Diageo sales hit by currency and 'challenging' trading environment

By Gemma McKenna

Published: 29 January, 2015

Diageo's half-yearly sales were hit by currency and the "challenging" trading environment as organic net sales fell 0.1% and volumes 1.9%.

However the group flagged an improved performance in the last three months of the half year ending December 31, 2014.

Haig Club Diageo launched its Haig Club whisky in OctoberThe Scotch is is produced by Diageo in partnership with the world famous footballer and British talent agent Simon Fuller.

Overall, the maker of Johnnie Walker, Guinness and Smirnoff vodka said net sales in the first half of its fiscal year were £5.9 billion pounds, coming in under analysts' expectations of £6 billion.

In Great Britain, its net sales increased by 2%, "driven by strong growth of ready to drink and reserve brands".

Its reserve brands were once again its strongest performers in the portfolio, up 10% over the period.

Ivan Menezes, chief executive, said: "We have improved our performance during the half and we have again shown: the strength of our brands, which is driving our share gains; our strong innovation capability, which has enabled us to access new growth opportunities; and our focus on cost. We delivered the planned savings from our global efficiency programme together with procurement benefits in marketing spend which we have reinvested in our brands and we increased our investment in our routes to consumer while again expanding our margins."

He added that the company has "already taken action to improve the performance of those brands and markets that have not performed as well as we would expect".

Over the last six months Diageo acquired control of USL, as well as reaching an agreement to acquire all of Don Julio, and exchange Bushmills Irish whiskey as part of the deal, which Menezes said "will significantly strengthen our position in one of our fastest growing categories".

Analyst Mark Brumby of Langton Capital said: "Diageo remains healthy despite the lukewarm figures, with free cash flow totalling £699 million (up £373 million year-on-year) and a 9% interim dividend increase to 21.5p per share."

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