UK: Analysts toast Diageo, but voice concern over UK
Diageo has reassured analysts after reporting FY numbers today
Analysts have been encouraged by a healthy set of full-year results from Diageo today, but voiced concern over its performance in the UK.
The group posted a 21.7% rise in operating profits today (23 August), boosted by a strong performance in emerging markets.
Analysts Investec noted that emerging market growth was "on track". But, it said it has "some concerns around the UK", pointing to an "implied" 6% drop in volumes. However, it noted that Easetern Europe "continues to motor" for the group, as the region registered a 16% jump in net sales.
The analysts noted that sales of Jose Cuervo Tequila, which Diageo distributes and has been eyeing to buy for some time, fell 5% in the year. This "suggests management will be eager to consolidate support around the brand in the short term," the note said.
Overall, Investec said that Diageo has "delivered on its promises" and an 8% increase in dividend is encouraging and "chimes with CEO Paul Walsh’s confidence that the business is very much ‘on track’ to deliver against medium-term guidance".
Analysts UBS said Diageo's medium-term guidance of 6% annual sales now looks "conservative". "We are comfortable with our 13 full-year forecast of +6.7% organic sales and +9.8% organic EBIT growth," it said in a note.
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