Diageo (DGE) outperformed market expectations across a swathe of metrics during the first half, pushing the beverage specialist's shares to a 12-month high. A stronger-than-expected performance across all five of the group's geographic trading divisions sent organic sales up 7.5 per cent, ahead of a consensus growth forecast of 5.55 per cent. Meanwhile, £1.3bn of free cash flow spurred the alcoholic drinks maker to increase its share buyback programme by £660m, bringing the total amount to be repurchased for the 2019 financial year to £3bn.
Diageo continued its move towards higher-end brands, tapping into demand for craft beers and premium spirits. That shift in product mix, together with favourable currency movements and efficiencies from its productivity initiatives, helped improve operating margins by 152 basis points to 35.2 per cent. In December, the group sold a portfolio of 19 of its basic brands to Sazerac, which contributed a 78-basis point improvement in North American sales. Net sales in that region improved by 6 per cent, helped by flavoured options, tequila, and ready-to-drink products. European revenue was up 5 per cent, driven by higher sales of UK favourites, including Guinness and Hop House.
Analysts at Liberum expect EPS of 123p for the year to June 2019, compared with 119p in FY2018.
| DIAGEO (DGE) | ||||
| ORD PRICE: | 2,889p | MARKET VALUE: | £69.8bn | |
| TOUCH: | 2,888-2,889p | 12-MONTH HIGH: | 2,903p | LOW: 2,346p |
| DIVIDEND YIELD: | 2.3% | PE RATIO: | 24 | |
| NET ASSET VALUE: | 388p* | NET DEBT: | 94% | |
| Half-year to 31 Dec | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
| 2017 | 9.9 | 2.20 | 82.2 | 24.9 |
| 2018 | 10.4 | 2.63 | 80.9 | 26.1 |
| % change | +4 | +19 | -2 | +5 |
| Ex-div: | 28 Feb | |||
| Payment: | 1 Mar | |||
| *Includes intangible assets of £12.6m, or 519p a share | ||||
