Diageo has beaten expectations, with surging sales and boosted profits, as consumers splashed out on premium tipples.
The group - which owns brands like Johnnie Walker, Smirnoff and Guinness - stated that its sales grew 9.4% organically to £9.4bn over the second half of 2022, from £8 billion during the same period in 2021.
Its organic operating profit also grew nearly a 10th to £3.2bn over the period, surpassing analysts’ expectations.
Reported operating profit grew 15.2% to £3.2bn, although reported operating margin declined by 92 basis points, with margin expansion more than offset by exceptional operating items and foreign exchange.
Sales growth in Europe was driven by increased prices of its spirits and rolling out more premium brands over the year. Sales of Guinness across the region jumped by a fifth, while sales of Scotch whisky brand Johnnie Walker surged by nearly a quarter.
However, Diageo shares were down more than 6% this morning as sales growth slowed in North America - its biggest market - with Scotch whisky in decline during the half-year.
During the half-year, Diageo acquired Mr Black, an Australian coffee liqueur, and Balcones Distilling, a producer of American single malt whisky.
It also announced an agreement to acquire Don Papa rum, a dark rum from the Philippines, while disposing of Guinness Cameroon, along with Archers and a portfolio of brands in India.
The group invested £400m in supply capacity, sustainability, digital capabilities and consumer experiences. Net cash flow from operating activities declined by £700,000 to £1.2bn.
Chief executive Ivan Menezes said: "Today, Diageo is 36% larger than it was prior to Covid-19, reflecting the strength of our diversified footprint and advantaged portfolio.
"Sales growth was supported by our continued focus on premiumising our portfolio, with our super-premium-plus brands growing organic net sales 12%.
"As category growth trends continue to normalise following Covid-19, winning quality market share remains a key focus, so I am pleased to say that we gained or held share in 75% of total net sales value in our measured markets, demonstrating our strong commercial execution."
He added: "As we look to the second half, whilst the operating environment remains challenging, I remain confident in the resilience of our business and our ability to navigate volatility."
Menezes confirmed that Diageo is "well-positioned" to deliver medium-term guidance of consistent organic net sales growth in the range of 5% to 7% and sustainable organic operating profit growth in the range of 6% to 9% for the fiscal years from 2023 to 2025.
Last week, Diageo was rumoured to be reporting a slowdown in sales and profits, as consumer spending steadied, with a consensus of analysts predicting net sales growth of 7.9% for the past six months - and an operating profit increase of around 7.6%.
This would have represented a slowdown from 18.2% growth in the previous financial year, after a strong showing in 2021.
Today, RBC Brewin Dolphin senior investment manager John Moore commented: “Diageo has delivered good sales and profit growth, despite inflation taking its toll on margins.
“The company is a big overseas earner, with the strength of the US dollar a particular tailwind, and many of its markets are rebounding as they normalise following Covid-related disruption.
“Diageo has been smart about managing, developing and evolving its brands, with their ‘premiumisation’ a major selling point and a way of insulating them from massively competitive markets, such as gin.“
He added: “The drinks group is a strong and steady business, and whilst these results highlight brand portfolio management it seems reasonable to expect to a more meaningful investment and addition to its current stable in the short to medium term.”
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