Bottom Line: Allied marks time

ALLIED-LYONS has yet to reap any reward from its much-vaunted refocusing. Indeed, in the first half its performance has been hurt by the forging together of Carlsberg-Tetley in a beer market where volumes have been declining and aggressive discounting is the order of the day.

Allied, like Northern, has vigorously resisted any price-cutting. But the cost has been market share. The market had underestimated the effect of this on beer profits. Hence yesterday's 3p fall in the shares to 568p.

Otherwise, the group is holding up well in harsh conditions. Margins are up in all four divisions; cash flow is significantly ahead of this time last year; gearing at 73 per cent is continuing to fall; and interest cover at 4.3 times is continuing to rise.

There are plenty of improvements that can still be made. It makes no secret of its view that there is room for more rationalisation and a need to dispose of peripheral activities.

Although reports of the death of the brand have been exaggerated, it needs a reasonably strong worldwide recovery for any excitement to return to Allied's upmarket brands. Without this there will be no significant increase in either volumes or prices. At 14.5 times prospective earnings the share is a hold, although a prospective yield of nearly 5 per cent is attractive.