Diageo: all regions growing + Shell and BT updates
Ivan Menezes: further evidence of change (pic: Terry Murden)
Drinks group Diageo reported half-year net sales up 5.8% to £6.9 billion with organic growth partially offset by unfavourable exchange. Reported operating profit (£2.4 billion) was up 11%, driven by organic growth.
All regions contributed to broad based organic net sales growth, up 7.5%, with organic volume up 3.5%
Organic operating profit grew 12.3%, ahead of top line growth, as cost inflation and higher marketing investment were more than offset by improved price/mix and efficiencies from our productivity programme
Cash flow continued to be strong, with net cash from operating activities at £1.6 billion, up £356 million and free cash flow at £1.3 billion, up £317 million
Basic eps of 80.9p was down by (1.6)%. Pre-exceptional eps was 77p, up 13.6%, driven by higher operating profit and lower finance charges, which more than offset an increased tax charge largely as a result of lapping the positive impact of US tax reform in the prior period
The interim dividend is increased 5% to 26.1p per share.
Chief executive Ivan Menezes said: “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.
“These results are further evidence of the changes we have made in Diageo to put the consumer at the heart of our business, to embed productivity and to act with agility to enable us to win sustainably.
“At £1.3 billion, we delivered another period of strong free cash flow. As a result the board approved an incremental share buyback of £660 million, bringing the total programme up to £3 billion for the year ending 30 June 2019.
“As we deploy our strategy, we remain focused on building the long-term health of our brands and ensuring we grow our business in a consistent and sustainable way.”
Royal Dutch Shell chief executive Ben van Beurden commented: “Shell delivered a very strong financial performance in 2018, with cash flow from operations of $49.6 billion, excluding working capital movements.
“We delivered on our promises for the year, including the completion of the $30 billion divestment programme and starting up key growth projects while maintaining discipline on capital investment. We paid our entire dividend in cash, further reduced our debt and launched our share buyback programme, with $4.5 billion in shares repurchased so far.
“We will continue with a strong delivery focus in 2019, with a disciplined approach to capital investment and growing both our cash flow and returns. Our strategy to deliver a world-class investment case is working.”
Gavin Patterson, Chief Executive, commenting on third quarter trading, said: “We have continued to deliver consistently against our strategic objectives in a tough market, resulting in another sound quarter of operational and financial performance.
“In Consumer we launched the next version of our converged consumer offering, BT Plus with Complete Wi-Fi. Following successful trials in London we announced our plan to launch 5G in 16 UK cities in 2019. Openreach accelerated its FTTP commissioning and has now passed 890,000 premises. We are ready to expand our FTTP programme up to and beyond 10 million premises if the conditions are right.
“Our overall outlook for the full year remains unchanged, with EBITDA around the top end of our guidance for FY 2018/19. We continue to expect regulation, market dynamics, cost inflation and legacy product declines to impact in the short term before being more than offset by improved trading and cost transformation by our 2020/21 financial year.
“I am handing over the business with good momentum behind its ongoing transformation programme and wish my colleagues all the best for the future.”