Diageo PLC (LSE:DGE) shares jumped 7% after the drinks maker reported a 28% drop in full-year profit but kept its dividend flat and served up a stronger profit outlook, helped by increased savings, product innovation and a strong presence in non-alcoholic drinks.
The Guinness, Baileys and Pimms maker reported a 0.1% decline in net sales to $20.2 billion for the year to 30 June 2025, bang in line with the average analyst forecast.
Organic net sales grew by 1.7%, up from 1% in the first half of the year, driven by 0.9% volume growth and 0.8% from price/mix.
Within the portfolio of global brands, Don Julio tequila, Guinness stout and Crown Royal Blackberry whisky were hailed as standout performances.
Reported operating profit dropped to $4.34 billion from $6.0 billion the year before, as the profit margin declined 819 basis points due to exceptional costs from impairments and restructuring, and foreign exchange movements.
On an underlying basis, organic operating profit fell by 0.7% to $5.7 billion, with a margin decline of 68 basis points.
Net cash from operating activities was very modestly positive at $4.3 billion, with net debt ending at $21.9 billion.
A final dividend of 62.98 cents was recommended, keeping the full-year dividend flat at 103.48 cents.
Interim chief executive Nik Jhangiani, in charge after Debra Crew stepped down last month, increased the company's cost savings target by $125 million under its 'Accelerate' programme to around $625 million over three years.
Diageo now expects to generate approximately $3 billion in free cash flow in fiscal 2026 as the programme continues.
Jhangiani guided to similar organic net sales growth to the past year, with performance weighted to the second half, while organic operating profit is forecast to grow at a mid-single-digit rate.
"While macroeconomic uncertainty and the resulting pressure on consumers continues to weigh on the spirits sector, we believe in the attractive long-term fundamentals of our industry and in our ability to continue to outperform as the [total beverage alcohol] landscape evolves," he said.
The shares rose 7.5% to 135.5p by mid-morning.
** Update: Adds share price **