Gin-loving Britons have helped drinks giant Diageo boost its sales and profits, new figures released by the company show.
The British drinks giant, whose brands include Guinness and Smirnoff, saw UK sales of its drinks rise 8 per cent in the year to June, with its Tanqueray gin brand drawing in ‘double-digit’ growth.
Toasting its strong results, Diageo is set to reward its investors with £2billion worth of share buybacks.
Trendy: Gin-loving Britons have helped drinks giant Diageo boost its sales and profits
Across Britain, Diageo saw sales of Guinness rise by 8 per cent in the last year, while sales of Smirnoff vodka dipped by 2 per cent. The group said vodka sales were falling across all its global operations, dipping 1 per cent in total.
Globally, the group saw revenues rise 1.7 per cent to £18.4billion in the year to June, slightly ahead of analysts’ expectations and despite the knock-on effect of currency fluctuations. Pre-tax profits increased by 5 per cent to £3.7billion. Earnings per share rose 9.3 per cent to 118.6p a share.
Diageo’s share price is down 1.26 per cent or 35.75p to 2,811.75p.
Neil Wilson, chief analyst for Markets.com, said: ‘Diageo results were very positive but despite very strong free cash generation and a fresh £2bn buyback shares have fallen as investors decided to take profits.
‘Whilst it’s easy to criticise firms for buybacks, what else is Diageo supposed to do with all this cash? It reported £3.1 billion net cash from operating activities and £2.5 billion free cash flow.’
He added: ‘Explaining today’s share moves, perhaps we can put it down to profit-taking, and investors may wish to see more imagination than yet another buyback.
‘The stock has rallied 20 per cent since the end of March so now’s maybe the time for investors to take a few chips off the table and look elsewhere.
‘Still with stable returns and very strong free cash there is plenty of reason to be bullish.’
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The group saw sales of Scotch, which make up a 25 per cent of its market, rise 2 per cent in the last year, with growth in North America, Asia Pacific and Latin America and Caribbean partially offset by falling sales in in Africa and Europe.
Ivan Menezes, Diageo’s chief executive, hailed ‘another year of strong cash flow generation’ that has allowed the group to boost its share buyback scheme.
He said: ‘The changes we have made in the business and the shifts in culture we continue to drive, ensure we are well placed to capture opportunities and deliver sustained growth.’
Falling sales: Sales of Smirmoff vodka in Britain fell by 2 per cent in the last year
Hotting up: Ivan Menezes, Diageo’s chief executive, hailed ‘another year of strong cash flow generation’
Earlier this month, Diageo outlined plans to tighten its grip on a Chinese drinks maker whose distillery dates back more than 600 years.
Diageo said it wants to raise its stake in Sichuan Shui Jing Fang from 39.7 per cent to 60 per cent. The move looks set to cost Diageo around £700million.