Diageo reveals double-digit profit growth

Scotland's biggest distiller revealed sales of Johnnie Walker helped to drive global growth. Picture: Diageo

Johnnie Walker maker Diageo has revealed double-digit growth in its global operating profit as a marketing tie-up with Game of Thrones helped drive US sales.

The international drinks giant, which is Scotland’s largest whisky producer, reported earnings of £2.4 billion for the half-year to 31 December, an 11 per cent rise year-on-year.

Overall net sales rose by 5.8 per cent to £6.9bn despite the impact of “unfavourable” exchange rates.

Shares in the company climbed as much as 4.7 per cent in early trading to hit a new all-time high in the wake of the results.

In the UK, sales of Johnnie Walker and Bell’s both grew although overall Scotch sales were flat, with gins Gordon’s and Tanqueray leading the charge by delivering double-digit growth.

Global Johnnie Walker revenues rose by 9 per cent, largely driven by US sales following the launch of White Walker, a drink inspired by blockbuster TV series Game of Thrones.

Asia Pacific was the fastest-growing region with 13 per cent organic net sales growth, as the taste for Scotch in Greater China helped to drive sales up by 20 per cent.

The company downplayed the impact of Brexit, saying that a no-deal scenario would have a “limited” effect on its supply chain, and it has “appropriate stock levels” to mitigate any risk.

It cautioned that predicted exchange rates for the year ending 30 June are expected to adversely impact net sales by approximately £80m and operating profit by around £10m.

An interim dividend was announced of 26.1p per share, an increase of 5 per cent. The firm also announced extension of its incremental share buyback scheme of £660m, bringing the total to £3bn for the year ending 30 June.

Arlene Ewing, investment manager at Brewin Dolphin Scotland, said: “This is a strong set of results from Diageo, despite currency exchange issues. Organic sales growth came in ahead of expectations at an overall 7.5 per cent, driving an 11 per cent rise in operating profits.

“Diageo’s shares, which are seen as a relative safe haven in difficult times, held up in the last quarter of 2018, despite volatile markets and currently yield 2.4 per cent. They will likely be helped by the £660m share buy-back programme and an increasing dividend in the months ahead.”

Graham Spooner, investment research analyst at The Share Centre, said: “Shares in the company fizzed to an all-time high this morning as the markets reacted to the group’s latest interim results, which came in towards the top end of analyst forecasts, and were impressed with a further £660 million of share buybacks.

“The group have been increasing focus on its faster growing brands, which has led to the sale of some of its smaller brands. The CEO highlighted growth was broad-based and they expect to deliver mid-single digit organic sales growth for the financial year.”