Diageo reports 24% rise in second-half earnings
Diageo reiterated its forecast that annual underlying operating profits should rise 7 percent.
16/02/06 The world's largest alcoholic drinks group, Diageo, reported a 24 percent rise in in half-year earnings and reiterated its forecast that annual underlying operating profits should rise 7 percent. Diageo said it had continued strong gains in North America, especially in spirits where value share in the US is now 28%. In Europe, organic operating profit up driven by growth in spirits brands and cost efficiencies. Meanwhile the company’s international division reported strong top and bottom line growth, particularly in Latin America, driven by growth of priority brands and successful innovation. Performance improvements delivered in Korea, Taiwan and Nigeria.
"This is a strong first half performance. We have invested in our brands and built our market positions. We have again achieved our financial objectives delivering top and bottom line organic growth, organic operating margin improvement and an increase in return on invested capital”, Paul Walsh, Chief Executive of Diageo, commenting on the interim results said.
"We continue to capitalise on our opportunities in the US where our market leadership and superior route to market have led to further volume share gains of 0.4 percentage points in spirits. In Europe, where we face a more challenging trading environment, we have created a more efficient organisation and this has enabled us to deliver 7% organic operating profit growth in the period. Sustained investment behind our brands in International markets has led to strong top line growth, up 12%. Throughout the business, mix improvement through stronger growth of brands such as Johnnie Walker together with the creation of a lower cost base have led to overall organic margin expansion of 0.2 percentage points”, he noted.
“Strong cash flow and the liquidation of our remaining interest in General Mills and Burger King have enabled us to double our share buy back programme, returning a further £700 million to shareholders in the period”, Walsh added.
Diageo said that the acquisition of Bushmills Irish Whiskey brand is now fully integrated into the Diageo business, following its £200 million acquisition last August 2005.
