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Allied Domecq Delivers 13% Growth In Earnings


Allied Domecq announces its preliminary results for the year to 31 August 2001.


2001 2000 % growth

Normalised earnings per share 31.0p 27.4p 13

Normalised earnings per share incl. Mexican excise rebate 33.9p 27.4p 24

Profit before tax £453m £404m 12

Profit before tax incl. Mexican excise rebate £500m £404m 24

Trading profit £543m £487m 11

Turnover £2,879m £2,602m 11

Marketing investment behind Spirits & Wine £330m £301m 10

Dividend 12.1p 11.0p 10

Return on investment 9.6% 9.3%

Profits and earnings are stated before goodwill and exceptional items and exclude those of discontinued operations and the Mexican excise rebate unless otherwise stated.

Allied Domecq’s Chief Executive, Philip Bowman, today announced double-digit growth in normalised earnings per share of 13% for the full year. Reported earnings further benefited from a rebate of Mexican excise duty that increased the growth in earnings per share to 24%.

“These are excellent results in another year of great change in our own business and the external environment. Two years ago, we committed to achieve significantly better financial performance. We are delivering against that goal with total reported earnings per share increased by 40% since 1999.

“The management capability of the group has been enhanced and we have focused on the profitable growth of our brand assets rather than simply chasing volume at any price. We have made a number of acquisitions to strengthen the business. The criteria are clear – valueenhancing investment targeted at categories and markets that will generate sustainable future growth as well as in local brands that provide scale in strategically important markets.

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“Towards the end of the last fiscal year we detected some slowdown in demand in certain markets. Recent events have made the economic outlook even more uncertain. However, the spirits industry has historically weathered adversity better than most others.

“It is too soon to offer any guidance on the medium term impact to our businesses. Although we have already taken initiatives to further reduce overheads, it is clear that earnings growth will be harder to achieve than last year. That said, we are confident that we will continue to build significant value for shareholders.

2 “Given our commitment to wine and the increased importance of this following a number of the acquisitions, we will operate our wine assets as a separate business under the leadership of David Scotland with effect from 1 January 2002. Neil Everitt, who has very successfully led our Spanish business for the past five years, will assume responsibility for our European operations on the same date.”


Comparative information here and in the Operating and Financial Review is based on constant exchange rates.

Spirits and Wine

Trading profit up 8% (£423m to £458m)

Net turnover up 8% (£1,814m to £1,966m)

Brand investment up 7% (£308m to £330m)

Core 4 gross margin up 11%

Quick Service Restaurants

Trading profit up 6% (£68m to £72m)

System-wide sales growth of 4%

Same store sales growth Dunkin’ Donuts of 7%; Baskin-Robbins of 2%, Togo’s of 1%

Number of combination stores up 23%

Investor enquiries: Graham Hetherington, Group Finance Director +44 (0) 117 978 5120 Peter Durman, Director of Investor Relations +44 (0) 7771 974817

Media enquiries:

Jane Mussared, Director of Corporate Affairs +44 (0) 7880 783532 Anthony Cardew – Cardew & Co +44 (0) 20 7930 0777


Corporate information can be downloaded from the website at A webcast of the presentation to analysts will be available on this site after 14.00 GMT.




Our strategy of managing existing assets more aggressively while adding to our business through selective acquisitions has delivered strong results, with an increase in underlying earnings per share of 13% to 31.0p. Trading profit for the year ended August 2001 is £543m, an increase of 11%, and comparable profit before tax is up 12% to £453m. These figures exclude the impact of a £30m excise duty rebate, net of tax, received in connection with our Mexican operations. More information on this is given in the commentary on Latin America.

Return on investment has increased to 9.6% compared with 9.3% last year and 8.3% in the year to 31 August 1999. We estimate that our weighted average cost of capital is now in the range of 7.0% to 7.5%, depending on assumptions, a reduction of over 100 basis points over the past two years. The directors are recommending a final dividend of 7.6 pence per share giving a total for the year of 12.1 pence per share, an increase of 10%. This is in line with our policy for the annual dividend to be covered approximately 2.5 times.

Better management of existing assets

One driver of Allied Domecq’s enhanced financial performance continues to be more effective management of existing assets. Cultural change is a key component of the initiatives we are undertaking to support the growth of our brands and overall profitability. We aim to be more responsive to markets, to embrace initiatives of all kinds in the search for better performance and to share best practice globally. While setting clear policies and targets centrally, we aim to leave local operations free to achieve the agile and sensitive response to customers which brand development requires. As we progressively change the culture of the company away from being production driven, we have focused in the short term on the profitable growth of our brands rather than volume as the key metric. Clear plans are in place to accelerate the growth of key brands once this repositioning work is complete.

Availability of timely and accurate information has been a significant challenge as we have worked to improve profitability. During the year the Board approved a phased investment of approximately £50m to enhance key information technology systems and standardise them on an SAP platform globally. Our Californian wine business is now operating on the new platform and we estimate that the conversion of other business units will be complete by the end of 2003. We are confident that the improved availability and consistency of data will contribute significantly to our ability to drive the performance of the business once this project is complete.

Over the past three years we have progressively de-stocked the supply chain in the US and borne an adverse impact on trading profits of some £15m. Following investment in improved information technology and a review of our partnership with key distributors we will accelerate this process through our supply chain re-engineering project, to achieve further significant reductions. This will allow us to manage the business more effectively and to reduce working capital, albeit at the cost of a one-off impact on trading profit over the next two years of approximately £30m.

4 Acquisitions

The selective acquisition of spirits and wine assets is also contributing to profits growth. Our acquisition strategy has addressed three objectives:

To increase our exposure to growth categories;

To enhance our position in markets with strategic importance or above average

growth potential; and

To start the development of a world-class premium wine business.

Acquisitions over the past 18 months have significantly strengthened our brand portfolio and will deliver some 20% of Allied Domecq’s revenues in 2002.

Increasing our exposure to growth categories Our portfolio will benefit from presence in additional categories that show above average growth. The acquisition of US distribution rights to the genuine Russian premium vodka, Stolichnaya, has filled an historic gap in our portfolio. The premium vodka category has grown by approximately 11% over the past five years. Initial performance of the brand has been very encouraging and we anticipate further progress in fiscal 2002 as a new advertising campaign is launched.

During the year, we also concluded a strategic alliance with Destileria Serralles in connection with Captain Morgan rum. The matter is currently subject to legal proceedings between The Seagram Company, Inc and Destileria Serralles in Puerto Rico. The addition of Captain Morgan to the Allied Domecq portfolio would provide a key brand in another fast growing category.

Enhancing our position in key markets

Our acquisition strategy has also sought to enhance our distribution in key strategic markets where we lack scale. The acquisition of Kuemmerling GmbH just after the financial year closed will transform our business in Germany, Europe’s largest spirits market. It also supports our ability to build strong partnerships with major pan-European customers. Our investment in the joint venture with Jinro has given us access to the growing Korean spirits market. Korea has the world’s second highest per capita consumption of spirits and is the third largest premium scotch market. Since the joint venture was formed in February 2000, we have seen excellent growth in volume and profit from both Imperial and Ballantine’s.

Developing a world-class premium wine business The premium wine industry is very attractive with volume growth of some 12% over the last five years coupled with strong revenue and profit growth. Our acquisitions have targeted brands that command superior margins and have the potential to be developed in export markets. The businesses we have acquired enjoy either good domestic scale or are capable of merging with our existing wine assets to deliver critical mass and cost synergies in local markets. The combination of strong profit margins, cost synergies and careful management of the capital base, such as flexible sourcing of grapes, will progressively generate increasing returns on capital. This strategy, applied to our Spanish and Californian wine businesses over the past five years, has delivered a post-tax return on capital well in excess of 10%.

Our acquisitions in Argentina, California, France and New Zealand, and our offer for Bodegas y Bebidas in Spain, transform the size of our wine operations. Shipments are forecast to increase to some 23 million cases in fiscal 2002 from 9 million cases this year.

5 There is significant opportunity to develop our enlarged brand portfolio in export markets and to build on existing domestic positions. The Montana acquisition, in particular, brings with it skills that can be leveraged across our other wine businesses as we share best practice in viticulture, sales and distribution.

Following these acquisitions and in line with our commitment to a global premium wine business, we will manage our wine assets separately with effect from 1 January 2002. After nine years as President of our European business, David Scotland will lead this new division.

Performance at constant foreign exchange rates is reviewed in detail below.


Trading profit up 8% to £458m

Trading profit including Mexican excise rebate up 19% to £505m

Turnover excluding duty up 8% to £1,966m

Advertising and promotion up 7% to £330m

Spirits and Wine trading profit is up 8% on last year to £458m with turnover, excluding duty, increased by 8% to £1,966m. This year’s gross margin improvement of 7% or £78m has been driven through better pricing, particularly in the US, enhanced mix, principally across Asia and Europe and acquisitions.

Advertising and promotion investment in our brands for the year is up 7% to £330m, at constant exchange rates, with most of the increase behind Beefeater, Courvoisier, Whisky DYC and Maker’s Mark. The spend increased in the second half as a consequence of a rephasing of spend behind Mexican brandies, increased investment in Beefeater, Courvoisier and Maker’s Mark in the US along with investment behind acquired brands.

We are continuing to drive increased value from our advertising and promotion spend through more effective targeting and investment evaluation. The new marketing team led by Kim Manley, Chief Marketing Officer, is playing a key role in transitioning the business to become more marketing-led through the creation of new structures and processes. The team are challenging the way we manage agencies, how we buy our media and how we undertake our research and planning work. These initiatives are expected to deliver over £20m of savings in the first full year, which we expect to re-invest in quality advertising and promotion work. We have evaluated our processes against a consortium of different industries – not just spirits – and have established a number of training modules with the London Business School. These build on previous initiatives and ensure the spread of best practice globally. We have also re-focused our approach to innovation and increased our investment in this area. Our projects now concentrate on three areas: ready-to-drink formats, low alcohol high margin products and trademark extensions.

Spirits brands performance

Total volumes fell in the year by 1%. The major driver of this reduction was in Mexico where higher excise duty levels affected sales, particularly of brandies. Sales of Sauza tequila continue to be held back, particularly in Mexico, by the industry shortage of agave. In addition, the implementation of price increases and the withdrawal of unprofitable promotional activity in the US slowed the volume growth of key brands. Despite these specific reductions in volumes, total turnover increased by 8% at constant foreign exchange.

6 The Core 4 brands, Ballantine’s, Beefeater, Kahlúa and Sauza, delivered good profit growth with an increase in turnover of 8% supporting net brand contribution, up 18%. Ballantine’s turnover grew 12% with the brand continuing to perform well within its key markets of Europe and Asia. Kahlúa turnover grew around 4% with volumes declining 1% as we withdrew some volume promotion activity. Kahlúa maintains its leading position in the US imported cordials and liqueurs category. Beefeater was given a revitalised look with a fresh new pack design launched in its key markets of the US, Europe and Duty Free and provides a good platform for future growth. The continued strength of the brand in Spain and price increases in the US helped to drive an increase in turnover of 9%. Price and mix improvements grew Sauza turnover and net brand contribution despite a fall in volumes of 27% as a result of the industry-wide shortage of the key raw material, agave. While total volumes of these brands reduced in the period in question, due principally to Sauza, the sustained increase in investment and innovation over the last two years continues to provide a strong platform for future sustainable growth.

Maker’s Mark had another good year with turnover up 26% delivering an increase in net brand contribution of 8%. Canadian Club grew turnover by 3% and net brand contribution 2% on the back of successful marketing in Canada.

Our concentration on profitable growth in the next 21 brands in the portfolio delivered good results with an increase in net brand contribution of 9% on flat volumes. Net brand contribution grew by 3% in the rest of the portfolio despite a 1% decline in volumes.

Spirits portfolio classification

Our aim is to increase the share of our portfolio that is capable of delivering sustainable profit growth. Our focus behind our Core 4 brands has already generated real value and over the last two years we have increased our investment in the next tier of brands that we have identified as having similar growth potential. As a consequence, we have reviewed our brands and will be extending the Core spirits brands to include further brands including Canadian Club, Courvoisier, Maker’s Mark and Tia Maria. These Core brands will receive the same level of focused investment and management as our Core 4 brands have done in recent years.

We have also identified a further set of brands that are ‘Local Market Leaders’; that is, brands that have a strong position in a particular market. These will include such brands as Stolichnaya and Hiram Walker Liqueurs in the US; our Mexican brandies; Whisky DYC and Centenario in Spain; Imperial in Korea; Fundador in the Philippines and Teacher’s in the UK.

These brands fall into two categories: those that deliver critical mass in key markets and those that provide an opportunity for strong value growth. We will continue to manage the rest of the portfolio in their respective markets, utilising their strong cash and profit generation to maximise their return for shareholders.


We are now a major global wine player, ranked fourth globally, following our targeted acquisitions in Argentina, California, France, New Zealand and presuming successful completion of our recommended offer for Spain’s leading wine producer. With these acquisitions, our wine volumes will increase from over 9m cases to around 23m cases and wine will in future represent around 20% of Spirits & Wine contribution compared with about 12% a year ago.

7 Our wine volumes for the year, which include table, sparkling and fortified wines and agency brands, were over 9m cases – an increase of 4% on last year. Net brand contribution for wine increased by 5% despite increasing advertising and promotion spend by 21% – particularly behind our Champagnes and table wines. Our US wine volumes were up 6% with Clos du Bois outpacing the market in volume and value growth. Callaway has had a successful relaunch in the year marking a shift in grape sourcing to the central coastal area of California.

The acquisition of G.H. Mumm & Cie and Perrier Jouët in January for £364m adds two world-class brands to our portfolio and supports the development of our on-trade business in Spirits & Wine, particularly in the US. Champagne is an attractive category that has demonstrated strong growth with good margins. The acquisition makes Allied Domecq the joint third-largest Champagne company worldwide.


Profits grew by 14% to £142m which represents a fifth successive year of double digit growth in the region. Management of the portfolio mix was a key driver, with total volumes up 2% and Core 4 brand volumes up 7% – led by Ballantine’s (up 5%) and Beefeater (up 12%).

Spain has continued to deliver good profit growth led by the strong volume growth of Ballantine’s and Beefeater. Ballantine’s volumes grew 9% while net brand contribution grew 13%. Beefeater volumes in Spain grew 10% and market share grew by two percentage points to 21% in a broadly static gin market. Whisky DYC, Spain’s second largest whisky, has had a difficult year, with volumes declining by 7%; we have increased advertising and promotion by 33% to help address this trend. In September, we announced our offer for Spain’s leading winemaker, Bodegas y Bebidas. This business will significantly enhance the scale of our wine business in Spain and strengthen our brands’ distribution.

The UK showed stronger trading in the second half and delivered profit growth for the full year. France, Germany and Greece all achieved good overall profit growth and strong performances were delivered in the Central & Eastern Europe and Nordic regions. The acquisition of Kuemmerling GmbH for £128m transforms our business in Germany. The deal will significantly enhance our share of the German spirits market and moves us from number eight to number four. This will increase our ability to build partnerships with key customers across Europe – particularly those based in Germany. Kuemmerling is Germany’s fourth largest brand and the second largest brand in the growing bitters category.

North America

Trading profits in the region are up 14% to £185m, which was driven by profit growth in both the US and Canadian businesses. The US growth has been achieved by price and mix improvements within the Equity portfolio – particularly Kahlúa, Maker’s Mark, and Sauza along with a strong initial performance from the Stolichnaya brand generating sales of 800,000 cases in the eight months to August. In the short term, our determination to build profitable brand growth and to reinforce the premium nature of our portfolio through price repositioning has led to a reduction in discount driven volumes. Over the longer term, however, these actions will enhance the value created from the growth of these brands.

Specifically the volume shipments of the US Equity portfolio, which includes Kahlúa, Sauza, Beefeater, Courvoisier, Canadian Club, Maker’s Mark and Midori, declined by 2%, on flat year on year depletions. However, our focus on value drove turnover up 9% and gross 8 margin up by 4%. The increase in gross margin was affected by the impact of a full year of agave costs on Sauza tequila. Advertising and promotion behind these brands increased by 5% in the period. The ADvantage portfolio also performed strongly with good profit growth from the Mexican brandies, Rich & Rare and the liqueur portfolio. In line with the last two years, US shipments were below depletions from our distributors representing a further destock of the US supply chain.

The acquisition in January 2001 of the US distribution rights for Stolichnaya gives a major new growth driver to our US business. The premium imported vodka category in the US has grown strongly over recent years and Stolichnaya provides a significant opportunity to take advantage of this growth. The deal marks an important strategic step for Allied Domecq and substantially enhances our brand portfolio in the US with the opportunity to develop the brand in other markets.

The profit performance of the North American business has been achieved at the same time as restructuring the US spirits organisation to enhance efficiency and brand building capabilities. As well as achieving overhead savings, this reorganisation helps to build a business focused on the consumer and brand building to support sustainable future growth.

We have strengthened our successful Californian business through the acquisition of Buena Vista Winery. Buena Vista is located in the heart of the Carneros appellation that is divided between the Napa and Sonoma Counties. The Buena Vista portfolio comprises brands which compete in the super- and ultra-premium categories, the most important being the Buena Vista Carneros Estate and the Haywood Estate. The acquisition also provides additional infrastructure to capitalise on the growth of our Californian wines to date – particularly from Clos du Bois. Significant cost synergies are available as well as the opportunity to develop new Carneros Pinot Noir brands.

Latin America

Trading profit for the region was down 30% to £46m (excluding Mexican excise rebate) reflecting a decline in the volumes of Mexican brandies and tequila. The Mexican brandy portfolio has suffered volume declines as a result of increases in excise duty. Tequila continues to be affected by the industry-wide shortage of agave. Steps have been taken to ensure future supply, with investment in improved yield management and agave plantings.

Agave costs have stabilised but ongoing demand for tequila will continue to put pressure on raw material costs.

As announced previously our earnings included a benefit of £30m (after applicable corporation taxes) during the period arising from a ruling of the Mexican Supreme Court with respect to the excise duty regime that was applicable to our Mexican operations during 1998 and 1999. The Mexican Supreme Court has awarded compensation which will allow Allied Domecq to offset current and future duties and taxes in Mexico by Pesos 1.5bn (£112m) plus interest and inflation adjustments applicable under the Court’s ruling.

The period over which the Group’s Mexican earnings will benefit from the offset will depend on the rates of duty and taxation applied in the future. Our current expectation is that the balance of the repayment of excess duties will be collected over the next three to five years and will be subject to interest and inflation adjustments.

9 Brazil has continued to perform well with good progress from Ballantine’s and Teacher’s.

Trading conditions in Argentina continue to be challenging with a weak economic outlook but our operations have been restructured to rationalise the cost base. Argentina is an important wine market with the fourth highest per capita consumption of wine worldwide.

Our acquisition of Bodegas y Vinedos Graffigna and Vinedos y Bodegas Sainte Sylvie will create opportunities for future growth. We expect to achieve rapid operational efficiencies as a consequence of the close fit with our existing Bodegas Balbi. This deal transforms our Argentinian domestic business, increasing case volumes by 90% and improving the business mix from 80:20 spirits/wine to 50:50 in a market where wine accounts for around half of the beverage alcohol sold. Furthermore, the Argentinian premium wine market has shown excellent growth of almost 13% per annum for the last five years.

Asia Pacific

We have achieved strong organic profit growth of 79% to £59m: this has been driven by sound performance across the region in spite of the recession that is affecting most markets.

Korea has benefited from the good performance of Jinro Ballantines. Imperial, Korea’s number one premium whisky, and Ballantine’s have both grown strongly in the year supported by increased advertising and promotion.

Duty free in Asia Pacific has benefited from the strong performance of Ballantine’s superpremium aged range resulting in an increased market share of 7 percentage points. Japan has also benefited from growth of aged Ballantine’s in duty free, improved net pricing and from the launch of Kahlúa and Beefeater ready-to-drink formats. Good growth in the Philippines and Taiwan was driven by a 12% volume growth in Fundador and improved advertising and promotion effectiveness in Taiwan.

We have established a foothold in the important Australasian wine market with our acquisition of Montana Group (NZ) Limited, New Zealand’s leading wine producer with 56% share of the domestic market by value. Montana exports around 37% of all its bottled wine, (around half of New Zealand’s total wine exports) to the main export markets of the UK, US and Australia.

Global Operations

We have reorganised our operations at Dumbarton in Scotland with the completion of our integrated bottling and office complex at Kilmalid. The project brings operational efficiencies including full year savings of £6m. In Spain, the initial phases to improve the capacity of our production facilities for Rioja have been completed. In Kentucky, we commenced a $25m investment to increase distillation and warehousing capacity at Maker’s Mark.

Productivity (measured as cases produced per employee) for Spirits & Wine is up 1%.

However, after taking into account the reduction of volumes in Mexico, underlying productivity improved by 9% in the year, primarily as a result of our investment in Scotland.

We have continued to concentrate on our global supply chain strategy that has delivered underlying improvements particularly in the area of inventory management.

A key activity during the year was to increase the number of operations with environmental management systems certified to the International Standard ISO 14001. Currently, 27 of our production sites have this accreditation.

10 Our Duty Free operations have shown a good performance with all trading channels delivering good profit growth. Our Duty Free business in Asia performed well and the reorganisation of our business in the Americas also contributed to profit growth. We have continued to build both the quality and sustainability of our business through superior consumer insight and core customer development.

Geographical Analysis – Spirits & Wine trading profit

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 3 to the accounts.

On a comparable management reporting basis, translated at 2001 foreign currency exchange rates and with a consistent allocation of central overheads and Sauza cost base, the Spirits & Wine trading profits analysed by sales and marketing regions were as follows for the period: 2000 2001 Reported 2000 £m Cost allocations £m Foreign exchange £m At 2001 exchange £m 2001 £m Growth at 2001 exchange % Europe 141 (7) (9) 125 142 14 North America 166 (20) 17 163 185 14 Latin America 49 8 9 66 46 (30) Asia Pacific 40 (5) (2) 33 59 79 Others 18 24 (6) 36 26 (28) Total 414 0 9 423 458 8

Cost allocations include restatement for increased tequila costs (previously reported in Mexico), transfers of operational responsibility for IT to regional management and allocated head office costs to reflect more accurately the current business structure. Sales and marketing regions have been realigned and Latin America now includes Mexico. “Others” include Global Operations (including profit from the sale of bulk whisky), standalone duty free operations and central costs not allocated to marketing regions.


Trading profit up 6% to £72m

System-wide sales growth of 4%

Same store sales growth in Dunkin’ Donuts of 7%; Baskin-Robbins of 2% and Togo’s of 1%

Number of combination stores up 23%

Our Quick Service Restaurants business has grown profit contribution resulting from the growth in same store sales (£6m), profit growth from the International business (£5m) and the 11 contribution from new stores (£3m). The revitalisation of Baskin-Robbins has had a £5m adverse impact on profits as the new franchise royalties do not yet exceed the loss of margins on ice cream manufacture. In addition, Baskin-Robbins profits were reduced by £5m as a result of additional raw material costs. The revitalisation is on track with the brand delivering one of its strongest summer performances in recent history. The good second half performance for Baskin-Robbins was driven by successful promotional activity around “Free Scoop Night” and the film “Shrek” and the benefits of a full year of restructuring for the brand offering.

Dunkin’ Donuts has delivered another good year of growth with same store sales up over 7% in the US and a 2% increase in global distribution points. Togo’s increased same store sales by 1% while growing the number of distribution points by 20%.

Our strategy of multibranded combination stores continues to drive growth in new store openings with a 23% increase in the number of combination stores to over 630. There are now almost 40 combination stores which offer all three of our Quick Service Restaurant brands. This strategy brings significant benefits to our franchisees through improved scale and operating efficiencies, along with revenue opportunities from cross-selling.


The group’s share of Britannia’s profits for the year was £13m (2000: £9m). We continue to pursue options to dispose of our 25% shareholding on appropriate terms.


Operating cash net of fixed assets from continuing businesses was £359m (2000: £408m).

Net debt increased by £602m during the year from £1,252m to £1,854m, the main outflows being for the acquisitions including acquired debt (Champagnes (£364m); Buena Vista and Argentinian wineries (£87m) and part payment for Montana (£180m)) and for three dividend payments amounting to £163m. Underlying working capital, excluding acquisitions and strategic investments in Mexico, aged whisky and US wine, has shown a 5% improvement against last year.


Excluding the impact of the Mexican excise rebate, which has been taxed locally at 35%, the normalised tax rate has decreased from 26% to 25% this year. The decrease reflects the successful management of the reduction of tax risk exposures, a process which is on-going.

Our expectation is the rate for the current year, excluding the impact of the Mexican excise rebate, will not exceed 25%.


Goodwill amortisation totalled £12m (2000: £3m). Exceptional items were £3m; being primarily aborted acquisition costs (£4m), the provision for surplus properties (£4m) and costs associated with the introduction of the Euro (£1m), offset by profit on disposal of businesses (£6m).


The group treasury operates as a centralised service managing interest rate and foreign exchange risk and financing.

At 31 August 2001, EV gearing (net debt as percentage of market capitalisation plus net debt) was 30 per cent, compared with 27 per cent at 31 August 2000.

In April 2001, a €600m 5 year bond and a £350m 10 year bond were issued. Continued investor appetite caused us to reopen the bonds in June 2001, by €200m and £100m respectively. The extendable term loan facility of £566m was retired in April 2001.

The $2.5bn Global Commercial Paper Programme was launched in February 2001 to provide access to both US and Euro commercial paper markets.


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