Diageo sales up 1.7%

25 January, 2018

Diageo, the world’s largest premium spirits company, has announced its interim results for six months ended December 31, 2017.

It claims a “strong performance reflects consistent and rigorous execution of our strategy.”

It reports net sales (£6.5 billion) and operating profit (£2.2bn) were up 1.7% and 6.1%, respectively, as organic growth was said to be partially offset by adverse exchange.

The results are: 

  • All regions contributed to broad based organic net sales growth, up 4.2%, and organic volume grew 1.8%.
  • Organic operating profit grew 6.7%, ahead of top line growth, as higher marketing investment was more than offset by efficiencies from our productivity programme.
  • Cash flow continued to be strong and in line with last year, with net cash from operating activities at £1.2 billion and free cash flow at £1 billion.
  • Basic earnings per share of 82.2 pence was up 36.3%. Pre-exceptional eps was 67.8 pence, up 9.4%, driven by higher organic operating profit and lower finance charges.
  • The interim dividend increased 5% to 24.9 pence per share.

Diageo chief executive Ivan Menezes, said: “These results demonstrate continued positive momentum from the consistent and rigorous execution of our strategy. We have delivered broad based improvement in both organic volume and net sales growth. We have increased investment behind our brands and expanded organic operating margin through our sustained focus on driving efficiency and effectiveness across the business.

"By consistently delivering on our six strategic priorities, Diageo continues to get stronger: we have better consumer insight through superior analytics, improved execution on brand and commercial plans and have embedded everyday efficiency across the business through our productivity initiatives. This has enabled continued growth, improved agility, and consistent cash flow generation.

“Our financial performance expectations for this year remain unchanged. We are confident in our ability to deliver consistent mid-single digit top line growth and 175bps of organic operating margin improvement in the three years ending 30 June 2019,” said Menezes.

Net sales in Diageo’s most important market the US were up 3%. North American whisk(e)y sales were up 54% while scotch grew 3% and flagship brand Johnnie Walker 5%. Vodka (Ciroc and Ketel One) was down 8% - Smirnoff’s decline has slowed to -2%. Don Julio net sales were up 39%.

Europe and Turkey sales were up 4%. Gin was key, driven by Tanqueray and Gordon’s pink variant. Scotch was up 2%, led by Russia. Reserve Brands were 8% up, driven by Ciroc, Zacapa and Bulleit. UK net sales were up 7%, driven by gin and beer.

Africa was up 2% with beer accounting for 5%. Latin America and the Caribbean showed net sales increases of 7%. Scotch was up 2% thanks to Walker and Black & White. Don Julio and Smirnoff showed double digit growth and Tanqueray grew in Brazil and Mexico.

Asia Pacific sales grew by 7% with "strong growth" in greater China and a “solid performance” from India. this was offset by contraction in Korea and a decline in scotch sales in Australia. Strong Johnnie Walker sales were offset by a decline in Windsor sales in Korea. Reserve Brands we’re up 29, driven by Diageo’s Chinese white spirits and Johnnie Walker variants.

Scotch represents 27% of Diageo’s net sales (+3%); Vodka: 11% (-3%); North American whisk(e)y: 9% (+4%); Rum: 7% (+5%); IMFL (Indian-made foreign liquor): 5% (+1%); Liqueurs: 6% (+5%); Gin: 4% (+16%); Tequila 3% (+43%); Beer: 15% (+4%) and RTDs 5% (-2%).

Keywords: diageo, ivan menezes




Comment

David Williams

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Few days before writing this article, i came across an old piece by Robert Parker, written in 2004, in which he made 12 bold assertions about how wine would look by 2015.

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