Benzinga | May 12, 2021 06:54AM EDT

Diageo Sees Organic Operating Profit Of At Least 14% For FY21; Co. Also Says Recommencing Return Of Capital Program Of Up To 4.5B

Diageo plc (Diageo) today announces that it expects organic operating profit growth to be at least 14% in fiscal 21, slightly ahead of organic net sales growth. In the context of this strong performance, Diageo is recommencing its return of capital (ROC) programme of up to ?4.5 billion to shareholders announced on 25 July 2019. Due to the impact of Covid-19, the original completion date for the ROC programme has been extended by two years to 30 June 2024.



Current trading update



Following a strong performance in the first half of fiscal 21, with a return to organic net sales growth, our business has continued to deliver a good recovery across all regions. In North America, our largest market, our performance has remained particularly strong, reflecting resilient consumer demand, the breadth of our portfolio and the effectiveness of our marketing and innovation.



In Europe, we are benefitting from strong execution in the off-trade channel and the partial re-opening of the on-trade channel in certain markets. In Africa, Asia Pacific and Latin America and the Caribbean, we are seeing a continued recovery in most markets, despite the ongoing impact from Covid-19. Travel retail remains severely impacted.



Return of capital programme



On 25 July 2019, the Board of Diageo approved the return of up to ?4.5 billion to shareholders in the three-year period from 1 July 2019 to 30 June 2022, utilising the most appropriate mechanic of either share buybacks or special dividends depending on market conditions. Under the first phase of the ROC programme, which ended on 31 January 2020, Diageo repurchased shares to a value of ?1.25 billion. On 9 April 2020, Diageo announced that it had not initiated the next phase of the ROC programme.



Diageo is announcing today that it is initiating the second phase of its ROC programme of up to ?1.0 billion to be completed by the end of fiscal 22. Diageo has entered into a non-discretionary agreement with UBS AG London Branch (UBS) to enable the company to buy back shares. This agreement will commence on 12 May 2021 and is expected to end no later than 12 November 2021 and will be for a value of up to ?0.5 billion. All shares repurchased will be cancelled. Further execution phases of the ROC programme will be announced in due course.