Diageo slump leaves glass half-empty
A PLUNGE in annual profits at Diageo kept the lid on gains in the blue-chip index yesterday after the spirit maker took a £1.3bn sales hit from lockdowns across the globe.
Shares tumbled 160p to £27.21 after the owner of Guinness and Johnnie Walker said pre-tax profits fell 52pc to £2bn in the year to June 30, with net sales falling 8pc to £11.8bn – slightly worse than analysts’ forecasts.
The company has struggled after bars, clubs and restaurants were forced to shut in a swathe of countries fighting coronavirus and sales fell in all markets apart from North America, where strong demand for drinks at home – especially tequila brands such as Casamigos – offset losses from licensed premises.
Such so-called on-trade demand usually accounts for a fifth of alcohol sales in North America, with most drinks instead bought at supermarkets and liquor stores.
Despite this declining performance, Diageo pledged to hold its final dividend at 42.47p a share, and the stock is still higher than at its £22 trough in late March.
On a busy day for corporate reporting, gains in oil heavyweights
BP and Shell helped the FTSE 100 edge up 3.2 points to end at 6,036.
BP jumped 18.2p to 299.3p after beating analysts’ expectations with its first-half results – despite slashing its dividend and slipping to a £21.6bn loss. Its rise reflected well on peer Shell, which rose 40.6p to £11.41.
But pharmaceuticals giant AstraZeneca – currently the FTSE 100’s second-largest constituent after Unilever – also weighed on the blue-chip gauge, dropping 217p to £85.50 after pricing a three-tranche bond offering worth $3bn (£2.3bn).
Engineer Melrose was the biggest riser on the FTSE 100, jumping 8.3p to 96.5p after securing a deal with lenders over a debt waiver.
Hot on its heels was BT, which jumped 8.1p to 106.1p after Berenberg raised its outlook for the group’s shares. Analyst Carl Murdock-Smith told clients that sentiment about the telecoms group was “on its knees”, but added “its significant underperformance and scope for improved sentiment over the next year” made it a “buy”.
The FTSE 250 outperformed its blue-chip peers with a 0.9pc gain to 17,307.7, led by the airline easyJet
– which rose 44.4p to 551.6p after outlining plans to increase its flight schedule in response to high levels of demand.
Direct Line climbed 16.4p to 324p after bumping its dividend slightly higher despite a fall in profits during the first half of the year. The mid-cap insurer will pay 7.4p per share to investors, versus last year’s 7.2p.
Babcock was the biggest mid-cap faller, dropping 27.2p to 261.8p. The defence engineer scrapped its final dividend after profits sank.