diageo results

Diageo results, year ended June 30

25 July, 2019

Diageo, the world’s largest premium drinks company has reported net sales of £12.9bn, increased 5.8% with organic growth partially offset by acquisitions and disposals.

The reported operating profit of £4bn, increased 9.5%, driven by organic growth, according to the company.

It says all regions contributed to broad based organic net sales growth, up 6.1%, with organic volume up 2.3%.

Organic operating profit grew 9%, ahead of top line organic growth, driven by improved price/mix and productivity benefits from everyday cost efficiencies, partially offset by cost inflation and higher marketing investment, it states.

Cash flow continued to be strong, with net cash from operating activities at £3.2bn, up £164m and free cash flow at £2.6bn, up £85m.

On July 25 the Diageo board approved plans for a further return of capital up to £4.5bn to shareholders for the period F20 to F22.

The final dividend increased 5% bringing the full year dividend to 68.57 pence per share.

Diageo chief executive, Ivan Menezes said: “Diageo has delivered another year of strong performance. Organic volume and net sales growth was broad based across regions and categories, with new product innovation being a strong contributor. We expanded organic operating margin ahead of our guidance and increased investment behind our brands ahead of organic net sales growth.

“Fiscal 19 has been another year of strong free cash flow delivery at £2.6bn and we have returned £2.8bn to shareholders via share buybacks. The Board has approved plans for an additional return to shareholders of up to £4.5bn over Fiscal 20 to Fiscal 22.

“Our focus on quality sustainable growth is backed by a culture of everyday efficiency that enables us to invest smartly in marketing and growth initiatives while expanding margins.

“These results reflect the steady progress we are making and as we look ahead we see attractive opportunities to deliver consistent growth and create shareholder value. In the medium term I expect Diageo to maintain organic net sales growth in the mid-single digit range and to grow organic operating profit ahead of net sales in the range of 5%-7%,” said Menezes.

Thomas Buckley and Ellen Milligan of Bloomberg News commented: “The company cited new product innovation and increased investment in its brands for driving growth. In the medium term, it expects to maintain organic net sales growth in the ‘mid-single digit range’ and to increase organic operating profit in the range of 5% to 7%.

“Currencies have been a challenge in the past for Diageo, but the company said it estimates exchange rates for the next financial year to favourably impact net sales by around £375m and operating profit by around £135m.

“Chinese demand for Diageo’s scotch and white spirits has fueled double-digit sales gains in the country,” they said.

Keywords: diageo




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