Diageo has reported net sales (£7.2 billion) increased 4.2% driven by organic growth and operating profit (£2.4 billion) increased 0.5%, driven by organic growth offset by unfavourable exchange, exceptional operating items and acquisitions and disposals.
All regions contributed to broad-based organic net sales growth, up 4.2%, with organic volume up 0.2%. The beverage company saw its organic operating profit grew 4.6%, ahead of organic net sales, driven by productivity benefits from everyday cost efficiencies and strong price/mix, partially offset by cost inflation and unweighted marketing investment.
Diageo’s net sales of tequila grew 31% driven by strong double-digit growth of Don Julio and Casamigos in US Spirits and Don Julio in Latin America and Caribbean.
Vodka, which represents 11% of Diageo’s net sales, declined by 1% driven by a 5% drop in North America. Vodka performance was driven by Smirnoff but offset by a softening of 19 Ketel One and continued declines in Cîroc vodka.
Baileys grew 8% with performance supported by Baileys Red Velvet innovation and a continued focus on reminding consumers that Baileys is an indulgent treat year-round.
Diageo continued to witness growth in its gin brands at 7%. Both Tanqueray and Gordon’s grew across their core brand and innovation variants, despite lapping a strong prior year.
Diageo continues to deliver consistently solid cash flow with net cash from operating activities at £1.3 billion, £0.3 billion lower than a prior period and free cash flow at £1.0 billion, £0.4 billion lower than prior period largely due to one-off tax impacts and timing of tax payments.
Basic eps of 79.2 pence decreased by 2.1% due to prior year exceptional gains. Pre-exceptional eps grew 4.2% to 80.2 pence, driven by higher operating profit and the capital return programme. Interim dividend increased 5% to 27.41 pence per share
Ivan Menezes, Chief Executive, commenting on the results said:
“Diageo has delivered another good, consistent set of results in the first half, with broad-based organic net sales growth across regions and categories. We have continued to increase investment behind marketing and growth initiatives while expanding organic operating margins.
During the half, we returned £1.1bn to shareholders via share buybacks, as part of our plan to return up to £4.5 billion of capital to shareholders for the period Fiscal 20 to Fiscal 22. We have also delivered another half of solid free cash flow at almost £1 billion.
These results reflect the changes we are making in the business to drive shifts in our culture. They are in line with our current mid-term guidance and have been delivered in the face of increased levels of volatility in India, Latin America and the Caribbean and Travel Retail.
For the full year, we, therefore, expect organic net sales growth to be towards the lower end of our 4 to 6% mid-term guidance range. We continue to expect organic operating profit to grow roughly one percentage point ahead of organic net sales.
There is ongoing uncertainty in the global trade environment and we would not be immune from further policy changes. We remain focused on building the long-term health of our brands, supported by data-led insights and culture of everyday efficiency. With the consumer at the heart of the business and with greater agility and discipline in the execution of our strategy, we are growing Diageo in a consistent, sustainable way.”
