Published: Sat, January 28, 2017
Finance | By Laverne Griffith

Diageo's Stock Gains on Strong Half-Year Sales Boosted by Weak Pound

Diageo's Stock Gains on Strong Half-Year Sales Boosted by Weak Pound

The company reported a 28 percent rise in operating profit for the first half of its fiscal year on Thursday morning and a hike in its dividend.

The company said the figures reflected accelerated organic growth and favourable exchange rates.

Operating profit, which excludes exceptional items, in the half year increased to GBP2.07 billion from GBP1.72 billion, boosted by a 339 basis points improvement in operating margin.

The company reported sales growth of 4.4% in its latest earning's report, a better-than-expected result. At the time of its full-year results last July, Diageo said currency movements hit net sales by 5.3% year-on-year, pushing revenue down to GBP15.64 billion from GBP15.97 billion and pretax profit down to GBP2.86 billion from GBP2.93 billion.

The owner of Johnnie Walker and Bell's whiskies' stronger performance was partly driven by growth in Spanish bars and clubs.

"Captain Morgan performed well, with solid volume growth and it is now the biggest brand in the rum category in Great Britain, overtaking Bacardi in value share".

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"This positive momentum demonstrates continued effective execution of our strategy", he said.

The priority for the company in this region is to focus on and strengthen these prestige and above brands, improve the route-to-consumer to ensure that its brands have great visibility, and drive out costs to invest in growth and expand margin.

Diageo GB's results were buoyed by sales of Guinness brand, a healthy premium core portfolio performance, continued growth of the luxury reserve business and several successful Innovation initiatives.

Menezes said: "We are identifying consumer trends faster, expanding the reach of our products across markets and developing trade channels to capture these growth opportunities".

Menezes added: "Our productivity work is on track, driving efficiency and effectiveness across the business". Our work on trade and marketing spend gives us better data enabling smarter, quicker decisions that generate higher returns.

"Our expectations of delivering a stronger financial performance this year are unchanged. We are confident of achieving our medium term objective of consistent mid-single digit top line growth and 100bps of organic operating margin improvement in the three years ending June 30th, 2019".

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