Diageo (DGE) posted improved organic growth and profitability in the year ended 30 June, but headline growth was hit by currency fluctuations.
Diageo posted global volume growth of 1.3%, net sales growth of 2.8%, and operating profit growth of 3.5% in the year.
However, reported net sales of £10.5bn declined 3% as organic growth in each region and acquisitions were more than offset by adverse exchange and disposals
Reported operating profit of £2.8bn grew 1.6% with the boost from organic growth, lower exceptional operating charges and acquisitions partially offset by adverse exchange rate impact and disposals.
Diageo posted organic sales growth in all its global regions, with organic sales up 3% in North America, 4% in Europe, Russia and Turkey and 2% in Asia Pacific.
Chief executive Ivan Menezes said: “This is a good set of results delivering what we set out to achieve this time last year and demonstrating our momentum.
“This better performance reflects the work we have done to strengthen our big brands through marketing and innovation, as well as expanding our distribution reach. Our six global brands and our US spirits business are all back in growth and we have seen a significant improvement in the performance of our scotch and beer portfolios.”
“These results position us well to deliver a stronger performance in F17. We are confident of achieving our objective of mid-single digit top line growth, and in the three years ending F19 delivering 100bps of organic operating margin improvement.”
On Brexit, which has boosted Diageo’s share price given its non-sterling revenues, Diageo said it is “working closely with government and industry bodies to ensure its views are reflected in the transition process”. It added: “It is important for Diageo that the UK continues to benefit from open access to the EU as well as favourable international trade agreements.”
Diageo recommended a final dividend increase of 5% bringing the full year dividend to 59.2 pence per share.
Diageo shares are up 0.4% this morning to 2,145.5p having already risen strongly this week. The shares are up by 2.2% in the past five days and by 15.6% since the start of 2016.
British American Tobacco (BATS) has posted its half year results to 30 June, reporting strong revenue and volume growth but profit held back by exchange rates.
Sales were up 7.8% at constant rates of exchange to £6.7bn, or 6% on an organic basis, driven by a strong volume performance and good pricing. Reported revenue was 4.2% higher than the same period last year, reflecting the continued adverse translational impact of exchange rates.
Group cigarette volume was 332 billion, an increase of 3.4% on the same period last year and 2.1% on an organic basis.
Profit from operations, at current rates of exchange, was 5.7% lower at £2.2bn, but adjusted group profit from operations at constant currency rates was up 1.8% to £2.6bn.
Underlying operating margin fell 170 bps. Excluding the adverse transactional impact of foreign exchange, it would have increased by around 50 bps. On a reported basis, operating margin fell 240bps to 36.8%
Richard Burrows, chairman, commented: “The business has delivered strong organic growth in the first six months of the year. This is despite the significant adverse transactional impact of foreign exchange and the continued investment in our long-term future via our Next Generation Products portfolio. With profit growth weighted to the second half of the year, we remain confident that we will deliver another year of good earnings growth at constant rates of exchange.”
Separately, BAT announced Dr Marion Helmes, formerly CFO at Celesio, Q-Cells and ThyssenKrupp Elevator Technology, will join its board as a non-exec director and “brings significant financial expertise and operational experience gained at an international level”.
Ahead of its AGM later today, PayPoint (PAY) has issued an update on trading for the three months ended 30 June 2016.
Transactions increased to 172.8 million, up 1%, excluding transactions for the online payments business, which was sold on 8 January 2016.
Revenue increased 3% to £51m and net revenue increased 8% to £29m excluding the online payments business.
In the UK and Ireland, retail services transactions (ATMs, debit/credit cards, parcels, money transfers and mobile phone SIM cards) growth continued, up 11.7% on last year. Collect+ volumes increased by 5.8% to 5.2 million transactions in the period, compared to 4.9 million last year.
Dominic Taylor, PayPoint’s Chief Executive, said: “Overall trading for the first quarter remains in line with our expectations. We continue to make good progress on our strategy. The commercial trial of PayPoint One is encouraging. Together with MultiPay, which is also progressing well, I am confident we have the platforms for extending and enhancing our proposition for clients and retailers.”
Consumers across Britain expect their household disposable income to fall over the next 12 months, according to a recent survey from PwC.
The survey shows that the balance of opinion in July was a net 8% of consumers expect to be worse off over the next 12 months. That’s in contrast with the 5% peak in net positive sentiment over the last 12 months.
Kien Tan, Director at PwC said: “While we do not expect consumer spending to grow as quickly as anticipated prior to the EU referendum, we do expect consumer spending to remain resilient and there is currently no evidence to suggest that a protracted decline in overall consumer spending is on the cards.
“What will change is where disposable income will be spent. When we asked consumers how the EU referendum result would impact family spending, the majority expected to spend more on groceries and holidays.”
The FTSE 100 has moved just 0.1% up to 6,755.9pts this morning.
British American Tobacco is 1% up to 4,792p and PayPoint is 0.2% up to 961.5p.
Other risers include a jumped for 8.8% at McBride (MCB) to 169.5p, while Just Eat (JE) is up 8.1% to 874p. Fever-Tree (FEVR) is up yet another 2.6% to 874p, while B&M European Value Retail (BME) is up 1.8% to 262p and Greencore (GNC) is up 1.5% to 322.8p.
Yesterday in the City
The FTSE 100 edged up another 0.4% to 6,750.4pts to continue the unusual relative calm gripping the City.
There were some strong risers in the grocery sector, notable the supermarkets which were recovering from a slump on Tuesday after the release of market share figures from Kantar and Nielsen.
Elsewhere, Fever-Tree (FEVR) jumped another 4.9% to set a new all-time closing share price high 851.5p, Greggs (GRG) was up 2.5% to 1,051p, Booker (BOK) was up 2.2% to 175.2p and Dairy Crest (DCG) was up 1.9% to 604.5p.
Greencore, which stumbled earlier this week despite strong quarterly sales and the acquisition of a sandwich manufacturer to boost its growing UK food to go capabilities, was up 2.3% to 317.9p yesterday.
Fallers included SABMiller, which dropped 0.7% to 4,380p as investors weigh the risk of the AB InBev deal collapsing.
British American Tobacco was down 0.7% to 4,746.5p ahead of its half year figures this morning, while Diageo was down 1% to 2,138p ahead of its full-year results.
McColl’s (MCLS) was down 1.4% to 146p after posting a 2.2% fall in like for like sales in the first half, despite reported sales growing by 2.2% driven by new store openings.