Diageo toasts spectacular first half results

Diageo toasts spectacular first half results

	Published : Fri, 17 Feb 2006 02:15 By : David Simms Print this Story

LONDON - The world's biggest alcoholic drinks maker Diageo registered a 24 percent increase in half-year earnings and sounded confident of meeting the expectations on its full-year revenues as well despite hurdles like the surging fuel prices.

The group, which is famous for its Smirnoff vodka, Johnnie Walker scotch and Guinness beer, reported a 6 percent increase in first-half profits to £1.26 billion. Diageo said that it had returned more than £700 million to investors.

Pre-tax profits in the six months ending December jumped 5 percent to £1.25 billion as against analysts' predictions of about £1.2 billion. Diageo said that the profits had been driven by strong growth in the North American market and a 2 percent increase in the European sector.

"In Europe, where we face a more challenging trading environment, we have created a more efficient organization and this has enabled us to deliver a 7 per cent operating profit growth in the period," said Diageo chief executive, Paul Walsh.

"This is a strong first half performance. We have invested in our brands and built our market positions. We have again achieved our financial objectives delivering top and bottom lines organic growth, organic operating margin improvement and an increase in return on invested capital."

The company also said that first half sales increased by £5.36 billion led by a 7 percent increase in sales of spirits. Sales of beer and wine increased by 4 percent and 5 percent respectively, but the problem as far as Diageo was concerned was the ready to drink sector where sales dipped by 3 percent. “This will impact performance in the second half and in future years when the wines were expected to be released," the company said.

Mr Walsh said that the rising fuel prices and the disruption caused by the hurricanes in the US had impacted their costs adversely, but strong sales had more than made up for it, “Material changes to these first half trends are unlikely in the balance of the year and we are therefore comfortable in reiterating our full year guidance of 7pc organic operating profit growth," he stressed. Diageo said that it would be paying an interim dividend of 11.95 pence a share on March 10.