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Allied makes an impact on Pernod results

Published:  23 July, 2008

In the half-year to the end of December, Pernod Ricard's
sales totalled e3.26bn (about 2.25bn) - an increase of 66.7%, due, in the main, to last year's merger with Allied Domecq. Organic growth of 4.5% was better than expected, and this figure was as high as 13.2% in Asian markets, where the French group had traditionally been weak prior to the takeover of Seagram four years ago.

However, analysts were disappointed that earnings per share will only rise by 10-15% over the 2005/06 financial year, and consequently the shares fell by just under 6% on the day. Pernod Ricard confirmed that cost savings from the Allied merger will amount to e300m, rather than the e400m-460m predicted in some quarters.

Despite the lukewarm market reaction, Pernod Ricard made notable progress during the period. Sales of existing (non-Allied Domecq) brands rose 4.5%, with good volume increases from Chivas Regal (+13%), Martell (+9%), The Glenlivet (+10%) and Jameson (+12%). The revenues from former Allied Domecq brands were reduced somewhat from original expectations by the effects of wholesalers reducing pre-merger stock levels and Pernod Ricard imposing

tighter controls, plus the inevitable switches to new distributors, notably in the United States.

On the plus side, the sales of the stake in Britvic and Allied's US fast-food operations went smoothly and, in the latter

case, before schedule. This will enable significant debt reduction to be announced when Pernod Ricard publishes full-year results to the end of June 2006.