Source: Diageo chief insists drinks giant is on track for return to growth | The Times
Diageo chief insists drinks giant is on track for return to growth
The chief executive of Diageo attempted to shrug off concerns over his tenure today as he insisted that his strategy “can deliver strong and sustained performance”.
Ivan Menezes, who took over from Paul Walsh two years ago, admitted that the Johnnie Walker and Guinness owner faced “short-term challenges … from an external environment where currency volatility continues to impact the emerging market consumer”.
However, he insisted the changes he was making were the right ones from a “long-term perspective” and assured investors that they would start to deliver stronger volume growth and improved topline sales over the coming year.
Diageo this morning reported a 2 per cent fall in operating profits before exceptionals to £3.07 billion in the year to the end of June, a rise of 1 per cent on an organic basis, from net sales up 5 per cent to £10.8 billion – flat on an organic basis.
Volumes fell by 1 per cent on an organic basis, with its key North American market down 3 per cent amid strong price competition suffered by brands including Smirnoff vodka and Captain Moragn rum.
Pre-tax profits rose from £2.7 billion to £2.9 billion and the company is upping the final dividend by 9 per cent to 34.9p, making a total of 56.4p, also up 9 per cent.
The results made no mention of the inquiry by the US Securities and Exchange Commission into its distribution practices in America, although it confirmed that shipments to distributors were “broadly in line” with depletions (sales to retailers) as it sought to address the issue of overstocking.
The Diageo chief executive said that productivity gains would save a further £500 million of costs to invest in growth and improve margins by 100 basis points over a three year period from 2017. He said it would deliver “mid single digit organic topline growth on a sustained basis”.