Diageo (DGE)

[idpickering]

FWIW I've held DGE since 22 Jun 2016. with an average buying price of £18.54 ps.

FWIW I've held (inherited) DGE since October 1998 with a book cost of £5.53. Capital growth of 541% over that period even with today's fall and it won't be many more years before it's paid me over 200% of the book cost in nominal dividends. Keep calm and keep holding!

Best wishes


Mark.

Thanks for your input, and wise words Mark. I have no intention of selling my DGE shares. Although not a high yielding share, they offer great diversification amongst my other 28 holdings in my HYP. My HYP is not for discussion here of course.

Ian.

[77ss]

Perhaps a case ( no pun intended) of being able to discern how much of the 18.4% increase in sales came from "strong organic sales growth " versus "strengthening of the US dollar"?

If you think back to what was happening in the previous reporting period ( Truss and Kwartang, £ to $ almost at parity) and then reflect on a recent recovery ('cough') in Sterling. I seem to recall 1.05 $ :£ and it is now 1.24. There's an 18% difference, albeit that was peak pessimism. Looking forward, that exchange rate bonus has (currently) evaporated. The US is a big market for DGE.

Personally, I wasn't so sure about the results.

It is all very well trumpeting a Reported net sales growth of 18.4% but drill down a bit:

Organic net sales growth of 9.4% - still looks OK, but further down we see:

Organic volume growth of 1.8%. Not so hot.

By comparison, last year's interims showed Organic volume growth of 9.3%.

Perhaps it is this that has concerned the market?

I have done reasonably well with DGE over the years, and don't intend to sell but I doubt that I shall be adding in the near future. The company had a very good 2021 - 40% capital growth, perhaps some fall back was to be expected

[KnightOfSpring]

Just listened to the analyst call (I asked very nicely to be allowed on it ) Suspect that after having good growth in market share in the US, the market doesn't like they have lost a very small amount of share. They have been pricing ahead of the market, which must have had some effect. Also ready to drink cocktails have shown very strong growth (something like 45% growth compared to 18% with DGE (NB figures ball park as I didn't note them down correctly) -"we are not chasing this as we want to be at the premium end". Suppose harder to justify putting your spirits in a can mixed with other stuff when you are ordinarily selling it for top dollar. Ciroc vodka also had lost a fair bit of sales, in part as consumers had switched to tequila and (US) whisky. Of course DGE was benefitting here, with strong growth in tequila (which still has a long runway NB bit of a long term mind your eye- if it loses it's appeal, DGE will take a fair hit, despite the portfolio of brands they have. Still they have been very right so far and their data is probably second to none. Also International tequila sales haven't yet really taken off). Also Ciroc impacted by US whisky (where Bulleit has done well). They do think that Ciroc will recover though.

Not sure effects market share (as competition may well be experiencing the same) but would effect growth- they had very low inventory levels and had been strong re-stocking in fiscal 2022. Think this means they are now running up against inflated year on year figures as this re-stocking has completed, so the year on year comparisons are harder. Anyway the CE seemed determined and fairly upbeat that they would resume market share growth in the US and mainatined the 4-5% US market share growth was likley to stay.. Investing ahead of sales in A+P (on a bottom up basis as they see their ad spend has become more effective and they believe they have very attractive specific brand opportunities to spend more) and also increasing spend in digitisation. The digitisation of course is the thing highlighting the specific marketing opportunities.Continuing to increase spend on aged stock. Almost 50% of the business is now in aged inventory (NB I like this aspect. Apart from tying in with premiumisation, it stops every man and his dog jumping on to any bandwagon to the same extent eg as we saw with gin in the UK).

Sorry a bit muddled but thought would get a few things down. Maybe slightly disappointing short term, but there again we have general recessionary fears and they are still confident that they and the market can grow regardless. If they had been ahead on pricing actions, assume the others will need to follow (which could help DGE's share). Cost pressures will abate at some point and the re-stocking year on year tough comparators will work through.

Like most of you, I have been a long term holder and intend to remain so. Indeed I was looking for a fall back in the shares and have bought some more this morning (a bit badly- just under both £35 and £34.50) despite it being my second biggest holding.

[Bouleversee]

What is the difference in meaning between organic net sales growth and organic volume growth?

I considered buying Diageo for many years but whenever I had cash to invest, the s.p. and p/e ratio seemed too high but I finally weakened, as everyone seemed enthusiastic and had done well over the years, and on 1.10.21, when the price was 3517, I invested £5k. Price was 3431p last time I looked, down 6.64%. When I read the report linked to by Ian, I wondered whether I should top up but on reflection I think I will leave it at that. The p/e ratio is still very high and the yield not all that marvellous. Whatever organic volume growth means, they don't seem to be expecting it to be great in the coming year. I won't be selling, however, so if this is the wrong call and they shoot up, I'll still benefit and hopefully recover my loss.

[idpickering]

Further to the above, the RNS is here: https://www.investegate.co.uk/diageo-pl ... 00058949N/

DGE down 4% as I type. I thought he results were good?

Ian.

That is a significant drop. Maybe we are missing something.

Dod

With regards to your comment Dod, a presenter on Bloomberg TV mentioned just now that the 4.78% drop in DGEs' SP today, may be due to there having been a comment that Americans are drinking less alcohol in the report. Whether that is the case, and it is the cause of the drop in DGEs' SP today, is up for grabs maybe?

Ian.

[MaraMan]

Further to the above, the RNS is here: https://www.investegate.co.uk/diageo-pl ... 00058949N/

DGE down 4% as I type. I thought he results were good?

Ian.

That is a significant drop. Maybe we are missing something.

Dod

With regards to your comment Dod, a presenter on Bloomberg TV mentioned just now that the 4.78% drop in DGEs' SP today, may be due to there having been a comment that Americans are drinking less alcohol in the report. Whether that is the case, and it is the cause of the drop in DGEs' SP today, is up for grabs maybe?

Ian.

I have read several reports in the press stating that young adults are drinking less alcohol that previous generations, which did factor into my decision to sell. I do though continue to admire DGE as a rock solid core holding due to its good management, moats etc. I just wonder whether it's the best place to look for growth &/or income in the current market.

MM

[idpickering]

I have read several reports in the press stating that young adults are drinking less alcohol that previous generations, which did factor into my decision to sell. I do though continue to admire DGE as a rock solid core holding due to its good management, moats etc. I just wonder whether it's the best place to look for growth &/or income in the current market.

MM

Thanks for your input. I realise that I can glean more income if I invested elsewhere other than DGE in my HYP, of which DGE is a member currently. Hmm…….

Ian.

[BullDog]

One thing that bothers me a little is when I see adverts for alcohol free gin and similar. How long will it be before buyers realise it's just very expensive flavoured water? I don't really understand how alcohol free spirit can be a thing? Suppose I'm just an old fart. That explains a lot these days.

[idpickering]

One thing that bothers me a little is when I see adverts for alcohol free gin and similar. How long will it be before buyers realise it's just very expensive flavoured water? I don't really understand how alcohol free spirit can be a thing? Suppose I'm just an old fart. That explains a lot these days.

I drink alcohol free lager. It tastes the same, but without the alcohol. I stopped boozing years ago. But each to their own, and I respect that.

Ian.

[Dod101]

What is the difference in meaning between organic net sales growth and organic volume growth?

Well to my understanding if sales growth gets ahead of volume growth it means that that the growth is coming more from increasing their prices than volume growth, ie buying more. You see that in a lot of businesses at the moment with inflation being where it is. I do not see that as being necessarily a good thing because you can only increase your prices so far before consumers start to cut back. I would prefer to see sales growth and volume growth more or less in tandem.

There was a story re Diageo that a lot of the downturn in US sales was because consumers had got back to normal after a big uptick during Covid but that does not seem to have got a mention in the conference calls. Personally, I think it is very difficult to make meaningful year on year comparisons at the moment considering the disruption caused by Covid over the last two or three years.

Dod

[Dod101]

One thing that bothers me a little is when I see adverts for alcohol free gin and similar. How long will it be before buyers realise it's just very expensive flavoured water? I don't really understand how alcohol free spirit can be a thing? Suppose I'm just an old fart. That explains a lot these days.

I drink alcohol free lager. It tastes the same, but without the alcohol. I stopped boozing years ago. But each to their own, and I respect that.

Ian.

Not sure that I see a lot of point in that but I am not criticising.

Dod

[idpickering]

I drink alcohol free lager. It tastes the same, but without the alcohol. I stopped boozing years ago. But each to their own, and I respect that.

Ian.

Not sure that I see a lot of point in that but I am not criticising.

Dod

Fair enough Dod, thank you.

Ian.

[idpickering]

Launch of partial tender offer for shares in East African Breweries PLC.

Today, following the announcement made on 14 October 2022, Diageo, through its wholly-owned indirect subsidiary, Diageo Kenya Limited ("Diageo Kenya"), announces that it has launched a partial tender offer to increase its aggregate equity stake in East African Breweries PLC ("EABL") from its current 50.03% to a maximum of 65%.

The tender offer price is Kenyan Shillings 192.00 per ordinary share and the maximum number of shares subject to the tender offer is 118,394,897. The tender offer period will run from 6 February 2023 to 17 March 2023. Further details are set out in the tender offer documents, which are available to shareholders of EABL on http://www.diageokenya-eabloffer.com.

https://www.investegate.co.uk/diageo-pl ... 00029049O/

Ian.

[idpickering]

Diageo commences new share buy-back programme.

Diageo plc (Diageo) today announces the commencement of its new share buy-back programme, as announced in Diageo's interim results for the six months ended 31 December 2022. This share buy-back programme will return up to an additional £0.5 billion of capital to shareholders and is to be completed before the end of fiscal 23.

Diageo is announcing today that it has entered into a non-discretionary agreement with Citigroup Global Markets Limited to enable the company to buy-back shares with an aggregate value of up to £0.5 billion (net of any fees payable to or by Citigroup Global Markets Limited under the terms of the agreement). This agreement will commence on 16 February 2023 and will end no later than 28 June 2023. The purpose of the new share buy-back programme is to reduce the share capital of Diageo plc. All shares repurchased under this agreement will be cancelled.

The launch of this new programme follows the successful completion of Diageo's return of capital programme in which £4.5 billion of capital was returned to shareholders since fiscal 2020 in four phases, completed on 31 January 2020, 11 February 2022, 5 October 2022 and 1 February 2023 respectively.

https://www.investegate.co.uk/diageo-pl ... 41451639Q/

Ian.

[idpickering]

Diageo completes acquisition of Don Papa Rum.

Further to the announcement on 17 January 2023, Diageo today announces that it has completed the acquisition of Don Papa Rum, a super-premium, dark rum from the Philippines.

This acquisition is in line with Diageo's strategy to acquire high growth brands with attractive margins that support premiumisation.

https://www.investegate.co.uk/diageo-pl ... 00015829S/

Ian.

[idpickering]

Close of partial tender offer for shares in East African Breweries PLC

Diageo, through its wholly-owned indirect subsidiary Diageo Kenya Limited ("Diageo Kenya"), is pleased to announce that it has successfully completed the partial tender offer to increase its aggregate equity stake in East African Breweries PLC ("EABL") from the current 50.03% to 65% (the "Tender Offer").

Noting that the Tender Offer was oversubscribed, Diageo Kenya applied the scale-down mechanism, specified in the Tender Offer Document, to purchase a pro-rata proportion of the shares that were tendered.

https://www.investegate.co.uk/diageo-pl ... 00010544U/

Ian.

[idpickering]

Sir Ivan Menezes to retire from Diageo - Debra Crew to be appointed Chief Executive Officer.

Today, Diageo announces that Sir Ivan Menezes has decided to retire as Chief Executive Officer and depart from the Diageo Board on 30 June 2023, following ten successful years leading the Company. Debra Crew, currently Chief Operating Officer, will be appointed Chief Executive Officer and join the Diageo Board, effective 1 July 2023.

Ivan joined Diageo through the merger of Guinness plc and Grand Metropolitan plc in 1997 and has held a number of senior positions in the business including Chief Operating Officer; President, Diageo North America; Chairman, Diageo Asia Pacific; and Chairman, Diageo Latin America and Caribbean. Ivan has been an Executive Director of Diageo since July 2012 and has served as Chief Executive Officer since July 2013, overseeing an outstanding period of change, growth and high performance.

During Ivan's tenure, Diageo has made great strides towards its ambition to become one of the best performing, most trusted and respected consumer products companies in the world. Diageo has grown significantly during this period, now selling over 200 brands in more than 180 markets and is today, the number one company by net sales value in Scotch whisky, vodka, gin, rum, Canadian whisky, liqueurs, and also tequila1, a category in which only eight years ago the company had no substantive position. And in December 2022, Guinness became the number one beer in the on-trade in Great Britain for the first time2.

Led by Ivan, Diageo has developed a leadership position in sustainability, becoming one of the top 1% of companies globally to achieve a "Double A" rating for Water Security and Climate Change from CDP (formerly the Carbon Disclosure Project), as well as a particularly strong stance on inclusion and diversity, with the company ranked number one in the UK, and number two globally, in Equileap's 2023 Gender Equality Report. And with Debra's appointment as Chief Executive Officer, women will make up more than 50% of Diageo's Executive Committee from 1 July 2023. During the past decade, Diageo's total shareholder returns have strongly outperformed the FTSE100, and the Company has continued its progressive policy to increase dividends every year. In January 2023, Ivan was awarded a Knighthood for services to Business and to Equality in His Majesty The King's 2023 New Year Honours List.

Prior to being appointed Chief Operating Officer in October 2022, Debra was President, Diageo North America and Global Supply, leading Diageo's largest market to 14% organic net sales growth in fiscal 2022, following on from 20% organic net sales growth in the prior year. Debra originally joined the Diageo Board as a Non-Executive Director in April 2019, before stepping down from the Board when appointed President, Diageo North America in July 2020.

Debra is the former President and CEO of Reynolds American, Inc., where she delivered strong performance growth before the company's acquisition, having previously served as President and Chief Operating Officer, and President and Chief Commercial Officer. Prior to that, Debra spent five years at PepsiCo, where she served as President, North America Nutrition; President, PepsiCo Americas Beverages; and President, Western Europe Region. Prior to PepsiCo, Debra held positions with Kraft Foods, Nestlé S.A. and Mars, Inc.

https://www.investegate.co.uk/diageo-pl ... 00133798U/

Ian.

[idpickering]

Intention to delist from Euronext Paris and Dublin

Today, Diageo plc ("Diageo") announces that it intends to submit applications for the delisting of its ordinary shares (ISIN: GB0002374006) from each of Euronext Paris and Euronext Dublin.

The decision by Diageo to delist was taken following a review of the trading volumes, costs and administrative requirements related to its listings on Euronext Paris and Euronext Dublin.

The delisting of Diageo's ordinary shares from Euronext Paris is subject to the approval of the board of directors of Euronext Paris and the delisting of Diageo's ordinary shares from Euronext Dublin is subject to the approval of Euronext Dublin. The delistings will not have any impact on Diageo's day-to-day operations in France or Ireland.

It is anticipated that Diageo's delisting from Euronext Paris will take effect on or around 26 May 2023 and that Diageo's delisting from Euronext Dublin will take effect on or around 30 May 2023, subject to the approval of Euronext Paris and Euronext Dublin respectively.

Diageo's listings on the London Stock Exchange (DGE) and the New York Stock Exchange (DEO) will not be impacted by the delistings from Euronext Paris and Euronext Dublin.

Investors whose shares are listed on Euronext Paris or Euronext Dublin are encouraged to consult with their own investment advisers as to how the delistings may affect them. Additional information about the delistings can also be found on Diageo's website at http://www.diageo.com.

Further announcements will be made in due course as required.

https://www.investegate.co.uk/diageo-pl ... 53071277W/

Ian.

[Dod101]

Ian's post drew me to take a detailed look at Diageo's Annual Report. It is well worth reading. Very clear and well set out. I had not realised that it had taken until the last financial year for Diageo and no doubt many other companies to reach the same profit as, in their case, 2019, prior to the pandemic. The Report is well set out and very clear. No nonsense about purpose and so on that we get from say Unilever. On another thread we were discussing amortisation and of course a large part of Diageo's Balance Sheet is represented by the value of their brands and they discuss that in some detail. For them, their brands have an indefinite life or so they say and so they do not write down the values, (except, I noticed, for Arthur Bell) I did not realise how small a proportion of their business both Bell's Whisky and Gordon's Gin is in the scheme of things. Both very popular in my part of the world.

Also noted that as tax collector's for HMRC, they raised Excise Duty of nearly £7 billion in their last tax year!

Dod

[idpickering]

VOLUNTARY DELISTING FROM EURONEXT PARIS.

Today, following its announcement on 13 April 2023, Diageo plc ("Diageo") announces that the delisting of its shares from Euronext Paris (ISIN:GB0002374006) (the "Paris Delisting") has been approved by the board of directors of Euronext Paris. It is currently anticipated that the Paris Delisting will take effect on 26 May 2023.

https://www.investegate.co.uk/diageo-pl ... 20503973X/

Ian.