Diageo (DGE) has withdrawn its guidance for 2020 and will not begin the second phase of its share buy-back programme. Lockdown measures implemented across the globe are taking a significant toll on the drinks giant, with restaurants and bars temporarily closed in several countries.
Such an update was not unexpected. Prior to this news, Diageo had last issued a trading statement on 26 February – and at the time, it focused largely on China and the Asia-Pacific region. Since then, the coronavirus has rapidly accelerated across Europe and the US – mandating further governmental interventions.
The group is cutting down its discretionary spending and deferring non-essential capital expenditure projects. It pointed to a strong balance sheet – with a year-end net-debt-to-cash-profits multiple of 2.8 times, and no financial covenants attached to its outstanding short or long-term borrowings. It has taken steps to improve liquidity, including the issuance of new bonds totalling £1.9bn in late March.
The group also has committed bank facilities of £2.8bn available, which are subject to a single financial covenant of at least two times interest cover.