DRINKS giant Diageo has declared it fears the Brexit impasse will have a damaging effect on smaller businesses, and urged
politicians to break the deadlock by reaching agreement on a withdrawal deal as quickly as possible.
Scotland’s biggest whisky distiller raised its concerns as it reported that strong trading across all regions lifted organic net sales by 7.5 per cent to £6.9 billion in the six months ended December 31. Operating profit before exceptional items climbed by 12% to £2.45bn.
Shares in Diageo surged nearly 5%, reaching an all-time high, as the board approved a further share buyback worth £660 million. It raises the value of the buyback programme to £3bn for the year ended June 30, 2019.
READ MORE: Diageo plans next leg of Johnnie Walker tour
Diageo appeared to show no ill-effects from Brexit uncertainty in the UK in the second half of last year, where double digit percentage growth on gin brands Gordon’s and Tanqueray helped net sales rise by 14%. Guinness sales also rose by 6% ahead of the start of the Six Nations rugby championship tonight, which is likely to boost the brand further as the title sponsor.
Diageo’s performance in Great Britain was a key driver as net sales in Europe climbed by 5%.
However, with the Brexit date of March 29 looming and no sign of an end to the parliamentary battles, David Cutter, Diageo’s president of global supply and procurement, implored UK politicians to come together to and “strike a deal as swiftly as possible”.
Asked whether the company had made any preparations for a no-deal Brexit, Mr Cutter said: “We’ve put a lot of effort into making sure we can take Brexit in our stride and we can manage short-term disruption.
“We’re concerned about smaller companies who might not have the same resources as us. We are a trading company at heart, we export 95% of what we do. Our underlying thing on Brexit is we really do urge everyone to come together, form a sensible deal as swiftly as possible and that’s going to give certainty to business and the people of the UK.”
READ MORE: Diageo gets nod to revamp Glenkinchie
Asked if the company viewed Prime Minister Theresa May’s proposed withdrawal agreement as a “sensible deal”, Mr Cutter noted: “The thing about the deal is that it is really up to the politicians to decide. Coming together as swiftly as possible to get a deal is just going to bring much more certainty.”
Elsewhere, Diageo reported an organic net sales increase of 20% in Greater China, despite concern over slowing growth in the country and its ongoing trade dispute with the US. Growth was driven by its Scotch whisky and the firm’s local white spirits operation.
Mr Cutter noted its operations in China remain relatively small and operate at the premium end of the market. But he emphasised the growth opportunity offered by China and India as well, where organic net sales grew by 12%.
READ MORE: China revival boosts whisky giant Diageo
Mr Cutter said: “Certainly, the [trade] deals going on with the US has had some effect, but we are seeing our brands grow and our categories grow.”
He added:“China is an amazing growth country. The wealth that is being created across China is opening up more opportunities for people to be able to access our categories and our spirits. And it is the same in India as well.”
Diageo is currently investing heavily in its Scotch whisky distilleries and visitor facilities.
It is bringing its “lost” Brora and Port Ellen distilleries back to life, developing a Johnnie Walker Experience in central Edinburgh, and refurbishing the visitor centres at the four distilleries that provide malts for the Johnnie Walker blend: Glenkinchie, Caol Ila, Clynelish and Cardhu.
Mr Cutter said Diageo sees whisky tourism as a key driver of future growth for its brands, adding that it is “very, very close to confirming” the former House of Fraser building on Princes Street as the location for the Johnnie Walker centre. He said: “We are confident that is where we want to be. We think it is a fantastic location, we think it is a wonderful part of Edinburgh to bring tourists into and have this amazing experience.”
Shares closed up 129.5p at 2,901.5p.
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