Diageo ‘confident’ of growth in fiscal 2017

Diageo’s 2017 fiscal year has “started well”, giving the group “confidence” that it can achieve its full-year growth ambitions, CEO Ivan Menezes has said.

Ivan Menezes said Diageo has experienced a good start to its 2017 fiscal year

In a statement released ahead of Diageo’s AGM, CEO Ivan Menezes said “improved marketing, innovation, and commercial execution” during the group’s last financial year has set the group up to “deliver a stronger performance”.

The Johnnie Walker maker’s priorities for fiscal 2017 – Scotch, US spirits and India – will drive an improved top line growth, according to Menezes.

The CEO also said since Diageo “no longer takes productivity related costs as an exceptional item”, these costs will impact its operating profit margin in H1 2017.

“In the second half productivity related costs will decline and be offset by higher savings as well as the benefits from our targeted reinvestment of those gains,” added Menezes. “This will contribute to organic margin expansion for the full year.”

Diageo announced last year it was looking to make £500 million in savings over a three-year period, as part of its “productivity programme”. Recent reports have speculated that this programme could lead to reduced staffing levels at its UK headquarters and global operations workforce.

In July, the group reported that its 2015/16 net sales had slipped 3% on a reported basis to £10.4 billion, while net profit fell 6% to £2.24bn, both impacted by currency weaknesses against the sterling.

At the time, the group forecast a “stronger performance” of mid-single-digit top line growth in fiscal 2017 off the back off more favourable exchange rate movements, which it said will add £1.1bn to net sales.

Menezes’s latest statement continued: “Our top line momentum and progress in implementing productivity changes, gives us continued confidence in achieving our objective of mid-single digit top line growth, and over three years ending fiscal 19 delivering 100bps of organic operating margin improvement.”