Diageo plc (LON:DGE) continued to benefit from growth in gin and tequila sales as well as the ‘premiumisation’ consumer trend, but shares in the drinks giant wobbled as sales growth slowed slightly in the second half of its financial year.
This was despite the FTSE 100 maker of Johnnie Walker whiskey, Cîroc vodka and Guinness stout also approving plans for a new £4.5bn cash return for the coming three years.
READ: Diageo raises share buybacks and dividend as operating profit and sales beat forecasts
For the 12 months to 30 June of £12.9bn were up 5.8% on the previous year and a wee dram ahead of average City forecasts.
But organic net sales growth of 6.1% was a short measure compared to the 6.2% expected as growth was watered down in the second half from the 7.5% in the first.
By type of drink, organic net sales of scotch were up 6%, vodka up 2%, gin sloshed up 22%, tequila surged 29%, beer was up 3%, ready-to-drink products such as pre-mixed Gordon's gin and Smirnoff vodkas leapt 12% and rum was the only loser, with sales shrinking 2%.
Organic sales volumes were up 2.3% but improved price/mix from ‘premiumisation’ plus cost efficiencies led to organic operating profit growing 9% to £4.04bn.
Basic earnings per share of 130.7p increased by 7.4%, or 10.3% to 130.8p if excluding exceptional items, with the final dividend increased 5% to top up the full year payout to 68.57p per share.
Cash flowing like gin
Chief executive Ivan Menezes said the return of capital was due to strong free cash flow of £2.6bn and the that the results “reflect the steady progress we are making and as we look ahead we see attractive opportunities to deliver consistent growth and create shareholder value”.
In the medium term he guided to organic net sales growth being maintained in the mid-single-digit range, with organic operating profit growth ahead of net sales in the range of 5%-7%.
Broker Liberum said the shareholder return, which compared to the £4.4bn delivered this year, and provides the group with "the flexibility pursue a buy-back and/or a special dividend, which makes sense in light of the valuation".
Diageo shares, which topped 3,500p for the first ever time earlier this month, were down 2% to 3,291p on Thursday morning.