DIAGEO SEES PROFIT GROWTH THANKS TO SCOTTISH SALES

Diageo has reported operating profits up 18.2% to £4.4bn, primarily driven by organic growth, with net sales up 21.4% to £15.5bn.

The beer and spirits group – which makes Guinness, Gordon’s gin and Smirnoff vodka among many others – hailed a solid start to its new financial year, with sales improvements across all regions, as consumers spend more at bars and restaurants following eased coronavirus restrictions.

Preliminary results show that their Johnnie Walker brands are delivering double-digit growth across all regions to surpass 21 million cases globally

Trading across Europe is recovering ahead of expectations, with the UK and many countries on the continent having opened up.

Growth reflects continued recovery of the on-trade, resilient consumer demand in the off-trade and market share gains, according to the group’s preliminary results.

Operating margin decreased by 77 basis points, although this was more than offset by exceptional operating items of £388m. Price increases and supply productivity savings also offset the absolute impact of cost inflation.

Growth was broad-based across categories, with particularly strong growth of Scotch whisky, tequila and beer. Premium-plus brands contributed 57% of reported net sales and drove 71% of organic net sales growth.

Diageo also increased organic marketing investment 24.7%, while investing £1.1bn of capital in production capacity, sustainability, digital capabilities and consumer experiences.

Net cash flow from operating activities increased £300m to £3.9bn, while free cash flow fell by the same amount to £2.8bn.

The group has increased its recommended final dividend by 5% to 46.82 pence per share, while completing £3.6bn of share buybacks as part of return of capital programme of up to £4.5bn.

It expects to complete remaining £900m of the buyback programme during the next fiscal year.

Chief executive Ivan Menezes (pictured above) said: “In a year of significant global supply chain disruption, our double-digit volume growth demonstrates the tremendous agility and resourcefulness of our teams.

We benefitted from the on-trade recovery, continued global premiumisation trends, with our super-premium-plus brands up 31%, and from price increases across our regions. I am particularly proud of the performance of Johnnie Walker, which delivered double-digit growth across all regions to surpass 21 million cases globally.”

However, Menezes warned that the operating environment is likely to be challenging going into 2023, with ongoing volatility related to Covid-19, significant cost inflation, a potential weakening of consumer spending power and global geopolitical and macroeconomic uncertainty. He added: “Notwithstanding these factors, I am confident in the resilience of our business and our ability to navigate these headwinds.”