Interim results for 6 months to 28 February 1998

Summary of Results	Group Profit & Loss Account
Main Points	Group Balance Sheet
Chairman's Statement	Group Cash Flow Statement
Chief Executive's Review	Review Report to Allied Domecq PLC
Financial Performance	Notes 1-3, Notes 4-6, Notes 7-10
Further Information	City Presentation - Slides

Financial Performance

Turnover
Turnover decreased from £2,319 million to £2,210 million. At constant exchange rates turnover was broadly constant.

Trading Profit
Trading profit was £372 million (£372 million) which includes profits from associated undertakings of £7 million (£7 million). At constant exchange rates trading profit increased by 6% from £352 million. As a result of the government decision not to allow the reclaiming of tax credits on dividends, pension charges have increased by £7 million (Spirits & Wine £3 million, Retailing £4 million) in the first half and a similar increase is expected in the second half.

Finance charges
Interest cover improved from 6.8 times to 7.2 times compared with the first half of last year.

Profit before Tax
Normalised profit before tax at actual exchange rates was £320 million (£317 million) and at constant exchange rates there was an 8% increase before a negative impact of currency translation of £20 million compared with the first half of last year.

Exchange rates
Exchange rate movements during the 6 month period adversely impacted normalised profit before tax by £35 million (compared with the first half of last year), of which £20 million relates to the translation of non UK profits and £15 million is attributable to exchange rate movements on transactions. The full year currency cost of translation and transaction at current exchange rates would be approximately £30 million and £25 million respectively.

Taxation
The taxation charge for the half year was 26% of profits, compared to 32% for the first half of last year and is the expected rate for the full year. This reflects a number of factors: the write back of ACT previously written off arising as a result of the payment of the interim and final dividends as foreign income dividends; the reduction in the standard rate of UK corporation tax; and the successful resolution of a number of long standing tax issues.

Earnings per share
Earnings per share increased from 20.5p to 21.3p on a normalised basis, after adjusting the 1997 interim tax rate to the rate for the full year. At level exchange rates earnings per share increased by 10%.

Cash Flow
Free cash flow (before acquisitions and disposals) was an outflow of £112 million compared to an outflow of £21 million in the first half of last year. This increase was due to the following factors: a reduction in the level of operating cash flow and increased payments of £52 million for tax, interest and dividends - of which £26 million related to minority shareholders in Corby Distilleries Limited. It is expected that there will be a positive free cash flow for the year as a whole.

Borrowings in the first half year increased by £118 million to £1,260 million and gearing at 54% is the same as at 28 February 1997 (August 1997 was 50%).

Return on Investment
Post tax return on investment at 10.2% continues to cover the cost of capital. This rose from 9.4% at February 1997, helped by improving returns in the business and the reduced tax rate.

Events since 28 February 1998
On 11 March 1998 the group purchased the £75 million 11¾ debenture stock which had a maturity in 2009, for a premium of £36 million which will be included in finance charges for the year. The borrowings for the purchase have been refinanced at lower rates of interest, which will result in a net benefit to the ongoing finance charge.