Diageo interim profit nudges up as organic sales rise

Diageo posted a slight rise in first half pre-tax profit despite a drop in revenue, as organic sales grew more than expected.

The drinks company said pre-tax profit edged up to £1.78bn in the six months ended 31 December from £1.64bn in the same period a year ago, as revenue slipped to £8.27bn from £8.72bn.

However, organic net sales were up 1.8%, beating analysts’ expectations for a 1.6% increase, while volumes grew 1%.

Diageo said adverse currency movements and the disposal of non-core assets reduced net sales by £400m and operating profit by £156m in the period.

The company announced a 22.6p interim dividend, up 5% on the previous year.

Chief executive Ivan Menezes said: “Diageo has become a stronger, more competitive business. We have delivered volume growth, a stronger top line, improved the performance of our key brands, driven cost productivity and continued to generate strong cash flow.

“While trading conditions remain challenging in some markets, Diageo's brands, capabilities in marketing and innovation and our route to consumer have proved resilient. I am confident that Diageo can deliver improved, sustained performance.”

For the full year, the group expects volume growth to drive a stronger top line performance, with margin improving slightly and strong cash conversion continuing.

Diageo said it remains confident of achieving its objective of mid-single digit top line growth and 100 basis points of organic operating margin improvement in the three years ending fiscal 2019.