Guinness owner set to reveal strong growth as economy opens up

Diageo is predicted to show pre-tax profits of £2.4 billion in the six months to the end of December, but inflation pressures remain a concern.

Simon Neville
Friday 21 January 2022 15:04
Guinness owner Diageo is expected to reveal impressive results next week (Damien Eagers/PA)
Guinness owner Diageo is expected to reveal impressive results next week (Damien Eagers/PA)

Drinks giant Diageo is expected to reveal a boost in profits close to pre-pandemic levels, as the company updates the stock market on how it fared in the second half of 2021.

Analysts are predicting pre-tax profits of £2.4 billion – a 9% rise on the £2.2 billion recorded during the six months to the end of December 2020.

It saw pre-tax profits of £2.46 billion in the same period before the pandemic hit.

The company, which makes Guinness, Johnnie Walker, Smirnoff and Captain Morgan struggled during the pandemic as lockdowns and restrictions saw sales in pubs, bars and restaurants dry up.

But hopes remain high that strong supermarket sales could continue to offset the drops elsewhere.

Matt Britzman, equity analyst at Hargreaves Lansdown said analysts will also be looking to hear how the Omicron variant affected on-trade sales when results are announced on Thursday.

He said: “Following periods of hefty restrictions, the return of customers to bars and restaurants should be positive for the on-trade sales numbers.

“Although, in light of Omicron developments, it’ll be interesting to see how much of an impact this has had on recovery. The balance sheet looked in good shape last year.”

Mr Britzman added: “Management warned of near-term volatility in their previous full-year results and with inflationary pressures pushing costs up, we’ll be looking out for any impact on operating margins.”

Analysts Russ Mould and Danni Hewson at AJ Bell said investors will also want to hear more about whether Diageo will restart its share buyback programme, pointing out the company has only spent £1.5 billion of the committed £4.5 billion on shares before halting it when the pandemic hit.

They said: “Analysts will no doubt look for any indication of how the remaining £2 billion will be spread across 2022, 2023 and 2024, and to chief executive Ivan Menezes for any financial guidance for the rest of the year to June 2022.”

The analysts also said the market will be looking to see a dividend increase of 5%, following a 4% rise last year, and expected Diageo to look forward to the return of duty-free shopping as international travel starts to increase.

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