Full- year profits, the last for the combined group, should emerge at pounds 185m against pounds 151.6m.Last week Footsie had another unsettling run, falling 79 points to 4,764.3. Bob Semple, the arch bull who called the market right at the start of the year, is still looking for a mundane performance for the rest of the year. But the NatWest strategist, despite recent events, remains bullish.He says: “We do not believe UK equity valuations are over-demanding. To be bearish investors have to assume that either earnings are about to collapse, as the UK is going into recession, or there will be an outbreak of inflation, pushing gilt yields well over 7 per cent. What is clear is that Allied cannot ignore Diageo.Armed with the results of a strategic review, it is hoped Sir Christopher will offer some pointers about the group’s direction with the figures.Allied must escape from the last-chance saloon if its present management is to survive.

Indeed, there must be a chance the new challenge will force Sir Christopher to reconsider his objection to a two-way split. Perhaps the spirit sides of Allied and Seagram could merge? That could leave Allied with, say, a half share in a new spirits outfit and free to concentrate mostly on its pubs and other retail activities.Another possibility is that Allied will buy Diageo’s Dewars brand, the top-selling Scotch whisky in the US A series of joint ventures is also on the cards So is the acquisition of some second-line spirit groups. So Allied remains a rather odd cocktail of pubs, various franchised catering concepts and a portfolio of brands which make it a world-leading spirit player.The merger of Grand Metropolitan and Guinness, despite the handicap of the Diageo handle, represents yet more pressure for the Beefeater and Teachers group.There are suggestions it may be forced to link with Seagram, the Canadian giant, which is the other big spirits influence, to counter the threat. Perhaps the man famed for splitting Courtaulds into stand- alone chemical and textile groups would work the same magic at Allied.But no He decided against a demerger. But the Danes decided sole ownership of the struggling brewer represented their best course.Allied has appeared to lag behind other drinks industry giants, prepared to follow rather than lead. It has had some disasters; a pounds 147m foreign exchange fiasco and a pounds 700m Mexican takeover just before the peso went into free-fall.The arrival of Sir Christopher Hogg as chairman seemed to offer a chance of redemption.

It could have demanded Allied pay pounds 33m for a 15 per cent CT stake. The final link with the beerage was severed when Carlsberg of Denmark, rather dismissively, said it did not need Allied to help it out over Carlsberg- Tetley (CT), the third-largest brewer which Margaret Beckett, President of the Board of Trade, refused to let Bass swallow.Her decision left Carlsberg with no option but to struggle on. Allied Domecq has been in the last-chance saloon for so long it should be suffering from alcoholic poisoning. Unfortunately they are not expected to be sparkling, but the accompanying comments may provide a little cheer.The drinks giant was once Britain’s biggest brewer, taking in a host of highly regarded names It has now abandoned its brewing heritage. Just ahead of one of its twice-yearly profit presentations, hopes inevitably rise that the drinks group has at last turned the corner.
Tomorrow, Allied has another chance to offer encouragement when it rolls out its yearly results.

Indeed, its presence there has taken on such an air of permanency its shares have become one of the stock market’s most glaring underperformers. This strengthens the case for down-playing the strong pound so as to justify not increasing the cost of borrowing any further.The Bulletin article looks at past episodes of sudden changes in the exchange rate, including a jump last spring after the publication of figures showing a drop in unemployment and an increase in earnings growth.In this case, a rise in the exchange rate now will be reversed later and is less likely to have much impact on the real economy.The research also established that, in 1996, as the financial markets came to expect the single European currency to go ahead with many members, investors bid up the pound because the UK was seen as less likely to join.. But others reckon there is still a chance of a rate rise this week on the back of evidence of growing inflationary pressure, with unemployment in America at its lowest for 25 years.On this side of the Atlantic, last week’s quarter-point rate rise will allow the Bank to forecast inflation staying on target. However, many economists believe the economy’s momentum will force a further rate rise – some predict to as high as 8 per cent from today’s 7.25 per cent.There could be a market reaction to this week’s figures on retail prices, factory gate prices, and earnings and unemployment.The Bank of England’s Quarterly Bulletin, published Wednesday, will argue that the pound’s appreciation can be explained by the expectation of rising interest rates.

In addition, the Bank of England’s Inflation Report and economic figures due this week will be scoured for clues as to how much further rates might climb in the UK.
Some believe recent financial turbulence around the world guarantees the Fed will postpone raising US interest rates. Financial markets could suffer a fresh bout of nerves today ahead of Wednesday’s meeting where the Federal Reserve Open Markets Committee will decide whether to raise US interest rates. It also believes that if a widespread auction develops for Rolls, then City institutions that hold shares in both companies will refuse to underwrite any offer from Mayflower.Meanwhile, Vickers has confirmed that it has won a pounds 100m contract from Oman for 20 Challenger tanks, to be built in Leeds and Newcastle Another order from Qatar is also in the offing.. Mayflower is likely to justify the highly- geared nature of its bid by arguing that the enlarged business would be highly cash generative and therefore able to withstand large levels of debt.However, Sir Colin Chandler, chairman of Vickers, has already made it clear that one of the main planks of any bid defence would be an assault on the financial position of Mayflower.