Diageo reports good start to financial year

(Sharecast News) - Diageo said it made a good start to the current financial year as the drinks company's US business beat expectations.
The maker of Johnny Walker whisky and Guinness beer said its first-half outlook had improved since the end of June. Sales improved compared to the second half of last year but sales and margins in the six months to the end of December will be lower than first half of last year.

The FTSE 100 company, whose other brands include Gordon's gin and Smirnoff vodka, said consumer demand was resilient in the US and its spirits gained market share. Some US retailers are restocking and bars and restaurants are open in all states with some restrictions.

In Europe off-trade demand is holding up and the on-trade has largely reopened though there are risks of new restrictions as Covid-19 infection rates increase. The Chinese on-trade market is recovering but big banquets are slow in returning. Other markets will recover more slowly and travel retail is still seriously affected by the crisis.

Diageo reported a near-halving of annual profit in August as net sales fell 9% because of Covid-19 and the company took a £1.3bn impairment charge on the value of some operations. The company disappointed investors at the time by giving little indication about current performance.

In a statement before Diageo's annual general meeting Ivan Menezes, chief executive, said: "Our outlook for the first half of fiscal 21 has improved since the year-end, reflecting the good start to the year, particularly for our US business.

"We continue to expect sequential improvement in organic net sales and operating profit compared to the second half of fiscal 20. Compared to the first half of fiscal 20, we still expect lower organic net sales and margin dilution."

Menezes said the operating environment was challenging. He said the pace of recovery from the Covid-19 crisis was uncertain but he was confident about Diageo's long-term prospects.