Warning sends Allied Domecq 10% lower

Allied Domecq, the Beefeater gin and Malibu rum drinks group, saw its shares plunge 10 per cent yesterday when it warned that profits would fall short of market expectations.

It blamed non-trading reasons such as a pensions shortfall and adverse currency movements. However, sales in Spain fell short of forecasts due to destocking by wholesalers.

City analysts had been expecting profits of around £520m this year. But Allied Domecq said the figure would now be similar to last year's £480m. The shares fell 34.5p to a three-year low of 309p.

Nigel Popham, drinks analyst at Teather & Greenwood, said: "It is mainly non-trading items but Allied Domecq is operating in a difficult industry and in the short-term there will be more negatives than positives."

Allied Domecq said profits in Spain in the first half would be £25m lower than expected. But is said this would have been more than offset by faster growth in Latin America and the Asia Pacific if it had not been for the pensions and currency changes. Currency fluctuations will hit profits by £40m rather than the £20m originally forecast in October.

Continued falls in the stock market will mean there will be a £40m charge to cover a pensions shortfall. The company had earlier anticipated a £16m hit.

The business has been reducing its exposure to equities as stock market falls continue. In 2001 64 per cent of its pension fund was invested in equities. That has since been cut to 54 per cent, with the balance invested in bonds and property.

Philip Bowman, chief executive, said: "The business is performing well, in spite of challenging market conditions." He said the European business remained strong, with increases in market share in key categories.

The trading update was given at the company's annual shareholders meeting where the £1.26m pay-off granted to the former chief executive Tony Hales was criticised.