Brussels threatened legal action yesterday against European energy companies accused of adding as much as £10bn to UK gas bills by rigging the market and abusing their dominant position. In Europe, operating profits climbed 7 per cent after Diageo created a pan-European structure to keep costs down. The group is trying to reverse its poor performance of Guinness in Ireland and Britain, where beer markets are in decline.. Their percentage contribution doubled over the past two years and is expected to double again over the next couple of years.Diageo raised its share of the US spirits market and posted sales growth of 7 per cent, though rising costs limited profits growth to 5 per cent. Marketing spending in Europe was cut by 7 per cent in the first half.

While the Bric economies comprise only 4 per cent of group volumes, their net sales (after deducting excise duties) shot up more than 40 per cent. Michael Bleakley, at CSFB, said: “These results show that Diageo has the flexibility to meet its targets – ‘whatever the weather’.”The company has shifted marketing spending from Europe, where net sales fell 1 per cent, to new markets such as Brazil, Russia, India and China (Bric). Diageo said the hurricanes cost it £4m to £5m, while higher oil prices landed it with a £10m bill. The group, whose brands include Guinness, Johnnie Walker whisky, Gordon’s gin and Smirnoff vodka, reported underlying sales up 5 per cent and operating profits up 7 per cent to £1.26bn in the first half.
The chief executive, Paul Walsh, predicted the group would meet its full-year target for 7 per cent operating profit growth. The drinks giant Diageo shrugged off weakness in Europe and the impact from soaring oil prices and hurricanes to deliver a 7 per cent rise in interim profits yesterday. The performance reassured investors after the company warned in November that first-half sales and profits growth could be blown off course by the US hurricanes.

“The level of complaints from mis-selling of endowment and investment products has considerably exceeded expectations and we have not escaped this trend,” it said.Mr Crawshaw said the bank was likely to continue acquiring mortgage customers as opportunities came available over the coming year, but said it was unlikely to get involved in a major acquisition.Shares in Bradford & Bingley gained 3 per cent in early trading yesterday, before closing down 1.5p at 448.75p, giving the group a market value of £2.85bn.. He said he expected the UK lending market to grow about 5 per cent in 2006 to push through £300bn.The bank said it planned to increase its full-year dividend by 7 per cent, compared with a rise of just 4 per cent last year, and would also manage to raise its dividend cover to almost two times the group’s underlying earnings.Claims for mis-selling of financial products, such as endowment mortgages and precipice bonds, continued to dog the company’s bottom line, forcing the group to increase its reserves for compensation for the year to £38.7m. However, Mr Crawshaw said he believed arrears levels in this market were also near their peak.”Back-to-back house price scare stories have lost their credibility,” he said. “The housing market is in good shape.”James Leal, an analyst at Teather & Greenwood, said he agreed that the buy-to-let market looked in good shape, adding that his sell recommendation on Bradford &Bingley stock was only on the back of his belief that the company is overvalued.Reporting its preliminary results for 2005, the bank unveiled an 11 per cent increase in underlying pre-tax profits to £310.1m – ahead of the market consensus of about £305m.Mr Crawshaw said the strong results were driven by a successful cut in costs across the business, as well as a growing momentum in the property market in the second half of 2005. Arrears in the regular residential lending market increased more than 50 per cent over the year, to almost 1.2 per cent. “Although the fact that arrears have doubled looks quite exciting, these are still very smallnumbers,” he said.