Allied Domecq profits unleashed

Allied Domecq's latest advertising campaign for Kahlúa invites drinkers to "Unleash It", which is just what the drinks group has been doing over the 12 months.

After missing out on the auction for the Seagram drinks business, Philip Bowman, Allied's chief executive, kept himself busy glugging enough wineries to establish the company as a major player in the global grapevine. The concern that Allied has been overpaying has proved hard to allay, although Mr Bowman remains confident that his piecemeal acquisition strategy will eventually deliver, even if returns still lag the cost of capital.

Full-year figures for the year to 31 August yesterday showed the group has made progress, if not at breakneck speed. Underlying profits of £480m were up 6 per cent on the previous year while turnover rose 16 per cent to £3.33bn.

Allied looks to have ironed out its problems in the US, where an ill-timed price rise and overstocking of products in the supply chain had depressed sales previously. Bar Kahlúa, the rest of its brands (Ballantine's, Beefeater, Sauza, Tia Maria et al) grew volumes, with organic volumes in the US in the second half rising 3 per cent against a 2 per cent decline in the first half.

But it was the news that the group has upped its advertising and promotional spend by 21 per cent on a like-for-like basis that promised to hold the key to growth down the line. New campaigns targeted at what Allied hopes are now the "right" sorts of drinkers include the "Go Play" campaign for Ballantine's and the "See What Unfolds" one for Stolichnaya.

Further confirmation from rival Diageo yesterday that the ideology behind the ready-to-drink revolution may have been faulty let Allied off the hook somewhat on its late entry into that market, which was handy given that Allied's Stolichnaya Citrona and Sauza Diablo offerings have not been an instant hit.

The group's shares, down 14p at 370p, trade on just nine times earnings, which is hardly expensive. Buy.

Westbury doesn't need skills to build profits

Westbury, the housebuilder, has successfully swallowed Prowting and yesterday reported a jump in interim profits.

Along with the rest of the sector, the company said demand remains strong, with its order book well ahead of last year. Before exceptional items, pre-tax profit, for the six months to 31 August, was up 25 per cent to £40.7m – the contribution from the £170m Prowting deal was just 10 weeks worth of sales.

Westbury is not one of the big players in the sector but it is far-sighted and willing to take a risk. It is investing £13m in its Space4 business, which produces houses in a factory, complete with wooden walls and windows. These are then trucked to a site, where the brick-work is done. The unit lost £1.9m in the period but it does have one (unnamed) external customer and plans to be churning out 2,000 homes a year in the near future.

There is a major building skills shortage and if Westbury is right, that will seriously constrain the construction of homes on site. So it could be on to a real winner. Manufactured housing takes out as much of the skilled labour as possible.

Westbury shares closed up 4.5p to 297.5p yesterday, putting the stock on a forward multiple of five. That doesn't give the company credit for an innovation that could pay rich rewards. Worth tucking away.

Wyevale Garden Centres loses ground

For a business that is so dependent on the weather, Wyevale Garden Centres has got the right idea in branching out into areas that will help even out the seasonality.

It hopes its newest garden centre will become a destination point/day-out area for families. This latest garden centre, formerly a caravan show site, is its largest to date and houses a 250-seat restaurant and sells pets and giftware as well as plants and the like.

The company also yesterday announced the completion of its purchase of Woodlands Nurseries in Leicestershire – one of the country's largest garden centres – for just less than £10m.

Analysts reckon both new sites will prove to be profitable businesses in time but note that the former will do little more than break-even in its first year thanks to a costly advertising campaign.

Woodlands, they say, is likely to boost margins due to the benefits of the company's buying power although they acknowledge that, as an already mature centre, there is probably limited scope to increase sales.

Shares in Wyevale have lost considerable ground since May, thanks to the cool and wet spring weather. But the business has probably benefited from the better summer and autumn weather and has still got Christmas, its fourth most important trading period in the year, to look forward to.

Analysts reckon Wyevale will make a profit of about £22.5m this year, translating to earnings of roughly 29p and putting the stock on a forward multiple estimated at 14 times.

That is not cheap but the shares, down 4p at 415p last night, could gain momentum in the run-up to Christmas and so might be worth holding.