Diageo said it had “got off to a strong start” in its fiscal year, forecasting improvement in operating margins despite supply chain constraints.
Updating the market manager of its annual general meeting, Diageo said it has seen organic net sales momentum across all regions in its new fiscal year as it benefits from the resilience of the non-commerce market and the continued recovery in non-trade trade.
He highlighted the short-term volatility and continued impact of future waves of Covid-19, but said he expects organic operating margin to benefit from a further recovery in sales volumes, a positive mix of channels and premiumization trends.
This recovery will be tempered by rising costs, but Diageo said it is managing mounting inflationary pressures, which are in part due to supply chain constraints.
Its North American business is “performing well,” despite some supply chain constraints, reflecting resilient consumer demand.
In Europe, it is recovering ahead of expectations, with non-trade demand remaining robust and good momentum in non-trade.
Africa, Asia-Pacific and Latin America and the Caribbean are also doing well, although volatility in these markets is expected to persist.
Travel retail continues to be disrupted.
Ivan Menezes, Managing Director, said: “I am satisfied with the performance of our company and remain confident in our ability to generate long-term sustainable growth and shareholder value. We will continue to do business the right way, grain to glass, for all of our stakeholders. “
Diageo stock is up 2.6% to 3,653p as of the update.
Baby boomer ready meals supplier Parsley tin lowered its sales and profit forecast for the full year as it was forced to cut marketing spending due to supply chain constraints.
The recently listed group said it saw revenue growth of 18% year-on-year for the 8-month period to Aug.31 in a business update this morning.
Revenue rose to £ 17.8million from £ 15.1million in the period, while products shipped also increased by 18% in the same period to reach 7.8million units against 6.6 million.
However, he said he was facing manpower issues throughout his supply chain and was severely limited by inventory availability at around 50% of the plan.
As such, the board has made the ‘hard’ decision to cut marketing investment, and this is expected to continue until the expected short-term supply chain constraints wear off. .
As a result, the group now expects annual revenue of around £ 25million, slightly higher than last year, with a consequent impact on the group’s pre-tax loss.
The company said it remains encouraged by the first signs of product releases in the third quarter and will provide a further update before the year ends.
CEO Kevin Dorren commented, “Implementing our product innovation plan remains the primary focus for the company as we navigate our way through the widely reported supply chain disruption. The second half of the year was even more impacted as we made the disappointing decision to reduce our planned marketing investments. However, I and the Board of Directors strongly believe that Parsley Box’s long-term growth prospects are unchanged.
Elsewhere, English wine producer Gusborne posted 63% growth in the first half, driven by strong direct sales to consumers and a rebound in commercial sales.
Net sales for the period were £ 1.45million, an increase of 63% from £ 0.89million in the corresponding period last year.
This increase in net sales for the six-month period is more than double the annual growth rate of 27.6% for the year ended December 31, 2020 and net sales for the year ended December 31, 2021. should exceed expectations.
It saw further strong growth in Direct To Consumer channel sales following the significant switch to DTC seen in 2020, with net DTC wine sales of £ 381,000 compared to £ 184,000 last year, or more than double that of the period of the previous year.
UK commercial sales rebounded strongly from their previous decline in 2020, when they were badly affected by hotel closures, with net wine income of £ 596,000 from £ 223,000.
Other income, at £ 162,000, was up from £ 54,000, due to increased visitors to its cellar door operations in Kent.
International sales of £ 309,000 were down from the corresponding figure of £ 429,000 last year, in part due to the continued travel disruption in the global travel retail sector.
Operating expenses for the six-month period, excluding depreciation, were £ 1.77 million, compared to £ 1.12 million, including the planned increase in sales and marketing expenses of £ 1.15 million. of pounds sterling, reflecting the continued investment in the growth of the company and its sales beyond the current financial position. year.
Selling and marketing expenses, which are largely discretionary, continue to represent a relatively high proportion of net income during this phase of the planned growth of the business.
As a result, its Adjusted EBITDA loss amounted to £ 0.95m versus £ 0.6m, which was in line with the expectations and the long-term growth strategy of the group.
Full-year Adjusted EBITDA loss is expected to be slightly higher than last year due to higher planned sales and marketing expenses designed to drive faster sales growth.
Charlie Holland, Chief Winemaker and CEO, commented: “We are delighted to report annual net sales growth of 63% in the first six months of 2021, despite the challenges posed by COVID-19. We expect significant commercial growth over the next few years to capitalize on our luxury brand positioning.
“The current business continues to reflect strong sales growth, and we remain confident in the long-term outlook for the business based on continued growth in direct-to-consumer sales, international expansion and establishment. direct relationships with key clients in the UK hospitality industry. “
Ultimately, EG Group announced that it had increased hourly rates of pay for 10,500 employees in the UK “in recognition of their hard work and commitment throughout the pandemic”.
Increased pay rates will apply to all EG service stations and catering brands in the UK, effective October 1, 2021.
Staff aged 18 and over will now be paid a minimum of £ 9.50 per hour, while more experienced colleagues such as team leaders and supervisors will receive a minimum of £ 10.00 per hour. time. These changes represent an average hourly wage increase of more than 5%.
In addition, EG is investing more in more than 200 existing colleagues – which is more than six times more than in its first apprenticeship attempt – who will embark on various apprenticeship programs in the company.
Mohsin Issa CBE and Zuber Issa CBE, Co-Founders and Co-CEOs of EG Group, commented: “Our colleagues have put everything in place and have been nothing short of heroic during often very difficult times since the start of the pandemic. It is through their hard work and dedication that EG has continued to be a growing company, showing strong performance over the past 12 months.
“We are grateful to each of them for their contributions and therefore provide them with a total awards package which we believe is among the best in the country.”
In the markets this morning, the FTSE 100 is up 0.6% to 7,151.2 pts.
Early risers include Deliveroo, up 3.1% to 302.3p, Greggs, up 2.1% to 3,068p and Glanbia, up 1.5% to € 14.29.
Fallers include Parsley Box, which plunged 21.8% to 77.2p, Science in Sport, down 3.6% to 76.2p and McBride, down 3.5% to 73.6p.
Yesterday in the city
The FTSE 100 jumped 1.1% to 7,108.1 pts yesterday to more than mitigate Tuesday’s losses.
The increases included Bakkavor, up 9.4% to 135.2p, McColl’s Retail Group, up 6.6% to 20.2p, Just Eat Takeaway.com, up 2.1% to 5,628p, Compass Group, up 1.9% to 1,542p, Coca-Cola HBC, up 1.8% to 2,432p and Deliveroo, up 1.5% to 293.2p.
Morrisons rose 1.4% to 296p after the UK Takeover Panel said there would be an auction for control of the supermarket on Saturday.
Slaughterers of the day included the SSP group, down 5.4% to 274p after the group said yesterday revenues were down 53% from pre-pandemic levels.
Other cutters include THG, down 1.9% to 530p, Greencore, down 1.6% to 144.3p, Parsley Box, down 1.4% to 98.6p, Pets at Home, in down 1.1% to 492.4p and Ocado, down 0.8% to 1,668.5p.