Whisky giant Diageo cheers gin boom

Gin sales were particularly strong. Picture: Britta Leuermann
Gin sales were particularly strong. Picture: Britta Leuermann
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Johnnie Walker maker Diageo has flagged further “sustained” growth after raising a glass to a near-4 per cent rise in annual operating profits.

The global drinks giant, which ranks as Scotland’s largest whisky producer, also toasted a double-digit surge in sales of gin, amid a boom in demand for the tipple.

Operating profit rose 3.7 per cent to £3.7 billion on net sales of £12.2bn, up by almost 1 per cent on a reported basis, or 5 per cent on an organic growth basis.

The group, which is also behind brands including Guinness, Smirnoff and Baileys, said performance was particularly strong in the UK and Europe, with Tanqueray gin gaining market share and Gordon’s benefiting from the launch of its Pink gin.

Sales of gin jumped 16 per cent in the year to the end of June, making it one of the star performers for the group and accounting for 4 per cent of net revenues.

The board has recommended a final dividend increase of 5 per cent bringing the full-year payout to 65.3p per share.

In Europe, Guinness enjoyed a 6 per cent rise driven by a “good performance” for Guinness draught supported by double-digit growth for Hop House 13 Lager.

Net sales of Captain Morgan grew 7 per cent. Johnnie Walker was up 2 per cent despite strong comparatives with the year before, while Smirnoff fell 4 per cent, “in line with the vodka category”, the group noted.

Chief executive Ivan Menezes said: “Diageo has delivered another year of strong, consistent performance. Organic volume and net sales growth is broad based across regions and categories.

“These results reflect the high performance culture we have created in Diageo, the ongoing rigorous execution of our strategy, our focus on the consumer and our ability to move swiftly on trends and insights.

“The changes we have made in the business and the shifts in culture we continue to drive, ensure we are well placed to capture opportunities and deliver sustained growth.”

Alongside its full-year results, the group announced a windfall for investors by unveiling a £2bn share buyback over the financial year ahead.

John Moore, senior investment manager at Brewin Dolphin Edinburgh, said: “Diageo’s results are reassuringly strong. With much of the company’s earnings denominated in dollars, currency shifts along with favourable market conditions in North America and Europe have meant good growth in earnings as well as dividends for sterling-based investors.

“The results have also been helped by a significant cost-savings programme that runs through to 2019, with organic operating profit up 7.6 per cent and organic operating margins rising 78 basis points.”

Steve Clayton, manager of the HL Select Shares fund at Hargreaves Lansdown, said: “Diageo’s consistency is its greatest attraction.”