Diageo Raises Share Buybacks; 1st Half 2019 Net Profit Hit by Higher Taxes -- Update
31 Gennaio 2019 - 1:31PM
Dow Jones News
(Rewrites first paragraph, adds more detail and share price)
--Diageo plans an extra GBP660 million of share buybacks
--The company's operating profit rose in the first half of
fiscal 2019
--Shares in Diageo rise on news of the expanded buyback
program
By Ian Walker
Shares of Diageo PLC (DGE.LN) rose 4.1% Thursday after the
company said that it approved a further 660 million pounds ($864
million) of share buybacks as it reported a 4% fall in net profit
for the first half of fiscal 2019 as a result of higher taxes.
Still, the world's largest liquor maker, which owns Johnnie
Walker whisky and Tanqueray gin, said operating profit--its
preferred metric--rose in the period, although organic growth was
offset by unfavorable exchange rates.
Operating profit was GBP2.43 billion for the half year ended
Dec. 31 compared with GBP2.19 billion a year earlier and analysts'
forecasts of GBP2.31 billion.
Diageo made a net profit for the half year of GBP1.98 billion
compared with GBP2.06 billion a year earlier, on net sales that
rose to GBP6.91 billion from GBP6.53 billion and compared with
analysts' expectations of GBP6.78 billion. Net sales exclude excise
duties. Net sales rose 5% in North America, the company's biggest
region.
Forecasts are taken from FactSet with revenue based on three
analysts' projections, and operating profit based on two.
Diageo said the board has approved an increase in its share
buyback program, taking the total for the year ending June 30 to
GBP3 billion. For the first half of the year Diageo bought back
46.5 million shares under the program worth GBP1.28 billion.
Last November Diageo announced the sale of a portfolio of 19
brands, including Seagram's VO whiskey and cinnamon schnapps
Goldschlager, to Sazerac Co. for $550 million, as it pivots toward
premium brands and higher-growth products. The sale was completed
on Dec. 21.
The company said at the time that it would return net proceeds
of about GBP340 million to investors through share buybacks.
"Diageo delivered broad-based volume and organic net sales
growth across regions and categories. We continue to expand organic
operating margins while increasing investment in our brands ahead
of organic net sales growth," Chief Executive Ivan Menezes said
Thursday.
He added that the board continues to expect a mid-single-digit
rise in organic net sales growth this year and to expand margins
for the three years ending June 30 in line with previous guidance
of 175 basis points.
The board has declared an interim dividend of 26.10 pence, up
from 24.90 pence for the first half of fiscal 2018.
Write to Ian Walker at ian.walker@wsj.com; @IanWalk40289749
(END) Dow Jones Newswires
January 31, 2019 07:16 ET (12:16 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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