Diageo boosted by 5% jump in Irish sales
A 5% jump in Irish sales helped drinks giant Diageo beat half-year earnings and sales forecasts, which in turn drove its shares to a record high.
The world's largest drinks group - which owns the likes of Guinness, Baileys, Smirnoff and Johnnie Walker - said net sales rose nearly 6%, year-on-year, to £6.9bn (€7.9bn) in the six months to the end of December. Operating profits jumped 11% to £2.4bn.
Growth was driven by India and China; strong demand for Scotch and Chinese spirits boosting sales by 20% in the latter. However, Diageo said its European sales were boosted by its performance in the UK and in Ireland.
Diageo Ireland saw net sales grow by 5%, year-on-year. Despite a 3% drop in sales of Guinness on draught, the Rockshore and Hop House 13 brands boosted net beer sales by 3%.
Diageo's spirits business in Ireland saw double-digit percentage net sales growth in the period, largely driven by Gordon's gin and Baileys.
Speaking about the overall first half performance Diageo chief executive Ivan Menezes said: "This half has benefited from some one-time and phasing gains in both organic net sales and operating profit, and, therefore, we continue to expect to deliver mid-single digit net sales growth for the year and to expand operating margins in line with our previous guidance of 175 basis points for the three years ending June 30 2019."
The group's shares rose by over 4% after it also announced its intention to boost its previously-announced share buyback programme to £2.34bn.
Diageo has been restructuring in recent years to improve performance and streamline its portfolio by selling non-core businesses and underperforming labels, while trying to bulk up on newer, hipper brands. It has looked to focus on its Scotch business and grow its operations in India and the US.
“Diageo has the strength of brands and global reach to be able to prosper in almost any environment. Diageo generates a lot of cash and the company threw off another £1.3bn in these last six months alone,” said Steve Clayton, manager of Hargreaves Lansdown Select funds.
