Brexit-hit pound gives drinks giant Diageo reason to cheer

Drinks giant Diageo has toasted a brighter outlook after securing a hefty jump in sales and profits thanks to the Brexit-hit pound.
Diageo reported a 6% rise in Johnnie Walker sales. Picture: Ian RutherfordDiageo reported a 6% rise in Johnnie Walker sales. Picture: Ian Rutherford
Diageo reported a 6% rise in Johnnie Walker sales. Picture: Ian Rutherford

The owner of Johnnie Walker whisky, Smirnoff vodka and Guinness stout said operating profit surged 25 per cent to £3.6 billion for the year ending in June, while reported net sales climbed 15 per cent to £12.1bn.

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The group was boosted by healthy growth in international markets and strong Scotch sales, while sterling’s weakness laid the foundations for an extra lift when translating overseas earnings back into pounds.

Stripping out acquisitions and currency movements, annual operating profit grew by 6 per cent to £3.6bn.

Chief executive Ivan Menezes said: “We have delivered consistent strong performance improvement across all regions and I am pleased with progress in our focus areas of US spirits, Scotch and India.

“Our productivity work is delivering ahead of expectations allowing us to reinvest in our brands, drive margin improvement and generate consistent strong cash flow.”

The firm also hiked its profit margin growth target, raised its annual dividend by 5 per cent and announced a £1.5bn share buyback scheme to be paid out next year.

Diageo, which owns 200 brands across 180 countries, said Scotch sales rose by 5 per cent over the period, as Johnnie Walker and Buchanan’s climbed by 6 per cent and 16 per cent respectively.

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However, vodka, which represents 12 per cent of the group’s net sales, dropped by 4 per cent, as its Ciroc and Ketel One brands struggled on the American market.

In total, US sales stepped up by 3 per cent over the period, while Europe, Russia and Turkey grew by 5 per cent. There was also healthy growth across Africa, Latin America and the Caribbean.

Diageo announced last month that it had inked a $1bn (£790 million) deal to buy premium tequila brand Casamigos, co-founded by Hollywood actor George Clooney.

Steve Clayton, fund manager at Hargreaves Lansdown, said the results delivered “encouraging news” for investors.

He said: “Currency movements gave the company a big helping hand, but the underlying progress was strong too.”