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Diageo warns of ‘Significant Impact’ to Business

Drinks giant Diageo has released a trading update statement in respect to the global spread of COVID 19, warning that the widespread closing of bars and pubs in kkey markets is having a ‘significant impact’ on business performance.

“Widespread containment actions put in place by governments across the globe in March, including the closure of bars and restaurants, are having a significant impact on the performance of our business,” said the statement.

Diageo has allocated significant resources to assisting individuals and groups during the COVID 19 crisis, including donating alcohol to make more than eight million bottles of sanitiser for frontline healthcare workers around the world, while providing support packages for bartenders and others impacted by COVID 19 related closures.

Across Europe approximately 50% of Diageo’s sales are accounted for in the on-trade and this has been heavily impacted by closures. It is unknown if this is balanced by an increase in off-trade sales.

The company has also put on hold a share buyback scheme aimed at increasing the share price, and has suspended shareholder returns for the remainder of fiscal 2020.

The company is reducing all discretionary expenditure, as well as stopping all advertising and promotional spending ‘that will not be effective in the current environment’. “We are also tightly managing working capital and deferring discretionary capital expenditure projects. We are providing an appropriate level of support to our key suppliers and customers to ensure we are strongly positioned for a recovery in consumer demand,” said the release.

The statement continued: “Given the global nature of the COVID-19 pandemic, and the uncertainty around the severity and duration of the impact across multiple markets, we are not in a position to accurately assess the impact of this on our future financial performance. We are therefore withdrawing our guidance on group organic net sales growth and organic operating profit growth for fiscal 2020.”

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