"Diageo is a strong business, getting stronger," said chief executive Paul Walsh and, looking at these results, it's not a claim that can be dismissed as management spin.
While a 6 per cent organic increase in net sales was driven by an 8 per cent increase in marketing expenditure to £1.7bn - equivalent to a chunky 15.8 per cent of net sales - the ability to get behind its brands without impacting profit growth is a clear signal of Diageo's improving financial might. Indeed, underlying operating profit climbed 9 per cent and, although the group also invested heavily in acquisitions, it pushed through a higher-than-expected dividend increase, too.
Those acquisitions have been focused on faster-growing emerging markets, which saw net sales growth of 15 per cent last year and now account for 40 per cent of the group total. Ongoing investment plans should see this proportion continue to increase - on top of last year's acquisitions in Turkey and China, it has since announced the acquisition of Brazil's leading Cachaca maker, Ypióca, and a £1bn investment in emerging market scotch capacity. That should offset softness in developed economies, although a 6 per cent increase in North American net sales was slightly better than expected.
Broker Investec expects underlying pre-tax profits of £3.3bn for 2013 and EPS of 103.5p.
DIAGEO (DGE) | ||||
|---|---|---|---|---|
| ORD PRICE: | 1,692p | MARKET VALUE: | £42.4bn | |
| TOUCH: | 1,692-1,693p | 12-MONTH HIGH: | 1,760p | LOW: 1,082p |
| DIVIDEND YIELD: | 2.6% | PE RATIO: | 22 | |
| NET ASSET VALUE: | 223p* | NET DEBT: | 111% | |
| Year to 30 Jun | Turnover (£bn) | Pre-tax profit (£bn) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2008 | 8.09 | 2.09 | 59.3 | 34.4 |
| 2009 | 9.31 | 1.99 | 64.5 | 36.1 |
| 2010 | 9.78 | 2.24 | 66.3 | 38.1 |
| 2011 | 9.94 | 2.36 | 76.2 | 40.4 |
| 2012 | 10.8 | 3.12 | 78.2 | 43.5 |
| % change | +9 | +32 | +3 | +8 |
Ex-div: 5 Sep Payment: 22 Oct *Includes intangible assets of £8.82bn, or 352p a share | ||||
