Diageo saw its share price surge more than 5% this morning as the drinks giant reported interim results.
Reported net sales were up 14.5% to £6.4bn in the six months to 31 December, with operating profit up 28% to £2bn, driven by favourable exchange rates and organic growth.
Diageo reported growth across all regions on an organic basis, with volumes up 1.8% and net sales up 4.4%. Volume growth was down 1% on a reported basis as Diageo streamlined its portfolio during the year.
Organic operating profit grew 4.4%, driven by gross margin improvement, progress on productivity offset by implementation costs and the profit on sale of the United Breweries shares in the prior period.
In Great Britain, net sales were broadly flat as changes in its commercial footprint led to efficiencies, including inventory reduction.
Charles Ireland, general manager GB, Ireland and France, said: “In Great Britain, Diageo continued to win share in both the on and the off-trade. Net sales were broadly flat driven by changes in selling patterns across channels resulting from an increase in our commercial footprint.”
The performance was delivered through maintained momentum of the Guinness brand, healthy premium core portfolio performance, continued growth of the luxury reserve business, several successful innovation initiatives and impactful activations with customers, he added.
Baileys performance improved with net sales up 2% driven by increased on-trade activations especially around Christmas in the off-trade. Guinness net sales were flat, lapping last year’s ‘Rugby World Cup’, but it gained market share driven by improved distribution and the success of Hop House 13 Lager.
Tanqueray net sales grew 42% due to expanded distribution, while Smirnoff recovered momentum, gaining share both in off-trade and on-trade, but net sales were down 6%.
Reserve brands experienced profitable solid growth, driven by scotch malts and Tanqueray No Ten. Ciroc has increased its share of vodka and share gains in Scotch whisky have been boosted through a focus on flavour-led malts.
Net sales were up 3% on an organic basis in North America, 5% in Europe, Russia and Turkey, 4% in Africa, 11% in Latin America and the Caribbean and by 3% in Asia Pacific.
CEO Ivan Menezes commented: “Diageo is building a stronger, more consistent, better-performing company. We are identifying consumer trends faster, expanding the reach of our products across markets and developing trade channels to capture these growth opportunities. Our productivity work is on track, driving efficiency and effectiveness across the business. Our work on-trade and marketing spend gives us better data enabling smarter, quicker decisions that generate higher returns.”
The company’s expectations of delivering stronger financial performance this year were unchanged, he added. “We are confident of achieving our medium-term objective of consistent mid single-digit top line growth and 100bps of organic operating margin improvement in the three years ending 30 June 2019.”
On the back of the results, Diageo increased its interim dividend by 5% to 23.7p per share.
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