Sales Growth At Diageo Plc Fails To Meet Target

…. but management at Diageo plc (LON:DGE) recommends a dividend lift of 9% following otherwise positive results.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Shares in Diageo (LSE: DGE) (NYSE: DEO.US) dipped marginally in early trade this morning, following mixed preliminary results.

Despite reporting a seemingly positive organic growth in net sales of 5%, it fell just short of the 6%-per-year growth figure that the alcoholic beverages company had been targeting.

Management blamed the shortfall on “weakness in some markets”, which includes the well-documented tightening of regulations in China over ‘gifting’ in March that banned high-level military officials from indulging in alcohol during official visits.

However, shareholders were cheered by an 11% rise in earnings per share (pre-exceptional items), contributing towards the recommended full-year dividend lifting by 9% to 47.40p, which puts Diageo on a consensus yield of around 2.4%.

This was boosted by pre-tax profits rising 8% organically to £3.53bn, driven by 0.8 percentage points of margin expansion, while marketing investment increased 5%, focusing on Diageo’s strategic brands.

Areas that outperformed included the lucrative market in North America where net sales increased by 5% and operating profit by 9%, while emerging markets — whose sales now contribute 42% of Diageo’s business, following 11% net sales growth and acquisitions which added £233m — saw operating profits lift 18%.

Chief executive Ivan Menezes commented:

“Price increases in each region, positive mix in North America and Latin America and the rigour we have in managing our cost of production and controlling our overheads drove significant expansion in operating margin. 

 “Innovation is driving growth in every region, with our biggest launches in US spirits where we continue to lead the innovation agenda in the industry. Elsewhere, the investments we have made to enhance our routes to market in Africa, Latin America and Eastern Europe have driven strong growth.

“This year, we have again made a strong business stronger and we remain on track to deliver our medium term guidance.”

If you’re interested in the kind of growth that saw Diageo’s shares leap almost three-fold in just five years, then we’ve pinpointed our favourite growth share and produced a special report in which we evaluate its finances, risks and growth prospects going forward. 

Hurry, though, as the company in question very recently surged over 10% in just one day! Simply click here to get your copy delivered to your inbox immediately — completely free.

> Sam does not own shares in Diageo.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

More on Investing Articles

Young mixed-race woman jumping for joy in a park with confetti falling around her
Investing Articles

Why the FTSE 250 looks an incredible bargain

While all the attention is on the elite FTSE 100, the mid-cap FTSE 250 index looks unbelievably cheap. I don't…

Read more »

2024 year number handwritten on a sandy beach at sunrise
Investing Articles

Here’s my plan to make the most of juicy UK shares ahead of 2024 and beyond!

Our writer reckons there hasn't been a better time to snap up quality UK shares. She explains how she's planning…

Read more »

Young Black woman using a debit card at an ATM to withdraw money
Investing Articles

Here’s how many Lloyds shares I’d need to buy for a £100 monthly income!

Offering a higher dividend yield than the average across FTSE 100 stocks, are Lloyds shares worth buying for passive income…

Read more »

Playful senior couple in aprons dancing and smiling while preparing healthy dinner at home
Investing Articles

Up 27% in 2023, what next for the Tesco share price in 2024?

The Tesco share price has had a great 2023, rising 27% while the FTSE 100 was flat. But what might…

Read more »

Hand is turning a dice and changes the direction of an arrow symbolizing that the value of an ETF (Exchange Traded Fund) is going up (or vice versa)
Investing Articles

FTSE 250? No, I’d buy this index fund instead

Investing in index funds can be a profitable enterprise. Our author has been exploring the different options to determine the…

Read more »

Young black colleagues high-fiving each other at work
Investing Articles

This 4% yielding FTSE 100 giant is dirt-cheap and perfect for passive income!

Looking for a mammoth business with shares trading at discount levels and offering an excellent passive income opportunity? Our writer…

Read more »

UK money in a Jar on a background
Investing Articles

Here’s how I’d use dividend shares to try and turn £5,000 of savings into passive income of £900 a year

With dividend shares at today’s prices, Stephen Wright thinks there are two ways to turn a £5,000 investment into something…

Read more »

Investing Articles

After a recovery that Lazarus would have been proud of, is the easyJet share price worth a look?

With its dividend restored and its balance sheet repaired, the easyJet share price looks like a bargain. But Stephen Wright…

Read more »