Diageo talks up lacklustre showing

DIAGEO chief executive Ivan Menezes claimed the Smirnoff and Guinness maker was its best shape ever despite missing targets and producing lacklustre results.

The shares fell 28.5p, or 1.55pc, to 1811p after sales at its key American business missed forecasts, and revenues for Smirnoff fell 4pc.

Menezes, who has been trying to turn the business around, said: ‘I am confident we will achieve our targets. The business is in the best shape it has ever been. America is still an extremely attractive market for us.’

The firm has been affected in the US by a price war on vodka and a shift from flavoured Smirnoff towards flavoured whisky, a trend in which the firm has little presence.

Pre-tax profit grew to £2.9bn for the year to June 30 from £2.7bn on sales of £15.9bn. There will be a 9pc increase in the final dividend taking the full year amount to 56.4p a share.

But the market was disappointed sales were flat once the effect of takeovers was stripped out. Investors had hoped for 0.2pc growth.

Diageo has also been hit by a slowdown in some emerging market economies in which it operates, and a crackdown on corporate gifts in China.

Menezes, who recently sold the luxury Gleneagles hotel Diageo owned, seemed open to further disposals of unwanted assets.

He said ‘we are active managers of our portfolio’ and hinted the wine business – it owns Piat d’Or and Blossom Hill – could be next.

‘Wine is not going to get bigger for us,’ he said.