Diageo posts positive organic growth, while reported sales slide

International distilling giant Diageo posted its preliminary results for the year to 30 June on Thursday, reporting an improvement in organic results with volume growth of 1.3%, net sales growth of 2.8% to £10.485bn, and operating profit growth of 3.5% to £3.008bn.

The FTSE 100 firm said reported net sales declined 3.0% as organic growth in each region and acquisitions were more than offset by adverse exchange and disposals

Its reported operating profit grew 1.6% to £2.841bn with organic growth, lower exceptional operating charges and acquisitions partially offset by adverse exchange and disposals

Free cash flow continued to be strong at £2.1bn, Diageo’s board said, up £134 million on last year, with operating cash flow at £2.5bn

Basic earnings per share were 89.5p, down 6% as lower exceptional income reduced it by 6.1p.

The company’s pre-exceptional earnings per share increased 1% to 89.4p

Diageo’s board recommended a final dividend increase of 5% bringing the full year dividend to 59.2p per share

“This is a good set of results delivering what we set out to achieve this time last year and demonstrating our momentum,” said chief executive Ivan Menezes.

“This better performance reflects the work we have done to strengthen our big brands through marketing and innovation, as well as expanding our distribution reach.

“Our six global brands and our US spirits business are all back in growth and we have seen a significant improvement in the performance of our scotch and beer portfolios,” Menezes added.

He said the delivery of volume growth, organic margin expansion, increased free cash flow and the disposal of £1bn in non-core assets came from the company’s aim to improve the role of alcohol in society, partner with its communities and reduce its environmental impact.

“These results position us well to deliver a stronger performance in FY17.

“We are confident of achieving our objective of mid-single digit top line growth, and in the three years ending FY19 delivering 100bps of organic operating margin improvement,” Menezes explained.