pounds 400m buy-back to boost Guinness earnings

A day after disappointing investors by failing to come up with a scheme to return cash to shareholders, Guinness moved into the market yesterday to buy 100 million shares at 463p. The move was welcomed by analysts who expect it to be marginally earnings enhancing this year.

Guinness chairman Tony Greener said: "We are clear that our strategy, growing brands of alcoholic drink around the world, remains essentially an organic one. Our principal focus is reinvestment for growth in our existing business. Financial resource, where not required in the business, will be returned to shareholders in the most efficient manner."

The share buy-back, conducted on Guinness's behalf by Cazenove, followed the announcement on Thursday of disappointing full year figures dragged down by lower profits in the company's United Distillers spirits arm.

Despite heavy spending on marketing, Guinness had to struggle to overcome depressed economies around the world.

While profits were flat, however, cash flow remained strong during the year with net debt at the Johnnie Walker to Guinness stout group falling by almost pounds 200m.

Guinness also managed an 8 per cent rise in the dividend payout which has increased by 38 per cent over the past four years, compared with an average rise of 28 per cent for FT-SE 100 companies and an inflation rate over the same period of only 12 per cent.

Standard & Poor's, the credit rating agency, confirmed its previous double A minus debt rating for Guinness, saying the move did not depart from "Guinness's historically moderate financial policies".

A return of some value to shareholders had been expected since last year's annual meeting when Guinness received approval to buy back up to 200 million shares, representing 10 per cent of its equity.

"They are setting an example that other companies should follow," Panmure Gordon analyst Colin Humphreys said "When you have fairly mature businesses that aren't really growing but generate lots of cash, you should return money to shareholders."

Guinness shares edged 4.5p higher to 465p as analysts factored in earnings enhancement in a full year of about 1.7 per cent. The deal is expected to increase gearing to 33-35 per cent by the end of the year, compared with expectations that gearing would fall during the year from 28-23 per cent.

LVMH, the French luxury goods and spirits business which owns 20 per cent of Guinness, did not take part in the buy-back and its stake rose by one percentage point as a result. Announcing its own results on Thursday, the French company said it had no intention of reducing its holding.

Guinness said that under UK tax law, 325p of the cost of buying each share would be counted as a distribution. Tax exempt shareholders would therefore be eligible for a tax credit worth 81p a share.

Comment, page 23

Start your day with The Independent, sign up for daily news emails
ebooks
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
SPONSORED FEATURES
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Recruitment Genius: Sales Executive / Foreign Exchange Dealer - OTE £40,000+

£16000 - £40000 per annum: Recruitment Genius: A Foreign Exchange Dealer is re...

SThree: Experienced Recruitment Consultant

£20000 - £40000 per annum + OTE + Incentives + Benefits: SThree: Established f...

SThree: Trainee Recruitment Consultant

£20000 - £25000 per annum + OTE 40/45k + INCENTIVES + BENEFITS: SThree: The su...

Recruitment Genius: Collections Agent

£14000 - £16000 per annum: Recruitment Genius: This company was established in...

Day In a Page

Refugee crisis: David Cameron lowered the flag for the dead king of Saudi Arabia - will he do the same honour for little Aylan Kurdi?

Cameron lowered the flag for the dead king of Saudi Arabia...

But will he do the same honour for little Aylan Kurdi, asks Robert Fisk
Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Our leaders lack courage in this refugee crisis. We are shamed by our European neighbours

Humanity must be at the heart of politics, says Jeremy Corbyn
Joe Biden's 'tease tour': Could the US Vice-President be testing the water for a presidential run?

Joe Biden's 'tease tour'

Could the US Vice-President be testing the water for a presidential run?
Britain's 24-hour culture: With the 'leisured society' a distant dream we're working longer and less regular hours than ever

Britain's 24-hour culture

With the 'leisured society' a distant dream we're working longer and less regular hours than ever
Diplomacy board game: Treachery is the way to win - which makes it just like the real thing

The addictive nature of Diplomacy

Bullying, betrayal, aggression – it may be just a board game, but the family that plays Diplomacy may never look at each other in the same way again
Lady Chatterley's Lover: Racy underwear for fans of DH Lawrence's equally racy tome

Fashion: Ooh, Lady Chatterley!

Take inspiration from DH Lawrence's racy tome with equally racy underwear
8 best children's clocks

Tick-tock: 8 best children's clocks

Whether you’re teaching them to tell the time or putting the finishing touches to a nursery, there’s a ticker for that
Charlie Austin: Queens Park Rangers striker says ‘If the move is not right, I’m not going’

Charlie Austin: ‘If the move is not right, I’m not going’

After hitting 18 goals in the Premier League last season, the QPR striker was the great non-deal of transfer deadline day. But he says he'd preferred another shot at promotion
Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones