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Strong Performance By Diageo as it Looks to Increase Operating Margin

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Strong Performance By Diageo as it Looks to Increase Operating Margin

Strong Performance By Diageo as it Looks to Increase Operating Margin
July 28
09:48 2017

Diageo has reported a 15% increase in net sales to £12.1 billion and a 25% jump in operating profit to £3.6 billion, reflecting favourable exchange rates and accelerating organic growth, for the year ended 30 June 2017. All regions contributed to broad based organic net sales growth of 4.3%, and organic volume grew 1.1%.

Organic operating profit grew 5.6%, ahead of top line growth, driven by good progress on productivity partially offset by implementation costs and one-off items. Free cash flow continued to be strong at £2.7 billion, increasing by £566 million compared to the prior year, with net cash from operating activities up £584 million to £3.1 billion.

Ivan Menezes, chief executive of Diageo.

Ivan Menezes, chief executive of Diageo, comments: “We delivered a strong set of results including broad based improvement in organic net sales and operating profit. Our performance demonstrates the effective delivery of our strategy through disciplined execution of our six priorities put in place four years ago. We have delivered consistent strong performance improvement across all regions and I am pleased with progress in our focus areas of US Spirits, Scotch and India.”

He elaborates: “Our productivity work is delivering ahead of expectations allowing us to reinvest in our brands, drive margin improvement and generate consistent strong cash flow. Through productivity we have embedded an everyday efficiency mind set in the business and with improved data and insight we are making faster, smarter decisions on investment choices.”

Diageo is raising its productivity goal to £700 million with two thirds being reinvested in the business. The drinks group continues to expect to deliver mid-single digit top line growth, and is raising its operating margin expansion objective from 100bps to 175bps over the three years ending 30 June 2019.

Following three years of consistently improving cash flow generation, the board has approved a share buy-back programme of up to £1.5 billion in the 2018 financial year.

“Diageo is a strong company today and we are confident in our ability to deliver sustainable growth,” he says.

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