9th Apr 2020 08:37
(Alliance News) - Alcoholic drinks maker Diageo PLC on Thursday said it has halted its share buyback scheme as part of Covid-19-related cost cuts, but will pay its planned interim dividend.
The Johnnie Walker whiskey distiller and Guinness beer brewer said its 27.41 pence interim payout will go ahead as planned.
The second phase of a USD4.5 billion three-year shareholder returns programme will not, however.
Diageo back in July of last year said it planned to distribute up to GBP4.5 billion over a three-year period. So far, it has returned GBP1.25 billion as part of that scheme.
"We have not initiated the next phase of the three-year programme, and we will not do so during the remainder of fiscal 2020," Diageo explained.
Turning to recent trading, Diageo said it has noticed a "very slow" recovery at on-trade channels, so restaurants and bars, in mainland China, as Covid-19 lockdown curbs ease.
It's a very different picture in North America and Europe, where restrictions on social gatherings remain in place. On-trade sites have been forced to close in some countries.
Diageo said: "In North America, where the on-trade channel accounts for approximately 20% of US Spirits' net sales, most states closed bars and restaurants in March. In Europe, there have been significant closures of on-trade premises in most countries. This channel accounts for approximately 50% of Europe net sales, although the size of the on-trade channel varies significantly between individual countries."
In both Europe and North America, Diageo has noted a pick-up in sales in retail stores over recent weeks, though added it uncertain whether this trend will continue.
In India, a nationwide lockdown has closed all of Diageo's sales in both bars, restaurants and retail channels. At the United Spirits Indian subsidiary, which houses the Black Dog scotch whiskey brand, production facilities have been closed, until April 14 at least.
"In our main markets in Africa, the on-trade channels have also been impacted, and we have closed two of our production sites in Nigeria. South Africa has imposed a nationwide lockdown for an initial period of three weeks until April 16. Governments have also placed restrictions on the on-trade in a number of countries in Latin America and the Caribbean," Diageo added.
The company said it has withdrawn its financial guidance due to Covid-19 uncertainty. The company had expected organic net sales and operating profit growth.
Shares were 3.1% higher at 2,600.00p each in London on Thursday morning.
By Eric Cunha; [email protected]
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