Global gin fever helps boost Diageo’s (DGE) profits

Plans for a return of billions to shareholders was announced following the jump in profit.

Article updated: 25 July 2019 12:00pm Author: Ian Forrest

  • Overall sales increased by 6%, helped by strong gin sales.
  • The fall in share price in early trading is most likely due to profit-taking on the back of strong recent performance.
  • The strength and variety of its brands, opportunities in emerging markets and good financial position mean we maintain our ‘Buy’ recommendation.

Global spirits group Diageo reported a good set of full-year results today along with plans for a further return of £4.5bn to shareholders. Overall sales rose 6% to £12.9bn helped by a 22% increase in gin sales. The company said all of its regions had contributed to the growth and operating profit margin had increased by more than expected. Operating profit was up 10% to £4bn and further growth in net sales and profit margins was forecast to be in the mid-single digits range for the new financial year.

These figures from Diageo again demonstrated the strength of its global business and its ability to generate cash, which can be invested or returned to shareholders. The shares dropped back slightly in early trading, but that is probably just some profit-taking given that they’ve outperformed the market over the past year.

Our View on Diageo - Buy

We continue to recommend Diageo as a Buy because of the strength and variety of its brands, excellent long-term prospects in emerging markets and the support provided by good cash flow and the large capital return programme.

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Ian Forrest

Investment Research Analyst

Ian’s background in investments, financial journalism and research has seen him advising private investors on equities and helping to manage portfolios. His qualifications include the Certificate in Financial Planning and the Chartered Institute for Securities & Investment’s Investment Advice Diploma.