Diageo Shows Resilience
Diageo has reported a 4.5% decline in net sales to £6.9 billion for the first half ended 31 December 2020, as organic growth of 1.0% was more than offset by unfavourable exchange rates. Operating profit at £2.2 billion declined by 8.3%, driven by unfavourable exchange and a decline in organic operating profit.
Despite a significant impact from Travel Retail and on-trade restrictions, organic net sales rose by 1.0%. However, organic operating profit was down 3.4%.
North America, Diageo’s largest market, performed particularly strongly and ahead of expectations as consumer demand remained resilient and the spirits category continued to gain share of total beverage alcohol. Diageo also delivered strong sequential improvements across other regions compared to the second half of its 2020 financial year.
Ivan Menezes, chief executive of Diageo, commented: “We delivered a strong performance in a challenging operating environment, returning to top line organic sales growth during the half. We rapidly pivoted to the channels and occasions most relevant to consumers and invested behind new opportunities. This more than offset the impact of on-trade restrictions and the decline in Travel Retail.”
He continued: “Organic operating margin improved compared to the second half of fiscal 20 driven by increased operating leverage and tight control of discretionary expenditure. The decline compared to the first half of fiscal 20 reflected an adverse channel and portfolio mix. We expect margins to improve as the on-trade and Travel Retail recover and with the continued benefit of everyday efficiency.
“Our proprietary tools and data-led insights are enabling us to invest smartly in effective marketing and innovation. We continue to strengthen brand equity, premiumise our portfolio and expand our digital capabilities.”
