The group once again delivered positive results, with reported net sales having increased by 4.2% year-on-year to £7.2 billion. Operating profits for the period also rose by 2% year-on-year to £2.4 billion, despite headwinds from currency exchange and the net impact of acquisitions and disposals during the period. The results were broadly in line with expectations although management have dampened down full year guidance on organic net sales to the lower end of the 4-6% range due to uncertainty surrounding global trade tariffs, a slowdown in India and the recent coronavirus outbreak in China.
The impact of the outbreak on consumer goods is still relatively unknown, however the beverage sector is likely to be exposed with Greater China typically a driver of strong growth within Asia Pacific for the group. With travel slowing in the region whilst the outbreak unfolds, travel retail for the second half of the year is expected to be lower. Elsewhere, growth continues to be driven by the US, where the resilient spirits market is growing by over 5% per annum. The group is well-placed to benefit with the region accounting for a third of consolidated sales.
Despite ongoing uncertainties, the group delivered solid free cash flow at almost £1 billion during the six-month period and returned £1.1 billion to shareholders via share buy backs. This is consistent with their plans to return up to £4.5 billion of capital to shareholders over the three-year period to 30 June 2022. Furthermore, management continue to focus on building strength in the company’s brands through investment in innovation and marketing.