in Shareholders' funds 198 206
Shareholders' funds at the beginning of the period 510 237
Shareholders' funds at the end of the period 708 443
Page 22
Notes to the accounts
8. Detailed analysis of gross cash flows
Six months to Six months to
28 February 29 February
2005 2004
(pound)m (pound)m
Returns on investments and servicing of finance
Interest received 6 4
Interest paid (44) (54)
Dividends paid to minority shareholders (3) (3)
(41) (53)
Taxation paid
UK taxation - 1
Overseas taxation (47) (45)
(47) (44)
Capital expenditure and financial investment
Purchase of tangible fixed assets (40) (37)
Sale of tangible fixed assets 41 12
Purchase of intangible fixed assets - (8)
Disposal of trade investments 6 8
7 (25)
Financing
Net disposal of Ordinary Share capital for
employee trusts* 24 7
Decrease in other borrowings (20) (3)
4 4
* Includes American Depositary Shares representing underlying Ordinary Shares.
Notes to the accounts
9. Reconciliation of net cash inflow from operating activities to free cash
flow
Six months to Six months to
28 February 29 February
2005 2004
(pound)m (pound)m
Net cash inflow from operating activities 225 244
Capital expenditure net of sale of tangible assets 1 (25)
Dividends received from associated undertakings 8 9
Operating cash net of fixed assets 234 228
Taxation paid (47) (44)
Net interest paid (38) (50)
Dividends paid - Ordinary Shareholders (104) (93)
- minorities (3) (3)
Free cash flow 42 38
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10. Net debt
Other
short-term
Cash at Overdrafts borrowings Loan capital Six months to
bank and due within due within due after 28 February 29 February
in hand one year one year one year 2005 2004
(pound)m (pound)m (pound)m (pound)m (pound)m (pound)m
At the beginning of
the period 129 (74) (304) (1,692) (1,941) (2,412)
(Decrease)/increase in
cash (25) 60 (4) - 31 20
Increase in liquid resources 21 - - - 21 22
(Increase)/decrease in
loan capital and other loans - - (176) 196 20 3
Exchange adjustments 2 2 9 33 46 251
At the end of the period 127 (12) (475) (1,463) (1,823) (2,116)
11. Financial calendar
Ex dividend date for interim dividend 8 June 2005
Record date for interim dividend 10 June 2005
Interim dividend payable - Ordinary Shares 8 July 2005
Interim dividend payable - American Depositary Shares 15 July 2005
Preliminary results announced 20 October 2005
Annual Report published November 2005
Independent review report by KPMG Audit Plc to Allied Domecq PLC
Introduction
We have been engaged by the Company to review the financial information set out
on pages 19 to 26 for the six months ended 28 February 2005 and we have read the
other information contained in the Interim Report and considered whether it
contains any apparent misstatements or material inconsistencies with the
financial information.
This report is made solely to the Company in accordance with the terms of our
engagement to assist the Company in meeting the requirements of the Listing
Rules of the Financial Services Authority. Our review has been undertaken so
Page 24
that we might state to the Company those matters we are required to state to it
in this report and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the Company for
our review work, for this report, or for the conclusions we have reached.
Directors' responsibilities
The Interim Report, including the financial information contained therein, is
the responsibility of, and has been approved by, the Directors. The Directors
are responsible for preparing the Interim Report in accordance with the Listing
Rules which require that the accounting policies and presentation applied to the
interim figures should be consistent with those applied in preparing the
preceding annual accounts except where they are to be changed in the next annual
accounts in which case any changes, and the reasons for them, are to be
disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin
1999/4: Review of interim financial information issued by the Auditing Practices
Board for use in the United Kingdom. A review consists principally of making
enquiries of Group management and applying analytical procedures to the
financial information and underlying financial data and, based thereon,
assessing whether the accounting policies and presentation have been
consistently applied unless otherwise disclosed. A review is substantially less
in scope than an audit performed in accordance with Auditing Standards and
therefore provides a lower level of assurance than an audit. Accordingly we do
not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 28 February 2005.
KPMG Audit Plc
Chartered Accountants
London
20 April 2005
US GAAP reconciliation
The following statements provide a reconciliation between profit earned for
Ordinary Shareholders under UK GAAP and net income under US GAAP and a
reconciliation between Shareholders' equity under UK GAAP and Shareholders'
equity under US GAAP.
Six months to
Six months to 29 February
28 February 2004
2005 (Restated)
(pound)m (pound)m
Profit earned for Ordinary Shareholders in
accordance with UK GAAP 199 167
Adjustments to conform with US GAAP:
Brands - -
Goodwill 21 21
Other intangible assets (1) (1)
Stock (6) (8)
Restructuring costs (1) (1)
Pension costs and other post-retirement benefits (24) (5)
Share compensation (16) (12)
Derivative instruments and debt translation 83 264
Franchise income (2) (4)
Other (8) 1
Deferred taxation (6) (66)
Minority share of above adjustments - -
Net income in accordance with US GAAP 239 356
Net earnings per Ordinary Share:
Basic 22.1p 33.1p
Diluted 22.0p 33.0p
Page 25
Six months to
Six months to 29 February
28 February 2004
2005 (Restated)
(pound)m (pound)m
Shareholders' funds as reported in the Group
balance sheet 708 443
Adjustments to conform with US GAAP:
Brands 1,126 1,207
Goodwill 329 244
Other intangible assets 14 16
Associated undertakings 54 57
Stock 6 17
Pension and other post-retirement benefits 104 161
Share compensation (16) (6)
Proposed dividends 71 63
Derivative instruments and debt translation 37 8
Liabilities (37) (37)
Franchise income (23) (20)
Other 7 9
Deferred taxation (451) (493)
Minority share of above adjustments - -
Shareholders' equity in accordance with US GAAP 1,929 1,669
Page 26
As reported within the 2004 Annual Report and Accounts the US GAAP
reconciliation statements for the year ended 31 August 2003 were restated to
correct the treatment of the foreign currency translation of certain assets and
liabilities in connection with past business combinations. Accordingly, the
reconciliation statements for the 6 months ended 29 February 2004 have also been
restated.
Page 27
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, thereto duly authorized.
21 April, 2005
ALLIED DOMECQ PLC
By: /s/ Charles Brown
---------------------------------
Name: Charles Brown
Title: Director, Corporate Secretariat
Deputy Company Secretary
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