Diageo has 4.4% sales rise in six months to end December

Diageo, the world's largest distilled drinks company, reported a 4.4 per cent rise in sales for the half-year to December 31st.

The maker of Guinness, Baileys, Johnnie Walker Scotch and Smirnoff vodka reported net sales of £6.4 billion (€7.52bn) and operating profit of £2 billion, up 14.5 per cent and 28 per cent respectively.

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

There was organic growth across all regions, with 1.8 per cent volume growth and 4.4 per cent net sales growth.

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Organic operating profit grew 4.4 per cent, in line with top line growth, driven by gross margin improvement, good progress on productivity offset by implementation costs, as well as the profit on the sale of the United Breweries shares in the previous period.

Free cash flow continued to be strong at £1 billion, increasing by £245 million compared to the previous period with net cash from operating activities up £230 million to £1.3 billion.

Russia and Turkey

The company enjoyed a stronger performance in Europe, and good net sales growth in Russia and Turkey. In Europe, net sales were up 5 per cent with Continental Europe the main contributor.

Johnnie Walker and Baileys performed strongly driven by execution against core growth drivers, communication of brand purpose, in-store activation and sampling.

Guinness net sales were up 2 per cent supported by a solid performance of Hop House 13 Lager and Tanqueray which grew net sales by double digits in most countries across Europe. Reserve brands continued to perform well.

Diageo chief executive Ivan Menezes said the company had delivered "a strong set of results" with broad based improvement in both organic volume and top line growth.

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

“Highlights this half include improved performance in our US Spirits business and across our scotch portfolio, driven by our focus on marketing with impact, innovating at scale, expanding our route to consumer, and winning in reserve.

“Progress on productivity supports growth, margin improvement and consistent strong cash flow generation as well as improving our agility.

Consumer trends

“Diageo is building a stronger, more consistent, better performing company. We are identifying consumer trends faster, expanding the reach of our products across markets and developing trade channels to capture these growth opportunities.

“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 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.”