Diageo's sales fail to fizz but growth on track to meet 2017 target

 
Francesca Washtell
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Smirnoff and Guinness drinks maker Diageo reported net sales growth in its full-year results today and has said it is on track to deliver on its 2017 growth plans.

The figures

Net sales grew 2.8 per cent at the alcoholic drinks giant, in line with expectations, though reported net sales declined three per cent as organic growth and acquisitions were offset by adverse foreign exchange rates and disposals. Sales grew the most in its Europe, Russia and Turkey segment.

Operating profit grew 1.6 per cent to £2.84bn, up from £2.8bn in 2015, driven by organic growth, acquisitions and lower exceptional operating charges, which fell from £269m in 2015 to £167m in 2015.

Over the year, Diageo acquired the remaining 50 per cent shareholdings in Don Julio and United National Breweries, while it disposed of Bushmills and Gleneagles, as well as other wine and beer assets.

Read more: Diageo sells its last US wine asset

Earnings per share, excluding one-off items, increased one per cent to 89.4p.

The board recommended a final dividend increase of five per cent, bringing the full-year dividend to 59.2p per share.

Diageo's share price closed up 2.53 per cent yesterday to 2,192p - making it a top 10 FTSE 100 riser.

28 July 2016 @ 4:30pmDiageo (DGE)

Why it's interesting

Net sales and operating profit were impacted by adverse exchange movements driven by the weakness of a number of currencies against Sterling, in particular the Nigerian naira, the South African rand, the Venezuelan Bolivar, Brazilian real and Turkish lira, though was partially offset by the strengthening US dollar.

On the UK's surprise Brexit vote last month, Diageo has said it is working "closely with government and industry bodies to ensure its views are reflected in the transition process".

Read more: Diageo appoints Javier Ferran new chairman of the board

The company also said it "welcomes the formation of a specialist international trade department, as it is important for Diageo that the UK continues to benefit from open access to the EU as well as favourable international trade agreements".

Its chief exec had written to employees backing Remain, saying it would be better for the UK, Diageo and the Scotch whisky industry (in which most of its UK employees are based) to stay in the EU.

Diageo said its results position it well to deliver a stronger performance next year and is "confident" it can achieve its objective of "mid-single digit top line growth".

What Diageo said

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.

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