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GRANDMET INCREASES INCOME BEFORE EXTRAORDINARY ITEMS TO A RECORD L658 MILLION ($1.2 BILLION)

 GRANDMET INCREASES INCOME BEFORE EXTRAORDINARY ITEMS TO A RECORD
 L658 MILLION ($1.2 BILLION)
 PRELIMINARY ANNOUNCEMENT -- YEAR ENDED SEPT. 30, 1991


HIGHLIGHTS:
 percentage
 -- SALES FROM CONTINUING BUSINESSES L7,502m $13.1b + 2.3
 -- OPERATING INCOME FROM
 CONTINUING BUSINESSES L 990m $ 1.7b + 11.7
 -- PROFIT BEFORE TAX L 963m $ 1.7b + 4.8
 -- INCOME BEFORE EXTRAORDINARY ITEMS L 658m $ 1.2b + 3.8
 -- EARNINGS PER SHARE
 Including property/exceptionals 66.1p $ 1.16 + 3.1
 (per ADR (a), $2.31)
 Excluding property/exceptionals 62.3p $ 1.09 + 8.9
 (per ADR (a), $2.18)
 -- DIVIDEND PER ORDINARY SHARE 22.7p $ .40 + 11.3
 DIVIDEND PER ADR*, GROSS 60.5p $ 1.06
 DIVIDEND PER ADR*, NET 51.5p $ .90
 -- INTEREST COVER 6.6 TIMES
 -- DIVIDEND COVER 3.0 TIMES
 (a) Each American Depositary Receipt (ADR) is equivalent to two ordinary shares. Overall Summary:
 -- Local currency operating income growth from the continuing businesses was 17 percent, with particularly strong performances from Drinks (+21 percent), North American Food (+30 percent) and Burger King (+17 percent). Pearle traded at a loss.
 -- Property profits and net exceptional items generated income of L53 ($93) million compared with L76 ($133) million last year.
 -- Adverse currency translation reduced operating income by L43 ($75) million and profit before tax by L28 ($49) million.
 -- Profit before tax grew by 11 percent if the effects of adverse currency translation and the net reduction in property profits and exceptional items are excluded.
 -- Interest cover improved from 4.8 times to 6.6 times.
 -- Net cash inflow was L517 ($905) million. This was partially offset by L228 ($399) million adverse currency translation and reported borrowings decreased by L289 ($506) million to L2,599 ($4,548) million. Subsequently announced business disposals will further reduce borrowings by approximately L400 ($700) million. Chairman's Comments:
 Commenting, Sir Allen Sheppard, chairman and group chief executive, said:
 "These results demonstrate the strength of our core businesses and the quality of the Group's management team, which has again excelled in the face of particularly difficult trading conditions. The results also show the resilience of our powerful brands. In spite of very tough economic conditions in both the United States and the United Kingdom our businesses have continued to grow.
 "A year ago I stated our belief that 1991 would be another year of progress


for Grand Metropolitan and I am naturally pleased that this has been achieved. Although economic conditions are likely to remain testing, we fully expect that the Group's inherent strengths will enable Grand Metropolitan to make further progress in 1992."
 The detailed preliminary statement follows.
 GRAND METROPOLITAN GROUP
 DETAILED PRELIMINARY STATEMENT
 Profit and Loss Account
 The profit and loss account (unaudited) of the group for the year ended Sept. 30, 1991 is attached as Appendix 1, and a half year analysis is attached as Appendix 2. The average dollar exchange rate used to translate dollars into sterling during the year was $1.80, compared with $1.69 for last year. Segment Analysis:
 Year ended Year ended
 Sept. 30, 1991 Sept. 30, 1990
 Operating Operating
 Sales Income Sales Income
 Lm $m Lm $m Lm $m Lm $m
 Continuing
 businesses
 Food 3,026 5,296 300 525 2,998 5,247 271 474
 Drinks 2,425 4,244 454 795 2,266 3,965 391 684
 Retailing 2,051 3,589 236 413 2,072 3,626 224 392
 7,502 13,129 990 1,733 7,336 12,838 886 1,550
 Discontinued
 1,246 2,180 81 141 2,058 3,602 173 303
 8,748 15,309 1,071 1,874 9,394 16,440 1,059 1,853
 Discontinued businesses include Brewing, tenanted pubs, Express Dairy, Eden Vale, UK Drinks Wholesaling, The Dominic Group, Service Restaurants and, in the prior year only, Retail Betting. Sales:
 Total sales for the group of L8,748 ($15,309) million represents a decrease of 7 percent compared with last year, as a result of the disposal of businesses and adverse currency translation. Sales revenues of continuing businesses increased by 2 percent to L7,502 ($13,129) million.
 Sales by market of the continuing businesses was 19 percent in the United Kingdom, 14 percent in the rest of Europe, 58 percent in the United States and 9 percent in the rest of the world. Operating Income:
 Operating income of the continuing businesses was 25 percent in the United Kingdom, 17 percent in the rest of Europe, 52 percent in the United States and 6 percent in the rest of the world. Food:
 Despite difficult trading conditions, the North American food operations, which include Pillsbury, Green Giant, Haagen Dazs and Alpo, increased operating income by 30 percent in local currency terms to $390 million. In sterling terms operating income increased 21 percent.
 The North American businesses all achieved volume growth, benefiting from an increased advertising spend and from successful new product introductions. Market shares increased for almost all categories. Cost reductions resulted from the major manufacturing and distribution restructuring at Pillsbury and from other cost control initiatives.
 European Food now comprises ready meals and savoury products, baked goods, vegetables, and the remaining operations of Express. Strong performances on the Continent were more than offset by the recession in the United Kingdom causing total profits of the continuing European Food operations to fall 10 percent to L84 ($147) million. Drinks:
 Wines and Spirits increased sales by 7 percent and volume by 2 percent despite adverse trading conditions and a declining world market. Operating income in local currency grew by 21 percent, which, on translation to sterling, was an increase of 16 percent. Net margin showed further improvement, rising from 17.3 percent to 18.7 percent.
 J&B Rare and Baileys achieved strong volume growth, particularly in Europe, while Smirnoff gained share of the worldwide spirits market. Almost all of IDV's brands maintained or increased their market share in each of their product categories, helped by advertising and promotion expenditure which increased by 10 percent in local currency terms. Pricing initiatives and effective cost control enabled all the major brands to improve their profit contribution.
 The results also benefited from the acquisition of AED, the Spanish distributor, in October 1990. Retailing: International Retailing:
 Burger King and Pearle have a substantial part of their operations in the recessionary US economy and both adopted aggressive cost control programs to counter its effects. Burger King maintained its market share in an extremely competitive US market and increased its profits in dollar terms by 17 percent to $247 million. Its sterling profits rose from L125 million to L137 million. Pearle recorded a 15 percent fall in sales which resulted in a loss of L7 ($12) million for the year. UK Retailing and Property:
 The managed pub operations of the Chef and Brewer Group, formerly GrandMet Retailing, faced a very difficult trading year. However, the addition of 330 Courage pubs together with cost reductions produced growth in profits. GrandMet Estates also recorded profit growth. Inntrepreneur Estates Limited (IEL):
 The group's share of the loss reported by IEL for the six month period to Sept. 30, 1991 was L11 ($19) million, as anticipated when the joint venture with Courage was set up. Approximately half of IEL's tenanted pub estate has now been converted to Inntrepreneur leases. Property Profits:
 The reduction in profits on sale of property from L79 ($138) million to L18 ($32) million reflects the substantial completion in 1990 of the group's disposal program to upgrade the tenanted pub estate. Net Exceptional Items:
 Exceptional items of L35 ($61) million include gains on the sale of part of flour milling and of two pizza brands in the United States, offset by L6 ($11) million of reorganization programs mainly in the Retailing sector. Interest:
 Interest cover for the year was 6.6 times compared with 4.8 times in the previous year.
 The interest charge decreased to L171 ($299) million from L239 ($418) million. This was primarily as a result of the net receipt of approximately L615 ($1,076) million on March 28, 1991 from the restructuring of brewing and the tenanted pub estate, interest receivable from IEL, lower US interest rates and a favorable movement in exchange rates. Taxation:
 The effective rate of tax for the year was 30.9 percent compared with 30.4 percent for last year. Extraordinary Items:
 The L226 ($396) million extraordinary charge after tax for the year arose mainly from the brewing and pubs restructuring in March and a provision against the group's investment in International Brewing Holdings (formerly Harlin).
 Other items include the close of the UK Drinks wholesaling operations and the sale of The Dominic Group.
 The gain of approximately L200 ($350) million on the recently announced sale of Express Dairy and Eden Vale has not been included in these results. Balance Sheet:
 An abbreviated balance sheet of the group as at Sept. 30, 1991 is attached as Appendix 3. Shareholders' funds, before deducting minority interests, were L3,454 ($6,045) million, compared with L3,427 ($5,997) million at the previous year end.
 The increase in investments results from approximately L600 ($1,050) million invested in IEL. The balance sheet also reflects the sale of the brewing operations and the tenanted pub estate during the year.
 The net cash inflow was L517 ($905) million. Within reported borrowings this improvement was partially offset by L228 ($399) million translation impact, mainly from the strengthening of the dollar against the pound, which reduced the fall in borrowings to L289 ($506) million. At the year end net borrowings amounted to L2,599 ($4,548) million.
 Gearing at Sept. 30, 1991 was 75 percent compared with 84 percent at Sept. 30, 1990. The disposals of The Dominic Group and Express Dairy and Eden Vale will further reduce borrowings by approximately L400 ($700) million and gearing by approximately 14 percentage points. Dividend:
 Dividends for the year will total 22.7 pence per share compared with 20.4 pence - an increase of 11.3 percent. The recommended final dividend for the year is 14.3 pence per share.
 The annual dividend is covered 3.0 times.
 The final dividend will be paid on April 6, 1992 to ordinary shareholders on the register on Jan. 24, 1992. A share dividend alternative is being offered in respect of this dividend. Note to ADR Holders:
 Payment of the final 1991 dividend to ADR holders will be made on or shortly after April 6, 1992 to holders of record on Jan. 24, 1992.
 Qualifying US and Canadian resident ADR holders are entitled to a refund of the 25/75ths UK tax credit attaching to the dividend, less a 15 percent UK withholding tax charge on the sum of the dividend and the tax credit. The effect for qualifying US and Canadian resident ADR holders is a gross dividend of 38.1p ($.67) and a net dividend of 32.4p ($.57) per ADR. The actual rate of exchange used in determining the dollar payment of ADR holders will be the exchange rate on April 6, 1992. The 15 percent withholding tax of 5.7p ($.10) per ADR may be treated as a foreign income tax credit that is eligible for credit against the ADR holder's federal income taxes.
 Using $1.75 for illustrative purposes, the gross annual dividend for 1991 is $1.06 ($.90 net) versus $.95 ($.81 net), an increase of 11.3 percent. Annual General Meeting:
 The annual report and accounts for 1991 will be dispatched by Jan. 17, 1992. The Annual General Meeting will be held at Grosvenor House, Park Lane, London W1 at 11 am on Feb. 25, 1992. Notes:
 For the convenience of the reader, certain sterling amounts have been translated into US dollars using Grand Metropolitan's Balance Sheet rate on Sept. 30, 1991 of L1.00 - $1.75.
 Trading Profit in UK terms has been called Operating Income for purposes of this release.
 GRAND METROPOLITAN GROUP APPENDIX 1
 PROFIT AND LOSS ACCOUNT (UNAUDITED)
 (Years ended September 30th)
 1991 1990
 Lm Lm
 Turnover
 Continuing businesses 7,502 7,336
 Discontinued businesses 1,246 2,058
 8,748 9,394
 Trading profit
 Continuing businesses 990 886
 Discontinued businesses 81 173
 1,071 1,059
 Share of profits/(losses)
 of associates
 Inntrepreneur Estates Ltd (11) -
 Other 21 23
 1,081 1,082
 Property profits 18 79
 Net exceptional items 35 (3)
 Interest (171) (239)
 Profit before taxation 963 919
 Taxation (298) (279)
 Profit after taxation 665 640
 Minority interests (7) (6)
 Profit before extraordinary items 658 634
 Extraordinary items (226) 435
 Profit for the year 432 1,069
 Ordinary dividends (218) (198)
 Transferred to reserves 214 871
 Interest cover 6.6 times 4.8 times
 Earnings per share 66.1p 64.1p
 Dividend per share 22.7p 20.4p
 Average L/$ exchange rate 1.80 1.69
 GRAND METROPOLITAN GROUP APPENDIX 2
 PROFIT AND LOSS ACCOUNT (UNAUDITED)
 (Years ended September 30th)
 1991 1990
 First Second First Second
 Half Half Half Half
 Lm Lm Lm Lm
 Turnover
 Continuing businesses 3,582 3,920 3,813 3,523
 Discontinued businesses 852 394 1,157 901
 4,434 4,314 4,970 4,424
 Trading Profit
 Continuing businesses 401 589 401 485
 Discontinued businesses 67 14 81 92
 468 603 482 577
 Share of profits/(losses)
 of associates
 Inntrepreneur Estates Ltd - (11) - -
 Other 10 11 11 12
 478 603 493 589
 Property profits 7 11 44 35
 Net exceptional items - 35 9 (12)
 Interest (108) (63) (137) (102)
 Profit before taxation 377 586 409 510
 Taxation (117) (181) (125) (154)
 Profit after taxation 260 405 284 356
 Minority interests (3) (4) (2) (4)
 Profit before extraordinary
 items 257 401 282 352
 Extraordinary items (134) (92) 499 (64)
 Profit for the period 123 309 781 288
 Ordinary dividends (80) (138) (74) (124)
 Transferred to reserves 43 171 707 164
 Interest cover 4.5 10.3 4.0 6.0
 times times times times
 Earnings per share 25.9p 40.2p 28.6p 35.5p
 Dividend per share 8.4p 14.3p 7.6p 12.8p
 Average L/$ exchange rate 1.93 1.70 1.62 1.77
 GRAND METROPOLITAN GROUP APPENDIX 3
 BALANCE SHEET (UNAUDITED)
 (At September 30th)
 1991 1990
 Lm Lm Lm Lm
 Fixed assets
 Intangible assets 2,464 2,317
 Tangible assets 2,764 3,756
 Investments 851 214
 6,079 6,287
 Working capital
 Stocks 1,286 1,349
 Debtors 1,561 1,541
 Creditors and provisions (2,873) (2,862)
 (26) 28
 Capital employed 6,053 6,315
 Net borrowings (2,599) (2,888)
 3,454 3,427
 Shareholders' funds
 Called up share capital 515 508
 Reserves 2,907 2,893
 Minority interests 32 26
 3,454 3,427
 Gearing 75 pct. 84 pct.
 Closing L/$ exchange rate 1.75 1.87


Note:
 The figures on Appendixes 1 and 3 for the year ended September 30, 1990 have been extracted from accounts which have been filed with the registrar of companies. The auditors' report on those accounts was unqualified and did not contain any statement under section 237 of the Companies Act 1985.
 -0- 12/05/91
 /CONTACT: Mary Carroll (U.S public affairs), 612-330-4805, or Holly Clemente (U.S. investor relations), 212-554-9233/
 (GRM) CO: Grand Metropolitan ST: Minnesota IN: FOD SU: ERN


KH -- MN003 -- 9560 12/05/91 10:11 EST
COPYRIGHT 1991 PR Newswire Association LLC
No portion of this article can be reproduced without the express written permission from the copyright holder.
Copyright 1991 Gale, Cengage Learning. All rights reserved.

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