Diageo still delivering

A 20 per cent marketing spend increase in developing economies paid off, lifting sales and operating profits there by 18 per cent and 23 per cent, respectively, and offsetting a more sluggish performance in developed western European and North American markets. Latin America was the star performer, with net sales climbing 23 per cent on a strong Brazilian performance and investment in brand building around Smirnoff, which saw net sales grow nearly a third in the region. Once again, whisky led the way in Asia Pacific, where Diageo capitalised on strong demand for premium spirits through investment in distribution. It was a similar story in Africa, where investment in Johnnie Walker lifted net sales there by 32 per cent.

Although performance in developed markets was less impressive, there were encouraging signs of recovery. North America, which remains Diageo's largest market, saw net sales climb 5 per cent, although that did reflect price increases rather than volume growth as strong sales of premium and super-premium brands, such as Ketel One and Ciroc vodka, compensated for more muted demand of more value-oriented lines. Once again, economic troubles in Spain, Greece and Ireland put the brake on growth in Europe. In fact, it was only thanks to strong growth in eastern Europe and Turkey – boosted by last year's acquisition of the country's leading raki producer Mey Icki, and an ability to sell other Diageo brands through its distribution network – that sales in the continent didn't go backwards.

However, as in North America, operational improvement meant operating profits climbed ahead of the negligible rate of sales growth. Overall operating margins expanded by 60 basis points, in line with the 200 basis point improvement management has earmarked over the next three years.

Broker Shore Capital expects underlying full-year pre-tax profit of £3bn, giving EPS of 90.9p (from £2.7bn and 83.6p in 2011).