Interim results for the six months to 28 Febuary 2001

Highlights	Group Cash Flow Information
Key Achievements/ Performance Indicators	Notes 1 - 7, Notes 8 - 12
Review	Review Report (Auditors)
Group Profit & Loss Account	Investor Information
Group Balance Sheet	City Presentation

REVIEW

The successful transformation of Allied Domecq has continued during the first six months of the year with the delivery of further strong earnings growth reflected in a 15% increase in earnings per share to 16.1 pence. Turnover and trading profit on continuing operations both rose 13%. Return on investment has increased to 9.7% compared to 9.0% at February 2000. The Directors are declaring an interim dividend of 4.5 pence per share, an increase of 13%.

During the period we have made significant progress in the implementation of our strategy to enhance our brand portfolio and improve our geographic mix, while increasing the returns from our existing brand portfolio.

Enhancing our brand portfolio
Following our successful investment in South Korea last year, we have strengthened our brand portfolio through investment in high margin brands in growth categories. This has included the US distribution rights to Stolichnaya vodka and the acquisition of the champagne brands and businesses of G. H. Mumm & Cie and Perrier-Jouët. We took over the distribution of Stolichnaya in the US on 1 January this year for a ten year term. The deal marks a major strategic step for Allied Domecq with a premium vodka in the US market substantially enhancing our brand portfolio while giving us the opportunity to enhance further our international portfolio. The acquisition of the champagne brands and distribution rights on 24 January for £364m adds two world class brands to our portfolio and supports the continued development of our global wine business. These champagne brands will also support the development of our on-trade business in spirits and wine, particularly in the US. The integration of these businesses is on track, but the financial results for the period have not been materially affected by these transactions.

These additions to our portfolio have also enhanced the geographic profile of our Spirits & Wine business and these brands offer the potential to build on attractive market positions particularly in the US.

During the period, we also concluded a strategic alliance with Destileria Serralles regarding the acquisition of Captain Morgan rum. The matter is currently subject to legal proceedings in Puerto Rico between Destileria Serralles and Seagram.

Through these targeted transactions, we have achieved many of the commercial and strategic objectives that might have been obtained through the purchase of the Seagram Wines and Spirits business. We decided to withdraw from the Seagram auction because we did not believe it was in the best interests of shareholders to proceed at the expense of other options and at the price offered by others. As a result we avoided the potential risks associated with the integration of Seagram's large and disparate brand portfolio with the potential to disrupt the momentum of our existing business.

Performance at constant exchange rates is reviewed in detail below.

Spirits & Wine

• Trading profit up 10% to £253m
• Turnover up 10% to £1,327m
• Advertising and promotion up 1% to £161m

The growth of our Spirits & Wine business has resulted from increased volume and net price increases. Volume improvements were driven principally by Imperial and Ballantine's in Korea; Beefeater and Ballantine's in Spain; and Sauza and wines in the US but were partially offset by volume declines in Mexico. Pricing improvement has been achieved across the Equity spirits brands portfolio in the US, which includes Kahlúa, Sauza, Canadian Club and Maker's Mark, along with price increases of our brandies in Mexico.

Marketing investment behind our Spirits & Wine brands has increased by £1m to £161m, at constant exchange rates, a lower year on year increase than we anticipate at the full year. This reflects lower expenditure behind Sauza in Mexico and the phasing of expenditure in Europe and behind brandies in Mexico. Increased investment has been directed behind Maker's Mark, Beefeater, Ballantine's and through our acquisitions, principally Imperial in Korea. During the period, we have continued to improve the overall effectiveness of our advertising and promotion spend. Half of our total advertising and promotion is invested behind our Core 4 brands, Ballantine's, Kahlúa, Beefeater and Sauza.

Ballantine's volumes grew 5%, with a strong performance in its key markets within Europe and Asia. We have continued to grow whisky market share in Europe. Kahlúa volumes grew by 4%. Beefeater has been given a new revitalised look and this new packaging has been rolled out in the US and to global duty free; it is scheduled to be launched in other markets over the next year. Total Beefeater volumes grew by 4% in the period. The performance of Sauza tequila volumes have again been held back by the industry-wide shortage of the key raw material, agave. Overall volumes fell by 31%, mainly in Mexico, but the adverse impact on profits is significantly reduced by a 25% Sauza volume increase in North America, price increases and portfolio mix improvements.

The portfolio's next 21 brands, now including our champagnes, Stolichnaya and the Imperial brand, grew net brand contribution by 11% despite a 2% decline in volumes. The balance of the portfolio showed an 8% growth in net brand contribution on a 1% volume increase.

Europe
Trading profit increased by 11% to £77m. Total volumes grew by 2% with the Core 4 brand volumes achieving a 9% increase. Ballantine's has registered further strong growth with an 8% increase in volumes. Beefeater and Long John are the other major drivers of portfolio growth.

A good performance in Spain was led by the strong volume growth of Ballantine's and Beefeater, up 9% and 10% respectively. The Nordic region also delivered solid growth driven by strong volume increases in the Core 4 brands and improved pricing. The UK experienced tough competitive conditions leading to a decline in profitability but France, Germany, Greece and Central & Eastern Europe have all achieved overall profit growth.

North America
Trading profit grew by 11% to £88m largely driven by a 5% increase in volumes and improved pricing in Kahlúa, Sauza, Canadian Club and Maker's Mark.

We have continued to invest behind our US Equity spirits brands which have increased in volume by 3%. We have also significantly increased our investment behind Beefeater to support the launch of the revitalised packaging which we expect will arrest recent volume declines by the end of this year. Similarly the House of Courvoisier campaign, directed at young urban consumers, is attracting increased spend. Our awareness building campaign for Maker's Mark is also benefiting from increased investment. Our portfolio in the US has been significantly enhanced through the Stolichnaya vodka distribution transaction and the champagnes acquisition. US wine volumes performed well and achieved a 14% volume increase despite heightened competitive pressures.

Canada has delivered an 18% improvement in trading profit with volumes up 12%, driven particularly by Canadian Club.

Latin America
Trading profit for the region was £36m compared to £39m last year. In Mexico, trading profit fell 8% to £35m reflecting a decline in volumes of Mexican brandies and tequila. Tequila continues to be affected by the industry-wide shortage of the raw material, agave. Agave costs, now reflected in sales and marketing regions, are currently running in line with our previous estimates but the ongoing demand for tequila will put pressure on raw material costs for the next two years. We are also investing for the longer term through plantings and the introduction of new technology to improve yields.

The Mexican government have recently announced a change in the excise duty regime moving to an ad valorem basis. We are lobbying the government to ensure that any application of duty is applied to the total market and are also pursuing a claim for excess levels of excise duty levied in prior years.

Ballantine's and Teacher's performed well in Brazil but trading remains difficult in Argentina reflecting poor economic conditions. During the period, we restructured our operations in Argentina to rationalise the cost base.

Asia Pacific
We achieved an organic profit growth of 69% to £22m which was driven by strong results in Korea, the Philippines and Australasia. Korea's results were further enhanced by our investment with Jinro in Jinro Ballantines, which contributed £11m (2000: nil) to the trading profit in the period, raising our trading profit for the region to £33m. Korea's performance was driven by excellent results from Imperial Classic and Aged Ballantine's.

The Philippines delivered a 28% profit increase which largely resulted from a 9% growth in Fundador volumes. Australasia also performed well due to volume growth in Australia, a turnaround in New Zealand and strong duty free sales.

Global Operations
Our Global Operations function, which includes our production and supply chain activities, experienced a reduction in trading profit because the benefits of production cost savings have been passed to the sales and marketing regions.

We have reorganised our operations at Dumbarton in Scotland with the completion of our integrated bottling and office complex at Kilmalid. This project brings operational efficiencies (including full year savings of £6m). The $22m investment to increase the capacity of our US wine operations is now complete and we have embarked upon a $25m investment to increase capacity at Maker's Mark in Kentucky.

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 2000/01 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:

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.

Quick Service Restaurants (QSR)

• Trading profit maintained at £21m
• International business delivered £2m profit
• System-wide sales growth of 11%
• Number of combination stores up 9%

Trading profit was maintained while investing in the Baskin-Robbins brand revitalisation programme which commenced in the second half of last year. The £2m decline in US profits was offset by a £2m improvement in profits from our International business.

Dunkin' Donuts has continued to perform strongly and achieved 8% growth in same store sales in the US and a 1% increase in global distribution points. Togo's, our sandwich business, performed well with same store sales growth of 4% and an 8% increase in distribution points.

We have pursued our combination stores strategy which brings benefits of scale and revenue opportunities to our franchisees. The number of combination stores increased by 9% to 557. Those combination stores offering all three of our Quick Service Restaurants brands increased by 35%, albeit from a relatively low base.

The revitalisation of the total Baskin-Robbins brand offering introduces a shift from sales and profits driven by margins on ice cream manufacturing to profits driven by franchise royalties. During the period we saw franchise royalties increase by £5m although our gross margin from the manufacture of ice cream was reduced by £7m resulting in a net negative impact on US profits of £2m. We anticipate that the US QSR business will return to growth by the end of this financial year.

Investing in our people
Our people are key to unlocking the value from our brands and, in line with our commitment as a dynamic marketing-led brands company, we have refined our approach to human capital. We have focused our efforts on the development of talent, and reward and recognition, in a performance-driven culture. We have introduced a new compensation and benefits strategy, Rewarding Change, which provides a stronger link between reward and performance. We have also extended the assessment of our key management to ensure that we can provide relevant training and support for career development.

We have appointed a new Chief Marketing Officer, Kim Manley, who will be building on the strong marketing work already developed by Todd Martin and his team.

Britannia Soft Drinks
We retain our 25% interest in Britannia Soft Drinks which contributed £3m to profits in the period. We continue to pursue options to dispose of this non-core shareholding on appropriate terms.

Financial Information
The financial information is set out in the Interim Report with an independent review report by KPMG Audit Plc.

Taxation
The annual tax rate has decreased from 26.0% actual last year to an anticipated 25.5% for this year. The decrease reflects the successful management of the reduction of tax risk exposures, a process which is on-going.

Goodwill and exceptional items
Goodwill amortisation totalled £4m (2000: nil). Exceptional items totalled £6m, being primarily aborted acquisition costs of £5m.

Cash and borrowings
Operating cash net of fixed assets was £159m (2000: £117m). Net debt increased by £452m to £1,704m, mainly due to the acquisition of the Mumm and Perrier-Jouët champagne businesses and payment of both the interim and final 2000 dividends during the six month period.

In April we successfully launched two bonds in order to refinance our existing debt facilities. The euro tranche was euro 600m for a 5 year term fixed at a coupon of 5 1/2% and the sterling tranche was £350m for a 10 year term fixed at a coupon of 6 5/8%.

Outlook
These results demonstrate the strong continuing momentum in the business. We anticipate that good earnings growth will be sustained for the full year despite the dilution, for the remainder of this financial year, from Stolichnaya and the champagne acquisitions.