Sales Show Signs Of Recovery At Diageo

After two flat years impacted by a slowdown in emerging market, Diageo has posted improved year end results.

In the 12 months to 30 June 2016, the drinks giant’s organic results improved with volumes up 1.3% and net sales growth of 2.8%. However, reported net sales still declined 3% to £10.5bn as organic growth in each of the regions its operates and acquisitions were offset by adverse exchange rates and disposals.

Operating profit before exceptional items rose 3% to £3bn on an organic basis but fell 2% on a reported basis.

In the UK, net sales rose 4%, boosted by an 11% increase in sales of Baileys. The company put the improved performance down to “increased off-trade visibility and on-trade activation”.

Looking ahead, Diageo is forecasting that its sales will grow at a mid-single-digit rate over the next three years with 100bps of organic operating margin improvement.

Ivan Menezes, Chief Executive, commented: “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.”

He added: “The delivery of volume growth; organic margin expansion; increased free cash flow; and the disposal of £1bn in non-core assets, comes from an everyday focus on efficiency in each aspect of our business. These results position us well to deliver a stronger performance in F17.”

Meanwhile, commenting on the Brexit vote, the group said: “Diageo is working closely with government and industry bodies to ensure its views are reflected in the transition process. Diageo 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.”