Spirits giant Diageo in strong sales and profits rise

Diageo, Scotland's biggest Scotch whisky company, today cheered the City with a much better interim trading performance, sending its shares up 4 per cent.
Johnnie Walker whisky being bottled. Picture: Ian RutherfordJohnnie Walker whisky being bottled. Picture: Ian Rutherford
Johnnie Walker whisky being bottled. Picture: Ian Rutherford

The group, whose main brands include Johnnie Walker whisky and Smirnoff vodka, reported a 14.5 per cent jump in sales to £6.4 billion and a 28 per cent lift in operating profit to £2.1bn respectively.

“The turnaround is on track,” said drinks analysts at Exane BNP of the performance in the six months to end-December 2016.

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Ivan Menezes, Diageo’s chief executive, said: “We have delivered a strong set of results with broad based improvement in both organic volume and top line growth, and this positive momentum demonstrates continued effective execution of our strategy.

“Highlights this half include improved performance in our US spirits business and across our Scotch portfolio, driven by our focus on marketing with impact and innovating at scale.”

The more robust sales performance was well ahead of City consensus expectations for growth of 3.4 per cent. Diageo, whose other brands include Captain Morgan rum and Guinness, said it remained confident it could hit its full-year target of “consistent mid single digit top line growth and 100 basis points of organic operating profit margin improvement in the three years ending 30 June, 2019”.

“We regard these as a strong set of results and...think they go a long way towards justifying Diageo’s confidence,” said analysts at RBC Capital Markets.

Diageo said earnings per share, before one-off items, rose 21 per cent to 62p, as higher operating profit and favourable exchange rates more than offset the impact of disposals and a higher tax rate.

Among individual brands, Johnnie Walker sales rose 5 per cent on an organic basis, while Bulleit American whisky was up 29 per cent.

The company has hoisted the interim dividend 5 per cent to 23.7p.