30th Jul 2024 14:23
(Alliance News) - Diageo PLC shares slumped on Tuesday, with poor annual earnings, the lack of a buyback and balance sheet worries hitting already low sentiment towards the stock.
Shares fell 4.8% to 2,425.50 pence each in London on Tuesday afternoon.
The London-based brewer and distiller behind Guinness stout, Baileys liqueur, Tanqueray gin and Captain Morgan rum said sales in the financial year that ended June 30 slipped 1.3% from USD27.89 billion from USD28.27 billion. Drinks volumes contracted 5.3% to 230.5 million equivalent units from 243.4 million.
Pretax profit ebbed 3.3% to USD5.46 billion from USD5.64 billion.
Nonetheless, Diageo upped its yearly dividend by 5.0% to 103.48 cents per share from 98.55 cents.
"While [financial 2024] was a challenging year for both our industry and Diageo with continued macroeconomic and geopolitical volatility, we focused on taking the actions needed to ensure Diageo is well-positioned for growth as the consumer environment improves," Chief Executive Officer Debra Crew said.
"[Financial 2024] was impacted by materially weaker performance in [Latin America & Caribbean]. Excluding LAC, organic net sales grew 1.8%, driven by resilient growth in our Africa, Asia Pacific and Europe regions. This offset the decline in North America, which was attributable to a cautious consumer environment and the impact of lapping inventory replenishment in the prior year."
In the new financial year, Diageo said the "consumer environment continues to be challenging".
It predicts "negative pressure on organic operating margin" experienced in the second half will continue going into the current financial year. It will look to "drive productivity and pricing" to cope with cost inflation, Diageo added.
Shares in the company are down some 30% over the past year, having slumped 12% in a single trading day alone back in November, following a drab update. Save for a slight fightback around late-January to the end of February, which saw the stock rise some 10%, it has steadily declined since November.
"Diageo has gone from bad to worse," AJ Bell analyst Russ Mould commented.
"The company can dress up the numbers all it wants, but it's clear that something major has to change."
Mould believes the drab performance by Diageo could threaten Crew's position as CEO, or could it prompt and activist investor to try and force change.
The analyst added: "Investors won't like the figures, nor will they like the absence of a new share buyback programme and the fact the balance sheet is close to getting out of the company's comfort zone. Diageo targets 2.5 to 3 times net debt to adjusted earnings and the leverage ratio is now sitting at the top end."
By Eric Cunha, Alliance News news editor
Comments and questions to [email protected]
Copyright 2024 Alliance News Ltd. All Rights Reserved.
Related Shares:
Diageo