Diageo’s sales rise with Guinness, gin driving European growth

Organic growth overcomes currency headwinds

In Europe, Guinness sales rose 6 per cent for the year ended June 30th. Photograph: iStock

In Europe, Guinness sales rose 6 per cent for the year ended June 30th. Photograph: iStock

 

Drinks firm Diageo reported higher sales and profits on Thursday as organic growth overcame the negative impacts of foreign exchange.

The Guinness maker said net sales for the year ended June 30th rose 0.9 per cent to £12.2 billion (€13.7 billion) and operating profit rose 3.7 per cent to £3.7 billion.

The company said all regions contributed to broad based organic growth, with net sales rising 5 per cent and organic volume up 2.5 per cent.

Operating profit was up 7.6 per cent, with a higher marketing investment offset by efficiencies realised through its productivity programme.

Diageo said cashflow was broadly in line with the previous year, with £3.1 billion net cash from operating activities and £2.5 billion free cash flow.

Basic earnings per share (eps) rose 14.8 per cent to 121.7 pence, with pre-exceptional eps of 118.6 pence, rising 9.3 per cent on higher operating profit.

In Europe, sales grew 4 per cent, largely driven by strong growth in gin. Guinness sales rose 6 per cent, with good performance in Guinness Draught and double-digit growth in Hop House 13 lager. Vodka sales fell, with Smirnoff down 4 per cent.

“Diageo has delivered another year of strong, consistent performance. Organic volume and net sales growth is broad based across regions and categories. We have expanded organic operating margin while increasing investment behind our brands ahead of organic net sales growth,” said chief executive Ivan Menezes.

“The changes we have made in the business, and the shifts in culture we continue to drive, ensure we are well placed to capture opportunities and deliver sustained growth. Our financial performance expectations are unchanged and we expect to continue to invest in the business to deliver our midterm guidance of consistent mid-single digit organic net sales growth and 175bps of organic operating margin expansion for the three years ending 30 June 2019.” – Additional reporting: Bloomberg