Drinks giant Diageo said today that it is now expecting organic operating profit growth of at least 14% in its current fiscal year after seeing sales return to growth over the last six months.
The trading update did not provide any figures, but the British firm stated that it had continued to deliver a “good recovery” across all regions. Performance in North America, its largest market, was said to have been particularly strong thanks to “resilient consumer demand” and marketing activity.
In Europe, Diageo said it was benefitting from strong demand in the off-trade channel and the partial re-opening of the on-trade channel in certain markets. There was also further recovery in Africa, Asia Pacific, Latin America and the Caribbean. However, the group highlighted that travel retail remained “severely impacted”.
Diageo also announced today that it was restarting its return of capital programme of up to £4.5bn to shareholders after pausing it last year because of the pandemic.
Ivan Menezes, Chief Executive, said: “I am very pleased with how our business is recovering in fiscal 21, our strong competitive performance across key markets and our robust cash generation. Our disciplined approach to capital allocation is unchanged. Our priority remains to invest in the business to deliver sustainable and efficient organic growth and to pursue acquisitions that further strengthen our exposure to attractive categories.
“When we have excess cash, we have been clear that we will seek to return it to shareholders. The Board’s decision to resume our return of capital programme at this time reflects Diageo’s improved performance in the first half of fiscal 21, the continued strong recovery of our business, and our expectation that we will be back within the top end of our target leverage ratio1 of 2.5-3.0x at 30 June 2022, post completion of the second phase of the return of capital programme. We are confident that Diageo will continue to execute effectively in this challenging environment and will emerge stronger.”
NAM Implications:
- Great to be able to announce improvements in the business…
- …but without actual figures, the stock market tends to discount the share value.
- But major customers may form the opinion there is cash to spare…
- Diageo’s call…
