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Diageo poised for return of nightclubs but warns of volatility ahead

Diageo increased its dividend by 5%

Diageo (LON:DGE), the alcoholic beverages company, confirmed on Wednesday that its net sales rose by 16% on an organic basis to £12.7bn.

The company, which makes Smirnoff, Guiness and Gordon’s, saw growth in all regions, which it put down to its downturn in sales during the pandemic.

Diageo’s underlying profit rose at a quicker rate than its sales, with an increase of 18% to £3.7bn.

The FTSE 100 company confirmed it will pay a final dividend off 44.59p per share, an increase of 5% compared to the year before, bringing its full year payment to 72.55p.

The alcohol seller is expecting its organic net sales growth to continue into the next financial year, as well as anticipating a return to pre-pandemic levels of growth in North America.

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At the time of writing the Diageo share price is down by 0.31%.

Sophie Lund-Yates, Senior Equity Analyst at Hargreaves Lansdown, commented further on Diageo’s results: 

“As the maker of Smirnoff, Guinness and Gordan’s it comes as no surprise that the shuttering of bars and night clubs left Diageo with a nasty hangover of problems.”

“However, the strength of the group’s brands means it was able to recoup some of its losses through a huge increase in supermarket trade in some key markets, and it’s come out of the pandemic in remarkably resilient shape. It’s now poised to make the most of the re-opening of Europe’s bar and nightclub scene.”

“Something to keep in mind is the volume of footfall in bars and nightclubs. There’s certainly excitement about re-opening, we’ve all seen the early queues, but there’s also a have-fun-at-home sentiment that’s been bred by lockdowns. It’s possible this could see a permanent reduction in the number of feet on dancefloors as things get back to normal, which could see the likes of Diageo face a headwind.”

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