Allied Domecq 2002 Year End Results; Investing in Sustainable Growth.Business Editors BRISTOL Bristol, cities, United States Bristol. 1 Industrial city (1990 pop. 60,640), Hartford co., central Conn., on the Pequabuck River; settled 1727, inc. 1785. Its clock-making industry dates from 1790. , U.K.--(BUSINESS WIRE)--Oct. 29, 2002 Allied Domecq Allied Domecq PLC was an international company, headquartered in Bristol, UK that operated spirits, wine, and quick service restaurant businesses. History Allied Domecq was the result of a 1994 merger between Allied Lyons and Pedro Domecq.[1]. PLC ("Allied Domecq") (NYSE NYSE See: New York Stock Exchange : AED AED - Automated Engineering Design ), a leading international spirits, wine and quick service restaurant business, today announced its preliminary results for the year to August 31, 2002.
HIGHLIGHTS
2002(a) 2002 2001 %
growth
-- Turnover $5,168m (pound)3,334m (pound)2,879m 16
-- Trading profit $946m (pound)610m (pound)543m 12
-- Profit before tax $744m (pound)480m (pound)453m 6
-- Normalized
earnings
per share 32.6p 31.0p 5
-- Basic earnings
per share 36.8p 32.6p 13
-- Dividend 13.0p 12.1p 7
-- Marketing
investment
behind Spirits
& Wine $687m (pound)443m (pound)330mm 34
-- Cash flow from
operating
activities $1,178m (pound)760m (pound)423m
Profits and normalized earnings are stated before goodwill and
exceptional items unless otherwise stated. The post tax benefit of the
Mexican excise rebate for the year to August 31, 2002 was (pound)138m
and has been treated as an exceptional item. 2001 figures are (i)
reclassified to provide a comparison for Mexican excise rebate treated
as an exceptional item in 2002 and (ii) restated for deferred tax
treatment under FRS19.
(a) Dollar conversion for readers convenience only at August 30, 2002
rate of(pound)1=$1.55
Allied Domecq's Chief Executive, Philip Philip, tetrarch of Ituraea Philip, d. A.D. 34, tetrarch of Ituraea, son of Herod the Great. He was perhaps the ablest of the Herod dynasty. He is mentioned in the Gospel of St. Luke. Bowman, said: "These results represent a successful outcome to an important year for Allied Domecq. We have maintained our focus on delivering profit growth while adding significantly to our brand portfolio and improving volume performance in key markets. Our marketing capabilities have been strengthened, which has led us to invest heavily in the sustainable future growth of the business and bring us closer to our aim of becoming a truly marketing-led company. "Seven of our eight core brands are now showing volume growth reflecting our continued commitment to invest strongly behind our core brands. Our US spirits business has benefited from the positive actions taken earlier this year with the business returning to organic profit growth. Importantly, most of our core US brands show good growth trends and are gaining market share. We are also delivering innovation with ready-to-drink products and a new cream liqueur A cream liqueur (not be confused with crème liqueur) is a liqueur that includes dairy cream among its ingredients. Examples include Baileys Irish Cream and Saint Brendan's, which use Irish whiskey; Amarula, which uses distillate of fermented South African marula fruits; Voyant Chai , Tia Lusso Lusso may refer to:
[ imp. & p. p. os> r>; p. pr. & vb. n. os> With mumming and with masking all around. - Spenser. Cuvee Cuvée (or Cuvee on some English language labels) is a French term used on wine labels to denote wine of a specific blend or batch. The word originates from the French word cuve meaning "vat". Napa. The integration of our acquisitions is going well and our new wine business is performing in line with our plans. "Our Quick Service Restaurants business has delivered strong growth with improved overall same store sales Same Store Sales A statistic used in retail industry analysis. It compares sales of stores that have been open for a year or more. Notes: This statistic allows investors to determine what portion of new sales has come from sales growth and what portion from the opening of and an increase in distribution points. Dunkin' Donuts Sources: Dunkin' Donuts is an international coffee and donut retailer founded in 1950 in Quincy, Massachusetts, U.S. by William Rosenberg. Corporate Profile History continues to outperform Outperform An analyst recommendation meaning a stock is expected to do slightly better than the market return. Notes: Exact definitions vary by brokerage, but in general this rating is better than neutral and worse than buy or strong buy. the US QSR QSR Quick Service Restaurant QSR QoS (Quality of Service) Satisfaction Rate QSR Quality System Regulations QSR Quality Status Report QSR Quality System Review QSR Quarterly Status Report QSR Quality System Requirement category and Baskin-Robbins Baskin-Robbins is a global chain of ice cream parlors founded by Burt Baskin and Irv Robbins in 1945 in Glendale, California. It claims to be the world's largest ice cream franchise, with more than 5,600 locations, 2,800 of which are located in the United States. has benefited from its brand revitalization re·vi·tal·ize tr.v. re·vi·tal·ized, re·vi·tal·iz·ing, re·vi·tal·iz·es To impart new life or vigor to: plans to revitalize inner-city neighborhoods; tried to revitalize a flagging economy. . "The results for the first month of the new financial year have been in line with our expectations. We expect to continue to grow earnings benefiting from the contribution of our recent acquisitions while continuing to invest strongly in the business as we support new campaigns for our core brands and drive our program of innovation." Key Points Comparative information here and in the Operating and Financial Review is based on constant exchange rates. -- Trading profit up 11% to(pound)78m -- System-wide sales growth of 9% -- US same store sales growth in Dunkin' Donuts of 6% and Baskin-Robbins of 2% -- Number of combination stores up 31% Operational effectiveness -- Improving operational effectiveness by: -- Addressing short-term Short-term Any investments with a maturity of one year or less. short-term 1. Of or relating to a gain or loss on the value of an asset that has been held less than a specified period of time. volume challenges -- Investing in the US supply chain improvement project, at a cost of(pound)19m -- Boosting the focus on our people -- Strong progress in enhancing our marketing capabilities: -- Consumer segmentation study -- New marketing campaigns for key brands -- Underlying trading working capital improved by 7% ((pound)110m) Innovation -- Successfully developing consumer-led innovation to drive growth -- Launch of new ready-to-drink products -- New cream liqueur - Tia Lusso Acquisition -- Significantly strengthening the brand portfolio through targeted acquisition: -- Malibu -- Kuemmerling in Germany -- Bodegas y Bebidas, Spain's leading winemaker -- Mumm Cuvee Napa in California California (kăl'ĭfôr`nyə), most populous state in the United States, located in the Far West; bordered by Oregon (N), Nevada and, across the Colorado River, Arizona (E), Mexico (S), and the Pacific Ocean (W). -- Developed an international premium, branded wine business -- Integration is on track For further information: Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the : Corporate information can be downloaded from the website at www.allieddomecq.com. Presentation material: The results presentation will be available on the corporate website from 4:30 AM (Eastern time) on Tuesday October 29, 2002. Webcast: A recording of the results presentation webcast will be available from 9:00 AM (Eastern time). Allied Domecq is the second largest spirits company in the world and a leading quick service restaurant operator. Allied Domecq's ordinary shares trade on The London Stock Exchange London Stock Exchange London marketplace for securities. It was formed in 1773 by a group of stockbrokers who had been doing business informally in local coffeehouses. under ALLD ALLD Automatic Line Leak Detectors ALLD Airborne Laser Locator Designator . Allied Domecq's ADRs trade on The New York Stock Exchange New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. under AED. 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 United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. 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 forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. 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. Key Business Drivers We have achieved profit growth while continuing to invest in sustainable future growth, focusing our investment on: -- Further aggressive management of our existing asset base particularly through increased and more targeted marketing; -- Launching consumer-led innovation; and -- Enhancing the growth profile of our portfolio through acquisition in both spirits and wine. Marketing-led business: In our drive to become a truly marketing-led company, we have changed our approach to understanding the consumer. We have committed (pound)6m across 10 countries to develop a new modal Mode-oriented. A modal operation switches from one mode to another. Contrast with non-modal. 1. modal - (Of an interface) Having modes. Modeless interfaces are generally considered to be superior because the user does not have to remember which mode he is in. 2. approach to consumer segmentation, which is enabling us to predict better consumers' choice of drink and brand. This work has given us the marketing tools to determine strategies for 11 brands and country strategies for our 10 largest markets. This provides a rigorous basis to support our investment decisions across our whole portfolio. We are developing the creative work that brings the brands to life and identifying the most effective media to reach our target consumers with integrated campaigns - from TV and cinema commercials to on-trade promotions and parties. Consumer-led marketing: We are now delivering exciting new marketing campaigns for key brands. During the year we launched an integrated marketing campaign behind Ballantine's - "Go play "- which is a significant departure from traditional whisky marketing. Our fully integrated through-the-line campaign was launched in May in over 50 countries. Stolichnaya in the US saw a significant increase in investment with "See what unfolds". Our latest major marketing campaign for Kahlua - "Unleash it" - is being launched in six countries through a wide range of media from television and cinema to outdoor and radio. Innovation: We are delivering a program of innovation. We launched ready-to-drink products including two in the US - Stolichnaya Citrona and Sauza Diablo di·ab·lo adj. Diable. [Alteration (influenced by Spanish diablo, devil) of diable.] . These have been developed through a commercial partnership with Miller. As the market develops, both parties will explore together further opportunities to extend the range of ready-to-drink beverages via our portfolio of spirits brands. We also launched a major innovation to the Tia Maria Tia Maria is the brand name of an alcoholic drink. Produced by the industry giant Pernod Ricard through their Malibu-Kahlúa International subsidiary, Tia Maria is a "liqueur spirit" which resembles a coffee liqueur such as Kahlúa, which is also produced by Pernod Ricard. brand. Tia Lusso is a new light cream liqueur that has been rolled out to nine markets, with sales exceeding our launch expectations. Growth through acquisition: The future growth profile of our spirits portfolio has improved through the acquisition of Malibu, a leading international spirits brand. The brand will become our ninth core and the third most profitable in our portfolio with a dynamic growth profile. Our wine business has been enhanced though the addition of Bodegas y Bebidas and Mumm Cuvee Napa. We have set out clear plans to build a sustainable wine business that will deliver good returns and bring best value to the trade and the consumer. We are now delivering against these plans. Operating and Financial Review Summary At constant exchange rates, turnover was up 19% to (pound)3,334m in the period and trading profit Trading profit The profit earned on short-term trades of securities held for less than one year, subject to tax at normal income tax rates. trading profit increased by 14% to (pound)610m. Organic trading profit grew by 5% to (pound)557m. Normalized profit before tax grew by 6% to (pound)480m. We have delivered these results through the growth of Spirits & Wine gross margin and the continued improved performance of our Quick Service Restaurants business. At the same time, we have increased advertising and promotion by 35% (21% for organic businesses), invested in reduced US trade inventories at a pre-tax cost of (pound)19m and absorbed a (pound)16m increase in pension costs. We have maintained earnings growth with a 5% improvement in normalized earnings Normalized Earnings 1. Earnings adjusted for cyclical ups and downs in the economy. 2. On the balance sheet, earnings adjusted to remove unusual or one-time influences. Notes: An example would be removing a land sale in which a large capital gain was realized. per share to 32.6 pence pence n. Chiefly British A plural of penny. pence Noun a plural of penny USAGE: Since the decimalization of British currency and the introduction of the abbreviation p, per share. Acquisitions during the period diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. normalized earnings per share by 0.8 pence, of which 0.5 pence related to Malibu and its financing through debt and equity. Excluding this dilution Dilution A reduction in earnings per share of common stock that occurs through the issuance of additional shares or the conversion of convertible securities. Notes: Adding to the number of shares outstanding reduces the value of holdings of existing shareholders. , normalized earnings per share grew by 8%. The directors are recommending a final dividend of 8.1 pence per share giving a total for the year of 13.0 pence per share, an increase of 7%. This is in line with our policy for the annual dividend to be covered approximately 2.5 times. Outlook The results for the first month of the new financial year have been in line with our expectations. We expect to continue to grow earnings benefiting from the contribution of our recent acquisitions while continuing to invest strongly in the business as we support new campaigns for our core brands and drive our program of innovation. Explanatory ex·plan·a·to·ry adj. Serving or intended to explain: an explanatory paragraph. ex·plan notes Comparative information is based on constant exchange rates. Net turnover is turnover excluding excise A tax imposed on the performance of an act, the engaging in an occupation, or the enjoyment of a privilege. A tax on the manufacture, sale, or use of goods or on the carrying on of an occupation or activity, or a tax on the transfer of property. duty. Profit and normalized earnings are stated before goodwill and exceptional items which includes the benefit of the Mexican Mexican named after or originating in Mexico. Mexican axolotl see ambystomamexicanum. Mexican beaded lizard (Heloderma horridum excise rebate rebate, partial refund of the total price paid for goods or services. In the United States, rebates were historically given by railroads to favored shippers as a return on transportation charges. . Organic growth comparisons exclude the contribution of acquisitions until they have been incorporated in the business for one full calendar year from the date of acquisition. Volumes are quoted in nine litre LITRE. A French measure of capacity. It is of the size of a decimetre, or one-tenth part of a cubic metre. It is equal to 61.028 cubic inches. Vide Measure. cases unless otherwise specified.
SPIRITS & WINE
Total Organic
-------------------- -----------------
2002 Growth 2002 Growth
-- Trading profit (pound)516m 15% (pound)463m 3%
-- Net turnover (pound)2,380m 25% (pound)2,044m 7%
-- Advertising and promotion (pound)443m 35% (pound)396m 21%
We have grown both profits and turnover of our Spirits & Wine business through organic growth and acquisition. Before the benefit of acquisitions, gross margin increased by (pound)144m. This is partly offset by increased advertising and promotion ((pound)69m) and the combined impact ((pound)62m) of overheads and a decline in other income, driven primarily by higher pension costs, investment in new systems, US listing costs and investment in ready-to-drinks. Acquired businesses increased gross margin by (pound)152m, advertising and promotion investment by (pound)47m and overheads by (pound)52m. The organic gross margin increase of 13% ((pound)144m) has been driven through enhanced mix ((pound)86m) in Asia Pacific and North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , increased pricing ((pound)25m), particularly in Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. and volumes ((pound)24m) in Asia Pacific and Europe. A review of Spirits & Wine brand performance is on page 7 and a regional review of performance is given on page 9. Quick Service Restaurants -- Trading profit up 11% to(pound)78m -- System-wide sales growth of 9% -- US same store sales growth in Dunkin' Donuts of 6% and Baskin-Robbins of 2% -- Number of combination stores up 31% Profit growth in our Quick Service Restaurants business has been driven by growth in same store sales and the contribution from new stores. Dunkin' Donuts has delivered another good year of growth outpacing the overall QSR industry with system wide sales up by 10% and same store sales up 6% in the US. The brand also achieved a 4% increase in distribution points. The restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). of the Baskin-Robbins franchise arrangements has continued to grow system wide sales by 6% and US same store sales by 2%. Baskin-Robbins has benefited from a promotional tie-in with the animated film "Spirit: Stallion stallion 1. an entire male horse aged 4 years and over. 2. in UK, applied to a male donkey (jack). stallion ring see stallion ring. teaser stallion stallion used to detect those mares which are in estrus. of the Cimarron" which has driven sales of the Spirit flavors - Wild `N Reckless reckless adj. in both negligence and criminal cases, careless to the point of being heedless of the consequences ("grossly" negligent). Most commonly this refers to the traffic misdemeanor "reckless driving. and S'more. In addition, the highly publicized pub·li·cize tr.v. pub·li·cized, pub·li·ciz·ing, pub·li·ciz·es To give publicity to. Adj. 1. publicized - made known; especially made widely known publicised "Free Scoop Nights" have continued to drive brand awareness. Togo's has successfully increased the number of distribution points by 10% to grow system wide sales by 1%. A new advertising campaign - "Legend of Togo's" - has been launched to increase awareness of the Togo's brand and increase system wide sales. Innovation has long been an important part of QSR's growth strategy with new products being developed across the brand portfolio. Dunkin' Donuts is now the number one player in the QSR bagel category with 19% share of the US market and it's Coffee Coolatta is number two in the QSR iced and frozen slushy slush·y adj. slush·i·er, slush·i·est 1. Consisting of, covered with, or full of slush. 2. Resembling slush, as in consistency. 3. Revoltingly sentimental; maudlin. See Synonyms at sentimental. category. Baskin-Robbins has developed triple-layer shakes, "hot treats" and a variety of new exotic flavors including "Wild Amazon", "Turkish delight" and "African safari The default Web browser for the Max OS X operating system. It is noted for its fast download speed and many built-in features including the Google search bar and popup blocker. In June 2007, Safari was introduced in beta for Windows users. See Mac OS X. ". Togo's has widened its range of sandwich offerings with better quality bread and new toasted products. Our strategy of multibranded combination stores continues to be a driver of growth in new store openings with a 31% increase in the number of combination stores to over 800. There are now 74 combination stores that offer all three of our Quick Service Restaurant brands. This strategy is based on our brands' complementary daypart offering and brings significant benefits to our franchisees through improved scale and operating efficiencies, along with increased choices for consumers. Spirits & Wine Brand Performance Total Spirits & Wine volumes and net turnover increased by 26% and 25% respectively, driven by acquisitions. Before acquisitions, net turnover grew 7% on flat volumes. We have achieved a significant improvement in performance in the second half through a focused approach to our key brand market combinations and the positive actions we have taken in our US business. Overall organic volumes grew by 4% in the second half compared with a 3% decline in the first half. We are investing more heavily in our organic business with a 21% increase in advertising and promotion supporting the enhanced brand activation activation /ac·ti·va·tion/ (ak?ti-va´shun) 1. the act or process of rendering active. 2. the transformation of a proenzyme into an active enzyme by the action of a kinase or another enzyme. 3. work we have developed. The main focus for this investment is Ballantine's in over 50 markets, Mumm and Perrier Jouet in US and UK, Stolichnaya in the US, Imperial whisky in South Korea, the launch of Tia Lusso in nine markets and the development of new ready-to-drink products. Over the past 18 months, we have enhanced our marketing capabilities through detailed consumer insight research, country and marketing strategies and exciting new creative work. We now have the consumer-led initiatives and marketing tools to target this increased investment to drive sustainable future growth. We launched Stolichnaya Citrona and Sauza Diablo which have performed well in market research with target consumers. To the end of August, our partnership with Miller had invested $40m behind these brands to drive sales of 270,000 cases on an equivalent servings basis. We have achieved good awareness of these brands through extensive advertising and on-premise sampling which in turn will benefit the equity of the respective `mother brands', but distribution of these products has been disappointing. Since it is still early days for our products, our launch resulted in a small charge to the profit and loss account which is reflected as an associate in `Others'. Our partnership with Miller has given us access to an efficient production and distribution asset base in order to gain access to any upside Upside The potential dollar amount by which the market or a stock could rise. Notes: This is basically an educated guess on how high a stock could go in the near future. See also: Bull, Downside available from this category. We manage our Spirits & Wine portfolio as four groups: core brands, local market leaders, premium wine and other Spirits & Wine brands. Brand performance is reviewed below under these categories.
Spirits & Wine volume and net turnover growth
Including impact of Excluding impact of
US destock US destock
-------------------------- ---------------
Volume Volume Net Volume Net
million growth turnover growth turnover
cases % growth % growth
% %
------------------------------------------------------- --------------
Ballantine's 5.7 4 11 4 11
Beefeater 2.3 3 2 4 4
Canadian Club 2.2 2 (8) 7 (2)
Courvoisier 1.0 8 8 9 8
Kahlua 3.1 (9) (9) (5) (3)
Maker's Mark 0.4 10 16 10 16
Sauz a 1.9 10 19 10 20
Tia Maria 0.8 13 14 13 14
Core brands 17.4 2 6 4 8
Malibu 0.5 - - - -
Local market leaders 11.4 (1) 12 0 13
Local market leader
acquisitions 1.0 - - - -
Premium wine 2.2 7 10 10 12
Premium wine acquisitions 10.7 - - - -
Other wine 7.0 10 11 10 11
Other spirits 13.3 (1) 7 (1) 7
Other Spirits & Wine brands 20.3 2 8 3 8
------------------------------------------------------- --------------
Total (including acquisitions) 63.5 26 25 27 26
------------------------------------------------------- --------------
NB: The volumes of Stolichnaya Citrona and Sauza Diablo are not
included in this table.
The volumes of our core brands, excluding Malibu, grew by 2% and net turnover grew 6%, reflecting the improved second half performance across nearly all the brands. The core brand volumes were up 8% in second half compared with a 3% decline in the first half. This has been achieved through a more focused approach on the key brand market combinations and improved trading in the US. The growth for the year has been affected by our destocking of the US supply chain announced in October 2001. Excluding the impact of the destock, volumes grew by 4% and net turnover grew by 8%. We have also continued to invest strongly behind our core brands with an increase of 11% in advertising and promotion leaving the net brand contribution from our core brands up 1%. We acquired Malibu in May 2002 and this will join our core brands. It has performed well in the first three months of our ownership with a rapid and effective integration into our business. We have addressed trade loading issues and the brand continues to show good consumer growth trends. Ballantine's volumes grew 4% and net turnover increased 11% on continued good performance in its key markets in Europe, Asia Pacific and Duty Free, particularly following the launch of the new campaign "Go play". Beefeater beefeater yeoman of the English royal guard, esp. at the Tower of London; slang for Englishman. [Br. Culture: Misc.] See : Britain beefeater popular name for a Yeoman of the Guard or Yeoman Warder of the Tower of London. [Br. Hist. continued to perform well in Spain helping to offset a slower performance in the US to drive overall volumes up 3% and net turnover up 2%. The performance of both Kahlua and Canadian Club This article refers to the Canadian Club brand of whisky. For the Toronto club which hears speeches from prominent individuals, see Canadian Club of Toronto. have been held back by the US destock and by tougher trading conditions in the US during the first half. Canadian Club has shown improving consumption trends during the year and Kahlua should benefit from the recent launch of a new campaign, "Unleash it". Courvoisier benefited from strong growth in both the UK and US markets particularly following the success of the track "Pass the Courvoisier" by Busta Rhymes Trevor Smith (born on May 20 1972), better known as Busta Rhymes, is an American hip hop musician and actor. Chuck D of Public Enemy gave him the name Busta Rhymes (from former NFL wide receiver George "Buster" Rhymes) after watching him perform. and continued investment in the "House of Courvoisier" campaign in the US. The growth of Maker's Mark Maker's Mark is a hand crafted small batch type of bourbon whisky distilled in Loretto, Kentucky. When the famous T.W. Samuels family of distilling sold their distillery and their trademarks in the 1950s, those members of the family who wished to continue in the business has continued with a 10% increase in volumes driven by strong consumer interest, good brand PR and advertising. Sauza volumes grew 10% benefiting from our investment in improved tequila tequila Distilled liquor, usually clear in colour and unaged, made from the fermented juice of the Mexican agave plant. (See agave family.) It contains 40–50% alcohol. production and net turnover increased 19% also helped by improved price and mix. Tia Maria had a good Christmas in the UK and the launch of the new cream liqueur, Tia Lusso, helped to grow volumes and net turnover by 13% and 14% respectively. The local market leader brands benefited from Stolichnaya in the US and the acquisition of Kuemmerling in Germany. As a result, total volumes from the local market leader brands grew 8% while net turnover and net brand contribution grew 29% and 27% respectively. Before acquisitions, total volume for this brand category fell by 1% largely reflecting a 12% volume decline in Mexican brandies. In spite of in opposition to all efforts of; in defiance or contempt of; notwithstanding. See also: Spite this decline, caused by excise duty increases in Mexico and the on-going pressure of the informal spirits market, we successfully grew net turnover and net brand contribution of our Mexican brandies by 7% and 34% respectively. Strong performances by Stolichnaya in the US and Imperial in Korea helped to grow organic net turnover of the local market leaders by 12% and net brand contribution by 14%. We increased our organic advertising and promotion investment behind this category by 35%, mainly behind Stolichnaya and Imperial. During the year, we established our premium wine business following recent acquisitions. Before the benefit of acquisitions, our wine business grew volumes by 7% and net turnover by 10% to drive net brand contribution up by 14%. A full review of the wine business including our recent acquisitions is provided in the regional review on page 11. The volumes for the rest of the Spirits & Wine portfolio grew by 2% while net turnover increased by 8% growing net brand contribution by 1%. Market Review - Spirits & Wine The performance of our business is reviewed below by region. Europe Trading profit grew by 5% to (pound)160m driven by good performances in Spain and the UK and through acquisition. Trading profit before acquisitions was down 4% held back by advertising and promotion, up 11%, on net turnover up 6%. This strong investment is principally behind "Go play" campaign for Ballantine's and the launch of Tia Lusso. Our business in Spain has again achieved further market share gains for Ballantine's and Beefeater, which grew volumes by 3% and 9% respectively. Centenario consolidated its position as category leader with a 12% increase in volumes and a 14% increase in net turnover. Advertising and promotion was increased in Spain behind Ballantine's, Beefeater, Whisky DYC DYC Division of Youth Corrections DYC Diocesan Youth Council DYC Destilerías Y Crianza (Spanish whiskey) DYC Direct Yaw Moment Control and Malibu. The increase in excise duty in January slowed first half volume growth with core brands up 3% which recovered to 8% growth in the second half. The volume performance of Ballantine's outside of Spain was held back by weak market conditions, particularly in Germany but still managed to grow market share across Europe. The UK business benefited from a good Christmas and strong performances for Teacher's, Courvoisier and Tia Maria. Over the year, Teacher's grew volumes by 12% gaining share in the off-trade. Courvoisier also gained share to become the number one selling cognac Cognac (kônyäk`), city (1990 pop. 19,932), Charente dept., W France, in Angoumois, on the Charente River. The French brandy to which Cognac gives its name has been manufactured and exported from the city since the 18th cent. brand in the UK. Tia Maria also performed well, as well as benefiting from the launch of Tia Lusso. We acquired Kuemmerling, a leading German bitters brand, at the beginning of the period. The integration has been accelerated, and is now almost complete, with all our German operations now in one location in Frankfurt. Kuemmerling has given us critical mass in Europe's largest spirits market providing a sound economic platform for our German business. We are making good progress with the implementation of our major systems upgrade project in key European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. markets with systems live in France, Germany, Spain and parts of the UK, rolling out to other key European markets through to 2003. The project will significantly improve the availability and consistency of data across the region and will help drive enhanced performance. North America Trading profit grew 7% to (pound)169m driven primarily by the contribution from acquisitions and mix improvements. On an organic basis, net turnover grew 4% on volumes up 1% leading to an increase in trading profit of 1%. Organic volumes grew by 3% in the second half compared with a 2% decline in the first half. This significant improvement in trading during the latter part of this financial year is a direct result of our positive actions. We have refined pricing by brand and by state, improved communications within the business, reviewed deployment of our sales forces and re-aligned our advertising and promotion spend to improve its effectiveness. This has been achieved as part of our implementation of a new five-year country strategy. Significant management changes were made including the appointment of a new president, Tom Wilen. In addition, a new organizational structure  This article has no lead section.To comply with Wikipedia's lead section guidelines, one should be written. is being implemented that will allocate To reserve a resource such as memory or disk. See memory allocation. our resources closer to the market place and increase sales coverage. This will facilitate a better understanding of customers and consumers and further strengthen our relationships with distributors. The supply chain re-engineering project that we announced in October 2001 has reduced wholesaler and retailer inventories in the US with a negative impact on trading profit of (pound)19m, of which (pound)2m related to the Wine region. Excluding the impact of the destock, organic trading profit grew 12%. The destock has resulted in a reduction in shipments compared with depletions of 0.5m cases and has primarily affected Kahlua, Beefeater, Canadian Club, Hiram Walker Hiram Walker (4 July 1816 – 12 January 1899) was an American grocer and distiller, and the eponym of the famous distillery in Windsor, Ontario, Canada directly across from Detroit, Michigan. Walker founded the distillery in 1858 in what was then Walkerville, Ontario. Liqueurs Liqueurs are high-alcohol, high-sugar beverages with added flavorings usually derived from herbs, fruits, or nuts. Liqueurs are distinct from flavored liquors, fruit brandy and eau de vie which contain no sugar. Most liqueurs range between 15 and 70 percent alcohol by volume. and Californian wine. The project is expected to continue in the year to August 2003 with a further impact on trading profit of around (pound)10m. Stolichnaya continues to perform well, gaining share in the imported vodka vodka (vŏd`kə), traditional spirituous drink of Russia, the Baltic states, and Poland; it is now consumed internationally. The best vodka is distilled from rye and barley malt, but the cheaper corn and potatoes are commonly employed. category, helped by a new advertising campaign. Courvoisier, Maker's Mark and Sauza have all grown share during the year. Kahlua, Canadian Club and Beefeater have been held back by the impact of the US destock and by the slower trading experienced at the beginning of the fiscal year. Our objective is to work closely with our US distributors through a program where we are the `partner of choice'. We are focused on developing long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. partnerships where we actively shape a sustainable model for both parties. The recent changes in the US distributor environment have created new opportunities that we are currently evaluating. Our US portfolio has been significantly enhanced through the recent acquisitions of Stolichnaya, Mumm and Perrier Jouet champagnes and Malibu and we shall continue to provide mutual benefit through our increasingly premium portfolio in our distributor relationships. Latin America Trading profit for the region was up 42% to (pound)61m (excluding the Mexican excise rebate) on net turnover up 12%. This improvement was driven by reduced production costs and the success of the "Yo brandy brandy [for brandywine, from Du.,=burnt, i.e., distilled, wine], strong alcoholic spirit distilled from wine or from marc, the residue of the wine press. The most noted brandy is cognac, made from white grapes in the Charente district of France. " promotion for our Mexican brandies that helped to grow their net turnover by 7% and net brand contribution by 34% in spite of falling volumes. Sauza volumes in the region have grown 14%, benefiting from our ongoing careful management of the supply of the key raw material, agave and the production of tequila. We continue to manage supplies of Sauza between its major markets, the US and Mexico. The region also benefited from cost savings during the period. Advertising and promotion for the region increased by 27% particularly behind Sauza, Ballantine's and the introduction of a high energy ready-to-drink product, "Spirit". During the period, we received compensation of (pound)213m awarded by the Mexican Supreme Court. This was received through a combination of cash and offsetting of duties and taxes payable. The current estimate of excise duty rebate and related interest and inflation still to be received during the year to August 2003 is expected to be within a range of (pound)30m to (pound)50m. We are making good progress with the integration of our new wine businesses, Bodegas y Vinedos Graffigna and Vinedos y Bodegas Sainte Sylvie, in Argentina. We will increase their export potential as part of our global wine strategy; this will address the current weak domestic trading conditions in Argentina. Profits from Brazil have been held back by the weak economic climate but Ballantine's and Teacher's continue to drive volume growth. Asia Pacific We have achieved strong growth of 20% in net turnover and trading profit. The profit growth has been driven by good performances across the region, particularly in South Korea, and has been achieved after a 57% increase in advertising and promotion investment principally behind Ballantine's and Imperial. Our South Korean business, Jinro Ballantines continues to show strong growth. Imperial, South Korea's number one premium whisky, and Ballantine's have been the key drivers of this growth in the region with volumes up 19% and 23% respectively. We launched a brand extension, Ballantine's Masters, which is progressing well and should benefit further from a new advertising campaign. Ballantine's 12 and 17 year old have established a strong presence in the premium aged whisky category. Fundador continues to perform well in the Philippines with volumes up 15% and net turnover growth of 12%, helped particularly by Fundador Solera A solera is a series of barrels or other containers used for aging liquids such as Sherry, Madeira, Marsala, Mavrodafni (a dark-red fortified dessert wine from Greece), Muscat, Muscadelle, Balsamic and Sherry Vinegars. . Australia and New Zealand New Zealand (zē`lənd), island country (2005 est. pop. 4,035,000), 104,454 sq mi (270,534 sq km), in the S Pacific Ocean, over 1,000 mi (1,600 km) SE of Australia. The capital is Wellington; the largest city and leading port is Auckland. have reported strong results particularly with Kahlua and RTDs. We achieved a rapid launch of Tia Lusso in Australia supported by marketing materials developed by the central marketing team for local application. Wine region For the first time our premium wine business is presented separately within the regional review. This business includes Bodegas y Bebidas, Montana, Mumm and Perrier Jouet champagnes and our enlarged US wine business including Buena Vista and Mumm Cuvee Napa. David Scotland was appointed in January to lead the wine business and has put together a strong team of wine experts from a number of leading wine companies. The wine business delivered a trading profit of (pound)68m on wine volumes of 13m cases which is line with our plans. This includes the adverse impact of the US destock. Our plans support our key objective of achieving a return on investment above our weighted average cost of capital Weighted average cost of capital (WACC) Expected return on a portfolio of all a firm's securities. Used as a hurdle rate for capital investment. Often the weighted average of the cost of equity and the cost of debt The weights are determined by the relative proportions of equity by August 2005 and exceed our target of 10% by August 2007. Montana's trading profit grew by 35% in spite of a year of significant change and a poor North Island harvest in 2001. This growth was achieved from both domestic and export sales. Bodegas y Bebidas continued its mix shift towards premium wine with a 7% growth in net brand contribution on volumes down 10%. Including the impact of the destock, our US wine business is holding volumes in a tougher market as it benefits from the strength of well recognized brands like Clos du Bois Du Bois (d  `bois, dəbois`), city (1990 pop. 8,286), Clearfield co., W central Pa., in the region of the Allegheny plateau; inc. 1881. . Mumm Cuvee Napa was added to our US business in May and will
further support the development of our premium branded wine business.
Mumm and Perrier Jouet champagnes have shown significant growth during
the year growing share in key markets. We have addressed the excess
stocks following the millennium whilst maintaining premium price
positions.Global Operations Global Operations is a first-person shooter computer game developed by Barking Dog Studios and published by both Crave Entertainment and Electronic Arts. It was released in March of 2002, following its public multiplayer beta version which contained only the Quebec map. We have continued to achieve improvements in productivity with an increase for Spirits & Wine of 3% (measured as cases produced per employee). This improvement has largely been achieved through increasing production volumes through key sites, particularly Ballantine's at Allied Distillers and Courvoisier at Jarnac. During the year, we completed a review of our distillation distillation, process used to separate the substances composing a mixture. It involves a change of state, as of liquid to gas, and subsequent condensation. The process was probably first used in the production of intoxicating beverages. strategy in Scotland. As a result, we are investing (pound)6m at our Strathclyde Distillery over the next 18 months and have closed our distillery at Dumbarton. One-off costs of (pound)14m relating principally to the asset write-down Write-Down Reducing the book value of an asset because it is overvalued compared to the market value. Notes: This is usually reflected in the company's income statement as an expense, thereby reducing net income. of the balance sheet value of the distillery and site demolition Demolition is the opposite of construction: the tearing-down of buildings and other structures. It contrasts with deconstruction, which is the taking down of a building while carefully preserving valuable elements for re-use. and clearance costs have been charged as an exceptional item. The future cash benefits of this action will be approximately (pound)3m per annum Per annum Yearly. , initially reflected in the stock value of the grain whisky Grain whisky is any whisky made from at least some grains other than barley, such as wheat and maize (corn). Some grain whisky also contain malted barley. (Whisky made from only barley is called malt whisky. . We have completed our US$25m investment to increase the distillation and warehousing capacity for Maker's Mark in Kentucky Kentucky, state, United States Kentucky (kəntŭk`ē, kĭn–), one of the so-called border states of the S central United States. It is bordered by West Virginia and Virginia (E); Tennessee (S); the Mississippi R. . We are also managing the transfer of Malibu production to our sites in Walkerville, Dumbarton and Jerez which will take place during the first half of the coming year. Our Duty Free operations have shown a marked recovery following the downturn Downturn The transition point between a rising, expanding economy to a falling, contracting one. downturn A decline in security prices or economic activity following a period of rising or stable prices or activity. in travel experienced earlier in the year following September 11 and the economic recession in a number of markets. In particular, we have seen good growth in the Ballantine's super premium brands and a good performance from America in the second half of the year. We have consistently increased our leadership position in the super premium scotch scotch 1 tr.v. scotched, scotch·ing, scotch·es 1. To put an abrupt end to: The prime minister scotched the rumors of her illness with a public appearance. 2. in Duty Free. The recent additions to our portfolio, Malibu, our champagnes and Tia Lusso are all performing well in this channel. Geographical Analysis - Spirits & Wine trading profit In line with previous statements, the trading profits of the Spirits & Wine 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 2 to the accounts. The premium wine business has been presented separately within the regional analysis. The effect of the transfer of the US wine business from North America to premium wine and the shift of management responsibility for Duty Free from Others to Europe is shown in the market transfers column. "Others" include Global Operations (including profit from the sale of bulk whisky), standalone stand·a·lone adj. Self-contained and usually independently operating: a standalone computer terminal. duty free operations and central costs not allocated to marketing regions. The losses arising from "Others" reflects increased pension costs and higher levels of investment in central advertising and promotion in areas such as consumer segmentation research and new product development including Stolichnaya Citrona and Sauza Diablo.
Geographical analysis - Spirits & Wine trading profit
2001
--------------------------------------------
Reported Market Foreign At 2002
2001 transfers exchange exchange
(pound)m (pound)m (pound)m (pound)m
------------------------------------------------------------------
Europe 142 7 3 152
North America 185 (27) - 158
Latin America 46 - (3) 43
Asia Pacific 59 - (4) 55
Wine region - 26 - 26
Others 26 (6) (4) 16
------------------------------------------------------------------
Total 458 - (8) 450
------------------------------------------------------------------
2002 2002
Total Organic
-------------------- -----------------------
Growth Growth
at 2002 at 2002
2002 exchange 2002 exchange
(pound)m % (pound)m %
------------------------------------------------------------------
Europe 160 5 146 (4)
North America 169 7 160 1
Latin America 61 42 61 42
Asia Pacific 66 20 66 20
Wine region 68 - 29 12
Others (8) - 0 -
------------------------------------------------------------------
Total 516 15 463 3
------------------------------------------------------------------
Investing in Our People During the year we recruited a professional HR Director, Tom Brown, to reinforce our commitment to our people and their key role in harnessing the value from our brands. We continue to drive toward a performance related culture through the sourcing of the best talent, development and aligning a·lign v. a·ligned, a·lign·ing, a·ligns v.tr. 1. To arrange in a line or so as to be parallel: align the tops of a row of pictures; aligned the car with the curb. our rewards program with the critical performance measures for the business. Britannia Soft Drinks The group's share of Britannia's profits for the year was(pound)16m (2001:(pound)13m). Cash Flow Net cash flow from operating activities was(pound)760m (2001:(pound)423m) and free cash inflow in·flow n. 1. The act or process of flowing in or into: an inflow of water; an inflow of information. 2. increased to(pound)211m (2002:(pound)86m). This improvement was driven by increased profit and cash generation along with the benefit of the Mexican excise rebate (free cash flow benefit 2002:(pound)128m; 2001:(pound)47m). Net debt increased by (pound)724m during the year from (pound)1,854m to (pound)2,578m, the main outflows being the acquisitions of Kuemmerling ((pound)125m), Bodegas y Bebidas ((pound)199m) and Malibu ((pound)555m). In addition, we paid (pound)231m to the shareholders of Montana being the cash settlement of shares purchased in 2001. Underlying trading working capital, allowing for acquisitions and organic growth, has shown a 7% ((pound)110m) improvement over last year. Taxation The normalized tax rate for the year has remained in line with last year's rate of 25%. Financial Reporting Standard 19 - Deferred Tax was adopted resulting in a (pound)53m balance sheet adjustment to August 2001. The overall tax rate for 2001 has not changed. The tax charge for 2002 contains a credit of (pound)10m due to an adjustment to the estimated recoverable amount of a deferred tax asset in respect of tax losses arising in prior periods. We expect that the normalised normalised - normalisation rate for the next financial year will not exceed 25%. Goodwill and Exceptional Items Goodwill amortization totalled (pound)38m (2001: (pound)12m) the increase being primarily due to the acquisitions of Mumm and Perrier Jouet champagnes and Montana. During 2001, (pound)47m received in respect of the Mexican excise award was reported in operating profit Operating profit (or loss) Revenue from a firm's regular activities less costs and expenses and before income deductions. operating profit See operating income. . The Group has received (pound)213m during 2002 which due to its size has been treated as exceptional operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. . In response to the receipt of this cash the Group has undertaken to invest approximately (pound)11m on social and community projects in Mexico. Other exceptional costs this financial year include: (pound)14m associated with the closure of the Dumbarton distillery resulting from our review of distillery strategy; (pound)23m for the one-off costs associated with the planned termination of an onerous on·er·ous adj. 1. Troublesome or oppressive; burdensome. See Synonyms at burdensome. 2. Law Entailing obligations that exceed advantages. land lease in California; and (pound)36m for the acquisition integration programme. In aggregate, the acquisitions over the last 18 months have served to create our premium wine business, to fill portfolio category gaps and to create critical mass in certain markets. In combination these have been major transforming events for the business and, as a result, costs associated with acquisition integration are being treated as exceptional. Treasury Operations The group treasury operates as a centralized cen·tral·ize v. cen·tral·ized, cen·tral·iz·ing, cen·tral·iz·es v.tr. 1. To draw into or toward a center; consolidate. 2. service managing interest rate and foreign exchange risk and financing. The board agrees and reviews policies and financial instruments for risk management. We operate a prudent hedging policy. Business trading flows are netted by currency and hedged forward for up to 18 months using a combination of forward exchange contracts and purchased foreign exchange options. The group has a natural hedge to the impact of fluctuations of the Euro on transaction costs Transaction Costs Costs incurred when buying or selling securities. These include brokers' commissions and spreads (the difference between the price the dealer paid for a security and the price they can sell it). from selling into and out of Eurozone Eurozone Noun same as Euroland Eurozone n → eurozona, zona euro Eurozone n → zona euro . The impact of foreign exchange movements on the translation of profits was negative, though not material, resulting principally from the depreciation of the US dollar in the last two months of the fiscal year. This was partially offset by the strengthening of the Euro. Our balance sheet can be significantly affected by currency translation movements. Our policy is to match foreign currency debt in proportion to foreign currency earnings so as to provide a natural hedge for part of the translation exposure. The amount of risk to any one counterpart counterpart n. in the law of contracts, a written paper which is one of several documents which constitute a contract, such as a written offer and a written acceptance. is restricted according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. credit rating. We continually con·tin·u·al adj. 1. Recurring regularly or frequently: the continual need to pay the mortgage. 2. monitor our exposure to our counterparties Counterparties The parties on either side of an interest rate swap or a currency, equity or commodity swap, or to an options or futures position. and their credit ratings. Exposures to interest rate fluctuations on borrowings and deposits are managed by using interest rate swaps Interest Rate Swap A deal between banks or companies where borrowers switch floating-rate loans for fixed rate loans in another country. These can be either the same or different currencies. and interest rate options. It is our policy to keep between 50 percent and 70 percent of net debt at fixed rates of interest with a target of 60 percent. At August 31, 2002, EV gearing (net debt as percentage of market capitalization Market Capitalization A measure of a public company's size. Market capitalization is the total dollar value of all outstanding shares. It's calculated by multiplying the number of shares times the current market price. This term is often referred to as market cap. plus net debt) was 36%, compared with 30% at August 31, 2001. In June 2002, a <128>600m seven year bond and a (pound)250m twelve year bond were issued. Pensions In line with other companies, market and demographic dynamics over recent years have increased the cost of providing pensions. Allied Domecq has absorbed an increased pension profit and loss charge of (pound)16m in the current year. Recent stock market volatility has caused significant variation in the net pension liability when assessed under FRS FRS abbr. Fellow of the Royal Society FRS, n “flexed rotated side-bent,” an osteopathic abbreviation used to describe vertebral position in cases of spinal dysfunction. 17. At August 31, 2002, the post tax deficit under this accounting standard was (pound)336m compared with (pound)25m at August 31, 2001. This compares with Allied Domecq's enterprise value of around (pound)7bn. In aggregate, the pension funds remain well funded and we do not anticipate having to materially increase Allied Domecq's cash contributions to the funds. For tabular tab·u·lar adj. 1. Having a plane surface; flat. 2. Organized as a table or list. 3. Calculated by means of a table. tabular resembling a table. information please contact Taylor Rafferty at (212)889-4350. |
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