Diageo has once again given investors reason to raise a glass. The owner of the Guinness and Johnnie Walker brands rewarded them with an 8% increase in dividends, having narrowly beaten analyst expectations by reporting a 6% rise in full-year sales to £10.8bn.
The good news prompted a 1% increase in the Diageo share price to £16.98 on Thursday morning. A mix of encouraging financial results and successful emerging market acquisitions had already caused the share price to jump by 45% over the past year.
Analysts said Diageo continued to impress not just with its performance in emerging markets, which now account for almost 40% of sales, but also its resilience in more mature markets. “In contrast with some UK fmcg companies, Diageo continues to grow its mature markets business, which is important given that it generates 42% of its profits in the US, where margins are highest,” said Oriel Securities analyst Chris Wickham.
However, the domestic UK market was an exception. “We have some concerns around the UK, with an implied 6% decline in volumes,” said Investec analyst Martin Deboo. Last month, key domestic Diageo brands Guinness and Baileys both dropped down The Grocer survey of Britain’s Biggest alcohol Brands, with value sales falling by 11.1% and 8% respectively. Deboo said Diageo was being more “discriminatory” on promotions in the UK, chasing after profits over volumes.
Arch-rival Pernod Ricard is expected to report a similarly strong set of results next week. “Pernod has historically outperformed Diageo and we would expect them to edge it again this time around,” said Deboo.
Fellow alcohol giant Heineken had a mixed week. The Dutch brewer missed analyst expectations, reporting a small drop in like-for-like operating profits for the first half of 2012, which prompted a 1% drop in the share price to €44 on Wednesday.
However, preventing the share price falling further was more encouraging news of progress in Heineken’s bid to acquire Tiger beer brewer Asia Pacific Breweries. It agreed an improved price of £2.8bn for a 40% share of the company to add to its existing 41.6% stake, taking it closer to beating off rival bidder ThaiBev.