Diageo half-year results ahead of expectations

28 January, 2016

Organic sales at global drinks giant Diageo were up 1.8% for the second half of last year, the company has revealed.

Volumes also edged up 1% over the six months to December 31, 2015, according to figures released today.

The figures are slightly ahead of analysts expectations of 1.6% value growth and 0.6% volume growth, the Financial Times reported.

Overall sales were down by £400 million over the half-year, thanks to volatility in the currency markets and the company’s disposal of a range of non-core assets, most notably the majority of its wine businesses to Treasury Wine Estates.

Profits likewise took a £156 million hit.

Some 45% of Diageo’s sales worldwide come from just six brands: Johnnie Walker, Smirnoff, Captain Morgan, Baileys, Tanqueray and Guinness.

This group, referred to as the global giants by Diageo, posted growth of 4% for the period.

This uptick was led by Guinness which was up 9% globally in value, and Tanqueray, which was up 8%.

Baileys rose 6% worldwide, thanks in part to substantial 14% growth in the UK market.

Captain Morgan rose 3%, Smirnoff 2% and Johnnie Walker 1%.

The company had already cautioned that it would contract in North America, and today reported a 2% fall in sales there.

Around 34% of Diageo’s business is in North America and turning around sales in the region, which have been flat for some time, is a priority for the group.

Finance director Deirdre Mahlan took the reins in the US last year to drive the revitalisation of the region.

The group’s portfolio of reserve brands, highlighted as a key strategic focus at its investor conference late last year, were down 2% for the period.

However, this was largely attributed to issues around the distribution model for Ciroc in the US, where the company is transitioning to a more responsive system.

Ciroc fell back 37% in sales in the six months.

Ivan Menezes, Diageo chief executive, said: “Diageo has become a stronger, more competitive business. We have delivered volume growth, a stronger top line, improved the performance of our key brands, driven cost productivity and continued to generate strong cash flow.

“While trading conditions remain challenging in some markets, Diageo’s brands, capabilities in marketing and innovation and our route to consumer have proved resilient.

“I am confident that Diageo can deliver improved, sustained performance.”

Menezes predicted that the group would see further volume and value growth over the full-year, with momentum carrying forward into 2017.

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