Wednesday, 31 July 2013

Diageo - Full Year Results

Diageo is truly a global company, operating in 180 countries,  with a whole barrel of famous brands, including -

Johnnie Walker - number 1 scotch whiskey sales worldwide
Smirnoff - # 1 premium vodka
Baileys - # 1 liqueur worldwide
Captain Morgan - #2 brand rum worldwide
Gordons - worlds best selling premium gin and
Guinness - worlds best selling stout.

They have today announced full year results to 30th June 2013. Sales and profits have continued to see strong growth, particularly in North America where profits increased 9% and emerging markets where profits increased by 18%.

The board are recommending an increase of 9% in the final dividend to 29.3p making a total of 47.4p for the full year. Not the highest yielder in my portfolio but possibly one of the most reliable over the long term. Dividends have almost doubled over the past 10 years - the long term CAGR is 6.4% per year.

The share price has seen strong gains in the past year or so - up from around £17 to currently just under £20.
3 yr comparison -v- FTSE 100
(click to enlarge)

Commenting on results, new CEO Ivan Menezes said,

“The effectiveness of our marketing campaigns remains a competitive advantage for us and this year we have seen these campaigns extend the leadership of our brands in many markets during the year. This has been a key driver of our performance in scotch, our biggest and most profitable category, especially for Johnnie Walker which is now a 20 million case brand. 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“.

Sales growth and acquisitions in emerging market countries now contibute 42% of sales and the continued investment in markets such as Asia, Africa and S. America means revenues are growing quickly and the company expects these markets to contribute over 50% of sales by 2015.

This is a fairly recent addition to my shares portfolio. I like the strong brands and of course, the argument in favour of Diageo is that alcohol is a recession-proof business (profits and dividends increased during the last one), and which also does well in the good times.

One to tuck away for the long term I suspect. As ever, please do your own research.

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