Thursday 18 July 2019

Diageo has 'appropriate stock in place' in case of no deal Brexit, as profit jumps

Diageo’s historic St James’s Gate brewery
Diageo’s historic St James’s Gate brewery
Ellie Donnelly

Ellie Donnelly

Guinness-owner Diageo has "appropriate stock levels in place" should the UK leave the European Union without a deal on March 29.

However, the group said it does not believe that, in the event of either a negotiated exit or no-deal scenario, the direct financial impact it experiences will be material.

"While there continues to be uncertainty over future trading arrangements between the UK and the rest of the world, we have mitigation plans in place for the short-term disruption that could arise from a 'no deal' scenario," Diageo said in an interim update.

It added that it had considered the impact to its supply chain in the event of a no-deal, which it assessed as "limited," and that it has "appropriate stock levels in place to mitigate this risk."

Elsewhere, and reported net sales for the group in the six months to 31 December were £6.9bn (€7.9bn), a 5.8pc increase year-on-year, with organic growth partially offset by unfavourable exchange rates.

Operating profit at £2.4bn (€2.7bn) was up 11pc, driven by organic growth.

Diageo added that all regions contributed to broad based organic net sales growth, which was up 7.5pc, with organic volume up 3.5pc.

Cash flow continued to be strong, with net cash from operating activities at £1.6bn, up £356m.

Ivan Menezes, CEO of Diageo said: "Diageo delivered broad-based volume and organic net sales growth across regions and categories. We continue to expand organic operating margins while increasing investment in our brands ahead of organic net sales growth."

Looking forward the group said the exchange rate movement for the year ending 30 June 2019 is estimated to adversely impact net sales by approximately £80m (€91.5m) and operating profit by approximately £10m (€11.4m).

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