Diageo admits targets 'look challenging'
Wednesday 30 October 2002
Shares in Diageo fell 8 per cent yesterday after the drinks giant warned that trading issues made its full-year targets look "increasingly challenging".
"Given world events and the more difficult world economic environment, current-year targets do look increasingly challenging," Paul Walsh, the chief executive, told the annual shareholders meeting. The group's shares fell 57p to 677p.
However, Diageo said that it was not issuing a profit warning and insisted that its targets of 8 to 10 per cent annual organic sales growth and double-digit percentage profit growth remained achievable.
The group also said it was pulling the plug on its latest ready-mixed bottled drink, Captain Morgan Gold, which had not gone down well with consumers.
The rum and coke "ready-to-drink" product, which cost Diageo £24m last year in surplus inventory, is being withdrawn from distributors across the US at a charge of £18m to the group after it failed to live up to early hopes that it would replicate the success of its market leading Smirnoff Ice vodka product.
Diageo also revealed that its pension deficit had swelled to almost £1bn since the June year-end when it stood at £366m. This meant that it would not be able to repeat a £30m pension credit that helped to boost last year's profits.
While it also warned that the operating environment for the fast-food sector had "worsened", Diageo said its $2.26bn sale of Burger King to a group led by Texas Pacific, was on track for completion by the end of the year.
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