Diageo toasts profits rise

Spirits group Diageo today unveiled a 6% rise in half yearly profits to £1.2bn (€1.8bn), but said demand for ready-to-drink brands such as Smirnoff Ice had declined.

Diageo said increased demand for neat spirits such as Captain Morgan had helped sales of its core “global priority brands” grow by 5%.

The group said both net sales and operating profits were up by 6%, although the latter fell by 2% to £1.18bn (€1.8bn) before exceptional items.

Reported turnover in the UK was up 2% to £847m (€1.3bn) in the six months to December 31 while operating profits grew £11m (€16.3m) to £150m (€222.8m).

Strong volume performance of spirit and wine brands in the UK offset volume declines in the group’s ready-to-drink brands and beer.

The group said the ready-to-drink market in Britain continued to decline, with volumes of Smirnoff ready-to-drink brands such as Smirnoff Ice falling by 12% and net sales dropping 20%.

Diageo said adverse exchange rate movements and the termination of distribution rights and disposals had cut organic turnover in its North American business by £78m (€115.8m).

Chief executive Paul Walsh said the company was continuing to deliver growth.

He said: “Looking forward, the trends we have seen in the first half are expected to continue, despite the uneven recovery in Europe, although the current exchange rate volatility will impact reported results.”