Brand cocktail boosts Diageo expectations

24-08-2006

Diageo has revealed it expects operating profits to rise in line with its seven per cent target following the encouraging performance of major alcohol brands Smirnoff and Johnnie Walker whisky.

The world's largest drink's company will release its preliminary results for the year ending June 30th at the end of August, but today's trading statement reveals that as well as meeting its profits target, its underlying sales are predicted to rise six per cent, beating the initial plan by two per cent.

Following its trading announcement, shares in the company, which also owns the Guinness and Baileys brands, fell after rising last night.

Paul Walsh, chief executive officer, explained that the firm was happy with its overall performance, despite having to contend with a fall in revenue due to smoking bans in Scottish and Irish pubs.

"As the year closes we have successfully delivered on our objectives. We are building a superior position in North America, investing strongly behind our brands in International and continuing to reduce costs in Europe. As our excellent top line growth shows, we are gaining share in many markets," he said.

"The strength of our brands and our broad based geographic exposure continue to provide us with opportunities. We expect that relentless focus on proven brand and market building strategies will ensure that this level of top and bottom line organic growth together with continued strong cash generation remain the consistent themes of Diageo's performance."

Mr Walsh added that Diageo planned to return £1.4 billion to shareholders at the end of this financial year, and also intends to replicate this in 12 months time.


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