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 LONDON, Sept. 23 /PRNewswire/ -- Today, Guinness PLC announced results for the six months ended June 30, 1993. Highlights include:
 -- Interim Dividend 3.62 pence +8 percent
 -- Operating Profit 384 million pounds sterling -7 percent
 -- Profit before Tax 320 million pounds -9 percent
 -- Earnings per Share
 (Diluted) 11.6 pence -8 percent
 -- Free Cash Flow
 (before Dividends) 286 million pounds +8 percent
 -- Interest Cover 4.3 times
 Guinness PLC today announced Group profit before tax of 320 million pounds sterling for the six months ended June 30, 1993. This represents a decline of 9 percent compared to the 353 million pounds for the first half of 1992.
 Diluted earnings per share decreased by 8 percent, falling from 12.6 pence in the first half of 1992 to 11.6 pence.
 Free cash flow before dividends increased by 8 percent to 286 million pounds.
 The Board has declared an interim dividend of 3.62 pence net per ordinary share, an increase of 8 percent on the 3.35 pence net for the first half of 1992.
 Commenting on the results, Anthony Greener, Chairman, said:
 "At the time of the Company's Annual General Meeting in May this year, we indicated that Guinness was being affected by the deterioration in trading conditions in many of the major economies of the world, particularly in Europe. As anticipated, profits for the first half have fallen below those for the relatively more buoyant period last year. In the circumstances the Company continues to perform resiliently through the recession, with our key brands maintaining or gaining share in most of the our major overseas markets. The increase in the dividend, by a similar rate in real terms as last year, reflects further growth in free cash flow, the Company's financial strength, and our confidence in the long term future.
 "Total volumes of Scotch whisky sold by United Distillers increased by 2 percent in the first half. Prices increased only modestly year on year, reflecting lower consumer price inflation and a highly competitive environment. Volume growth was principally in those markets where standard or lower priced brands are a large proportion of sales, while a few key markets for deluxe brands were soft. We have continued to increase investment in brand marketing and in our distribution capability, particularly in emerging markets. Margins were also affected adversely by currency movements. As a result of all these factors, operating profit margins were reduced at the half year although we expect to be closer to 1992 levels (excluding exchange effects) for the full year.
 "Guinness Brewing Worldwide faced difficult conditions in all its major markets. Total volumes of GBW were 3 percent below the first six months of last year. The rationalization program at Cruzcampo is ahead of schedule, and Cruzcampo slightly improved market share in a Spanish beer market 5 percent lower compared to the same period last year. Trading profits fell by 4 percent, due to reduced profits from Cruzcampo, although in the rest of Guinness Brewing profits grew by 2 percent at level exchange.
 "In view of the Chancellor's decision in March this year to reduce the rate of advanced corporation tax to 20 percent, the Company is carrying out an interim review of the funding position of its main U.K. pension fund, to take into account both the revised ACT rate and investment experience generally since March 1992. The preliminary advice of the scheme's actuary is that the Company should recommence its contributions no later than the end of this financial year. This would, of course, be earlier than anticipated at the last triennial valuation in March 1992, and the effect on annual cashflow is expected to be in the order of 30 million pounds. Subject to the final report of the actuary, it would also be our intention to recognize the scheme's funding position by making a charge to our profit and loss account this year of a similar amount. Our interim figures have been compiled on the existing basis, and hence our proposed treatment would affect the full year figures only.
 "The Chancellor of the Exchequer will shortly be preparing his second U.K. budget this year. The decision not to increase spirits duties in March was most welcome to an industry which continues to contribute significantly to the success of Britain around the world and where tax discrimination remains a major barrier to free trade in many markets. Since 1980, consumption of both beer and spirits in the U.K. has declined by about 10 percent, while the consumption of wine has increased by over 50 percent. In current circumstances, any additional increase in tax on spirits or beer will be counterproductive, further reducing consumption at home and increasing cross-border trading, leading to further reduction in Government revenue.
 "The world is suffering a long and difficult period of recession and the conditions we are experiencing this year are proving to be less favorable than previously anticipated. We are still seeing signs of further deterioration in some major markets and any overall recovery remains elusive. As a result, we currently expect the full year profits to be in line with those for 1992 before exceptional items, subject to the actual trading outturn in the critical final quarter of the year and before any increased pensions charge. Furthermore, if these conditions persist, profits growth next year is likely to be modest. In the medium term, we will reap the benefits of brand building investment and other management actions reinforcing the positive effects of any market recovery.
 "Guinness PLC remains committed to a strategy of organic growth, by developing its brands in markets all around the world in the two core businesses of spirits and beer. As a result of restructuring in the past few years our major brands have a solid foundation for the future, and are performing increasingly well in key major markets. By definition, brand building is a long-term process but it is, and will remain, the optimum route to superior long term financial performance for the Company."
 Trading Review
 United Distillers increased volumes sold by 2 percent in the half year, with gains in Scotch whisky, gin, bourbon and rum. Scotch whisky volumes sold in total rose by 2 percent, but mix was unfavorable with deluxe sales lower and the gains concentrated in the premium standard and secondary segments of the world market. This was a result of improved volume experience in markets where the Company's sales are predominantly standard and secondary brands, such as the USA and Australia, and reduced sales in markets with a high proportion of deluxe volume, such as Thailand, Mexico and the Brazilian region. This factor, combined with lower profits from commodity whisky trading activities, increased marketing expenditure and investment in sales capability, where a greater proportion of total spend fell in the first half, all contributed to lower profits for United Distillers at the half year.
 Trading conditions in Asia Pacific were mixed. In Japan, underlying demand for the Company's brands remains broadly level with last year in a market which is down quite significantly. Volumes sold to the trade in Japan increased in comparison with a period of destocking last year. I.W. Harper bourbon, Johnnie Walker Black Label and Old Parr Scotch whisky all recorded strong increases in sales. Conditions in Thailand were difficult in the first half although the Company held market share; both volumes and mix were adverse, although partially offset by buoyant duty free sales. Other Asian markets remained buoyant. Sales volumes increased in Australia in more favorable conditions, although at the expense of mix, with much of the growth coming in secondary and domestic brands. Bundaberg rum had a strong half year.
 Markets in Continental Europe were affected by increasingly difficult economic conditions and depressed consumer confidence. Volumes sold in Germany were well behind last year in a very depressed market and the market remains extremely competitive for both domestic and premium imported brands. Asbach Uralt increased market share in a very weak market. Sales in France were distorted by buying-in ahead of duty increases on July 1, but underlying demand has held up well in depressed economic conditions. Volumes sold in Spain were lower in a market affected by recession, although Dewar's increased volume and market share. In Greece, volumes sold and market share were substantially higher than last year, with key brands, notably Johnnie Walker Red Label, performing strongly. In the U.K. there are some signs that the rate of decline in the spirits market is slowing. Pricing is under considerable pressure from cheaper brands and own label, although United Distillers increased total Scotch market share. Bell's and Gordon's both suffered from pricing pressure in the take-home market.
 In North America, following the reorganization of the Company's distribution operations last year, business improved further with total volumes sold comfortably ahead of last year, and Scotch improving both volumes sold and mix. Wholesaler depletions of all the Company's major premium imported brands were ahead, with the strongest performance from Johnnie Walker Black and Red Labels and Tanqueray gin. Domestic brands also performed well with significant gains for bottled-in-U.S. Scotch whisky and Gordon's gin. Total profits in North America were constrained by higher marketing investment, and conditions in Canada which remained difficult with volumes and profits lower.
 In Latin America, continued buoyancy in Venezuela was offset by mixed trading conditions in Brazil and related markets, and in Mexico. Scotch volumes sold in Venezuela were again substantially ahead in the half year, with major gains for deluxe brands, notably Old Parr and Johnnie Walker Black Label. Dewar's also enjoyed a substantial volume increase to consolidate its position as the market leader. The domestic rum market has contracted further. Sales volumes in Brazil and related markets were lower although the underlying trend remains favorable. The market in Mexico has been more difficult and sales volumes were lower, although share increased. Conditions remained depressed in South Africa, with further trading down, although Bell's had a strong half year.
 Guinness Brewing Worldwide was affected by market conditions in all of its major markets in the first half. Total sales volumes were 3 percent lower than last year and Guinness stout sales showed a slight overall reduction.
 In Ireland volumes were marginally lower overall, although Group share was maintained with Guinness stout holding volume, and the Company's share of the lager sector increasing with Budweiser and Carlsberg increasing volume significantly.
 In Britain, the beer market shows no signs of recovery and total market volumes were 2 percent lower. Group sales volumes were lower in the half year. Draught Guinness volumes were only marginally behind last year, increased competition in the stout sector has had some effect on sales in the take-home trade, although on-trade market share was maintained. Guinness Draught Bitter in a Can increased volumes. Kaliber significantly increased market share in the NAB/LAB market and now outsells its nearest competitor by over 50 percent.
 The beer market in Spain was extremely depressed in the first half of the year, with total market sales 5 percent lower, following a duty increase at the start of the year, and reflecting extremely depressed local market conditions. Competition remains intense, particularly in the take-home market. The Cruzcampo Group's sales volumes were 3 percent below last year, showing an improving trend in market share against major competition. The adverse trend in mix of sales continues with non-returnable bottles in the take-home market growing at the expense of the on-trade.
 The beer market in Malaysia fell by more than 20 percent in the first half, following substantial punitive increases in excise duty in 1992. Cumulatively, excise duties have now risen by some 80 percent since 1991. This fall in consumption has also caused significant trade destocking, which together with an increase in cross-border sourcing of beer contributed to extremely difficult trading conditions for Guinness Anchor Berhad. Profits were 69 percent lower than last year and a program of cost reduction is nearing completion. In Singapore volumes and profits were ahead of last year. Volumes in other Asian markets continue to grow strongly, albeit from a low base, and profits were ahead of last year, with particularly strong performance in Hong Kong and Indonesia. Guinness stout continues to increase volume in Australia.
 Total volume sold in Africa was ahead of last year, but with unfavorable geographic mix. Sales in Cameroon fell sharply in depressed market conditions. Sales rose strongly in Nigeria in the first half although political disturbances began to impact towards the end of the period.
 Volumes in the USA rose in the half year, with particularly strong performance by Draught and Canned Draught Guinness with the latter now available throughout most of the USA. Sales in the Caribbean were level with last year, but showed signs of recovery towards the end of the period.
 GBW continues to make progress in containing costs. Fixed overheads were reduced in Britain, and rose only marginally in Ireland. Significant costs are being taken out in Malaysia. In Spain, underlying headcount has been reduced by nearly 300 so far this year. The reorganization plan, announced in January, is proceeding ahead of schedule and will deliver significant cost benefits progressively over the next three years.
 LVMH has today reported net profits of FF 0.94 billion, 28 percent below last year. The Company's equity accounted share of its profits -- taken before tax -- amounted to 34 million pounds, 15 percent lower than last year taking account of the devaluation of sterling relative to the French Franc in late 1992.
 Group Profit and Loss Account
 For the Six Months Ended June 30, 1993
 (In millions of pounds, except per share amounts)
 6 months 6 months Year
 ended ended ended
 6/30/93 6/30/92 Growth 12/31/92
 Turnover 1,977 1,753 13 pct. 4,363
 Profit before interest
 and taxation
 (excluding LVMH) 384 411 (7) pct. 898
 Share of profit before
 taxation of LVMH 34 40 101
 Profit before interest
 and taxation 418 451 (7) pct. 999
 Net interest charge (98) (98) (204)
 Profit before taxation 320 353 (9) pct. 795
 Taxation (93) (103) (242)
 Profit after taxation 227 250 (9) pct. 553
 Minority interests (8) (12) (28)
 Preference dividends (1) (1)
 Profit attributable to
 shareholders 219 237 (8) pct. 524
 Dividends (74) (67) (237)
 Retained earnings 145 170 287
 Earnings per share
 Basic 11.6p 12.9p (10) pct. 28.1p
 Diluted 11.6p 12.6p (8) pct. 27.8p
 Dividends per share
 Interim - net 3.62p 3.35p 8 pct. 3.35p
 - gross equivalent 4.52p 4.47p 4.47p
 Final - net 8.50p
 - gross equivalent 10.62p
 Interest cover (times) 4.3 4.6 4.9
 Dividend cover (times) 3.2 3.8 2.3
 Group Balance Sheet
 At June 30, 1993
 (In millions of pounds)
 At At At
 6/30/93 6/30/92 12/31/92
 Acquired brands at cost 1,395 1,395 1,395
 Tangible fixed assets 1,659 1,709 1,719
 Investment in LVMH 1,276 1,127 1,284
 Other long term investments 124 131 152
 Total Fixed Assets 4,454 4,362 4,550
 Stocks 1,876 1,725 1,810
 Debtors 946 848 1,244
 Creditors (1,062) (995) (1,440)
 Net current operating assets 1,760 1,578 1,614
 Long term creditors and provisions (534) (460) (483)
 5,680 5,480 5,681
 - amounts falling due after one year 1,581 1,399 1,548
 - amounts falling due within one year 806 806 1,116
 Cash Deposits (427) (473) (635)
 Net borrowings 1,960 1,732 2,029
 Ordinary shares 501 495 500
 Convertible preference shares -- 22 --
 Share premium account 504 463 498
 Other reserves 2,620 2,659 2,573
 Shareholders' funds 3,625 3,639 3,571
 Minority interests 95 109 81
 Total equity 3,720 3,748 3,652
 Total capital employed 5,680 5,480 5,681
 Net borrowings as percent of total
 equity (including acquired brands
 at cost) 53 pct. 46 pct. 56 pct.
 The balance sheet at June 30, 1992, has been restated to reflect the Group's liability for post-retirement benefits other than pensions of 18 million pounds after tax relief, following a change in accounting policy made in the second half of 1992 (disclosed in Note 22 to the 1992 Group accounts).
 Group Cash Flow Statement
 For the Six Months Ended June 30, 1993
 (In millions of pounds)
 6 months 6 months Year
 ended ended ended
 6/30/93 6/30/92 12/31/92
 Net cash inflow from operating
 activities 555 488 891
 Interest received 12 6 20
 Interest paid (126) (100) (198)
 Dividends received from
 associated undertakings 21 25 58
 Dividends paid (170) (156) (221)
 Net cash outflow from returns on
 investments and servicing of finance (263) (225) (341)
 United Kingdom corporation tax paid (79) (55) (72)
 Overseas tax paid (25) (31) (73)
 Total tax paid (104) (86) (145)
 Net cash inflow before
 investing activities 188 177 405
 Purchase of tangible fixed assets (77) (79) (218)
 Sale of tangible fixed assets 5 10 18
 Purchase of subsidiary undertakings -- (19) (16)
 Other investments (47) (34) (126)
 Disposals 6 -- 6
 Net cash outflow from investing
 activities (113) (122) (336)
 Net cash inflow before financing 75 55 69
 Proceeds of new borrowings 148 597 736
 Borrowings repaid (216) (1,010) (1,252)
 Issue of shares
 (employee share schemes) 7 2 15
 Net cash outflow from
 financing (61) (411) (501)
 Increase(decrease) in cash
 and cash equivalents 14 (356) (432)
 Group Cash Flow Statement
 For the Six Months Ended June 30, 1993
 (In millions of pounds)
 6 months 6 months Year
 ended ended ended
 6/30/93 6/30/92 12/30/92
 Analysis of free cash flow:
 Net cash inflow before investing
 activities 188 177 405
 Purchase of tangible fixed assets (77) (79) (218)
 Sale of tangible fixed assets 5 10 18
 Free cash flow (after dividends) 116 108 205
 Free cash flow (before dividends) 286 264 426
 The cash flow statement for the six months ended June 30, 1992, has been restated to reflect the adoption of FRS3 -- reporting Financial Reporting Performance (Disclosed in note 26 to the 1992 Group accounts). Tax payments of 12 million pounds relating to litigation settlements, which were previously classified as extraordinary items, had been reclassified as United Kingdom tax payments and deducted in arriving at free cash flow.
 Statement of Total Recognized Gains and Losses
 For the Six Months Ended June 30, 1993
 (In millions of pounds)
 6 months 6 months Year
 ended ended ended
 6/30/93 6/30/92 12/31/92
 Profit for the period attributable to
 shareholders 219 237 524
 Unrealized deficit on revaluation
 of properties -- -- (98)
 Share of LVMH profit after tax relating
 to Guinness not recognized in the
 profit and loss account 9 9 18
 Exchange adjustments (99) (15) (8)
 Total recognized gains and losses
 relating to the period 129 231 436
 Reconciliation of Movements in Shareholders' Funds
 For the Six Months Ended June 30, 1993
 (In millions of pounds)
 6 months 6 months Year
 ended ended ended
 6/30/9 6/30/92 12/31/92
 Profit for the period attributable
 to shareholders 219 237 524
 Dividends (74) (67) (237)
 Retained earnings 145 170 287
 Other recognized gains and losses
 relating to the period (net) (90) (6) (88)
 New share capital issued 7 10 28
 Goodwill on acquisitions deducted from
 reserves -- (28) (99)
 Attributable share of LVMH reserve
 movements (8) (20) (70)
 Net increase in shareholders' funds 54 126 58
 Shareholders' funds at start of period 3,571 3,513 3,513
 Shareholders' funds at end of period 3,625 3,639 3,571
 -0- 9/23/93
 /CONTACT: Tom Corran, head of corporate development for Guinness PLC, 011-44-71-486-0288; or Felicia Vonella or Jason Thompson of Dewe Rogerson, Inc., 212-688-6840/


TW -- NY009 -- 5112 09/23/93 10:32 EDT
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Publication:PR Newswire
Date:Sep 23, 1993

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