UK: Analysts toast Diageo, but voice concern over UK

By | 23 August 2012

Diageo has reassured analysts after reporting FY numbers today

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.

Expert analysis

Diageo plc (DGE) - Financial and Strategic SWOT Analysis Review

Diageo plc (Diageo) is one of the world's leading companies in the beverage alcohol industry. The company carries out the production and distribution of spirits, beer and wine. The key brands of the company include Johnnie Walker, Smirnoff, Captain Morgan, Baileys Original Irish Cream, J&B, Tanqueray, Guinness, Crown Royal Canadian, Beaulieu Vineyard and Sterling Vineyards, and Bushmills Irish. Diageo also has distribution rights for the Jose Cuervo tequila brands in North America and various other markets. The company sells its products in around 180 markets in North America, Europe, Latin America, Africa, the Middle East and Asia Pacific.

Sectors: Beer & cider, Emerging markets – BRIC, Spirits, The off-trade, The on-trade, Wine

Companies: Diageo

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