- Alcoholic beverage group Diageo reported interim results for the six months ended 31 December 2022, with organic net sales increasing 9.4% to £9.4 billion. The increase was on the back of a 7.6% increase in prices and a 1.8% increase in volumes. The revenue print was also above consensus of 7.9%.
- In the current environment, Diageo is one of a handful of companies that have been able to raise prices & still grow volumes highlighting the quality of the brands. Every region of the world experienced growth, with premium and super premium products growing at double digits in every region.
- Organic operating profit grew 9.7% and the operating margin declined by 90bps to 33.6%. Price increases and supply productivity savings more than offset the impact of absolute cost inflation on gross margins. Basic EPS increased by 19.7% to 100.9 pence and pre-exceptional EPS by 15.2% to 98.6 pence. Diageo declared an interim dividend of 30.83 pence, an increase of 5%.
- The two largest regions, Europe and North America saw flat volume growth although net sales growth increased by 3% and 10% respectively, on an organic basis. The Latin America & Caribbean region reported the largest volume and net sales growth of 6% and 20% respectively.
- With brands such as Johnnie Walker, Baileys, Guinness and Don Julio, Diageo is undoubtedly a high-quality company. In our view, these brands provide a substantial moat which should allow the company to continue generating shareholder value as it has done for decades. We remain long-term shareholders in the Cratos BCI Worldwide Flexible Fund as well as global portfolios and at a forward PE multiple of around 20x believe the company is fairly valued.
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