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Why Diageo Is Up 34% During the Last 12 Months

By Douglas Adams - Apr 15, 2013 at 9:40PM

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Diageo has issued a series of favorable statements since this time last year.

LONDON -- Diageo (DGE 0.12%) (DEO -0.26%) has advanced 34% to 1,987 pence during the last 12 months, making the share one of the best performers in the FTSE 100.

The company, which holds a hefty lineup of renowned brands in the drinks industry, such as Guinness beer, Baileys Irish cream, and Jose Cuervo tequila, seems to have impressed investors with a series of strong statements.

During May last year, Diageo announced nine-month results that highlighted organic net sales had advanced 7%, with revenue within Africa, Asia, and Latin America up between 10% and 18%. Underlying sales in Europe, however, fell by 1%.

During August, Diageo's final-year results revealed sales had climbed 6% to almost 11 billion pounds and profits had gained 9% to 3.2 billion pounds, helped in part by the acquisition of Turkish firm Mey Içki. Free cash flow came in at 1.6 billion pounds, which supported an 8% dividend lift to 43.5 pence per share

Then in January, Diageo disclosed interim results that revealed operating profits had climbed 9% to surpass 2 billion pounds. Also up by 9% was the half-year dividend, sitting comfortably at 18.1 pence per share.

Paul Walsh, Diageo's chief executive, said:

These results reflect the global strength of our strategic brands, our leadership in the U.S. spirits market and our increasing presence in the fastest growing markets of the world. Our expanding reach to emerging middle class consumers in faster growing markets was the key driver of our volume growth, while net sales growth was driven by our pricing strategy and premiumization, especially in the U.S. This drove gross margin expansion, which together with our continued focus on operating efficiencies, delivered operating margin improvement.

Walsh also said the strong half-year results underpinned the group's medium-term prospects and guidance.

Diageo's third-quarter results for 2013 will be published on April 18, which may reveal further positive news that can encourage investors.

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