Alcoholic drinks giant Diageo (DGE) gained 2.3% to £36.44 as it signalled a strong start to its current financial year and a positive outlook for margins.
Diageo, whose year ends in June, attributed the robust trading to improving sales momentum amid a continued recovery in on-trade revenue following the reopening of bars and restaurants.
The company, which makes Johnnie Walker whisky and Guinness among other leading brands, noted its North American business was performing strongly, while Europe was recovering ahead of expectations.
Looking ahead, the firm said it expected organic operating margins to benefit from a further recovery in sales volumes, positive channel mix and a 'premiumisation' trend despite ongoing inflationary pressures.
'As previously indicated, we are managing rising inflationary pressures, which are partly due to supply chain constraints,' it added.
‘GOOD THINGS COME TO THOSE WHO WAIT’
AJ Bell investment director Russ Mould commented: ‘Guinness manufacturer Diageo is demonstrating that good things truly do come to those who wait as, having ridden out the worst of the pandemic, the company reports a really strong start to its new financial year.
‘The company is benefiting from people opting for premium brands and greater on-trade spending as people get back to restaurants and bars.
‘Impressively this is expected to bolster margins, despite the company facing extra costs associated with supply chain constraints.’
Mould notes that the company is not complacent about ongoing Covid-related uncertainty but nonetheless continued to adopt a long-term perspective by investing in marketing and its commercial capabilities.
