Guinness, Smirnoff and Johnny Walker maker Diageo (DGE) delivered better-than-expected half year organic sales and a welcome improvement in its US spirits market.
North American customers could barely get enough of whisk(e)y brands, including Crown Royal and Bulleit, and it was a similar story for Johnnie Walker Black Label scotch.
This saw US spirits net sales rise 4% while volumes across North America increased 3%. That fed through to overall organic volume growth of 4.4%, substantially better than reported consensus expectations of 3.1%, while underlying operating profit rose by a similar margin.
'Organic sales are better-than-expected even after excluding an earlier Chinese New Year,' explained Liberum analyst, Alicia Forry.
Ivan Menzies, Diageo's CEO, put the US recovery down to 'our focus on marketing with impact, innovating at scale and expanding our route to consumer.'
There has certainly been a big marketing push, the budget going up 10.4% overall, and 16% in the US, the latter to £308m, about a third of the group's overall spend. But Diageo is clearly spending money wisely, and the underlying spend on its marketing push in the US actually went down 2% during the six months to 31 December.
The market's reaction was to chase the share price more than 4% higher to £22.29, making the group one of the biggest gainers on the FTSE 100 on Thursday.
But that rise is unlikely to convince sceptics, Liberum's Forry among them. The analyst still doesn’t see Diageo's valuation appealing to any but the most ardent fan. The stock is changing hands on a current year PE of 21.1, even though Forry admits that's roughly in line with peers Pernod and Brown-Forman, on 19.3 and 21.1 respectively, according to her calculations.
