{"id":98678,"date":"2026-08-06T17:01:09","date_gmt":"2026-08-06T17:01:09","guid":{"rendered":"https:\/\/www.europesays.com\/britain\/98678\/"},"modified":"2026-08-06T17:01:09","modified_gmt":"2026-08-06T17:01:09","slug":"diageos-cost-cutting-pleases-investors-investors-chronicle","status":"publish","type":"post","link":"https:\/\/www.europesays.com\/britain\/98678\/","title":{"rendered":"Diageo\u2019s cost-cutting pleases investors – Investors’ Chronicle"},"content":{"rendered":"

Investors raised a glass to Diageo\u2019s (DGE)<\/a> keenly anticipated full-year figures and details of its new strategy, as the booze group\u2019s share price made up some lost ground on results day. <\/p>\n

Although statutory figures were less than impressive, organic operating profit increased by 2 per cent, on a 116 basis point rise in the related margin. It was achieved despite an unfavourable product mix in the US, and largely due to mounting cost savings, the latter the most pertinent issue given this year\u2019s change at the helm.\u00a0<\/p>\n

The market valuation has been on a down-leg ever since January 2022 due to a succession of setbacks. Some were beyond management\u2019s control, such as changing drinking habits among Gen Z and millennials, but other issues, such as the excess inventory in Latin America and the Caribbean, were avoidable. <\/p>\n

If you were to identify Diageo\u2019s primary bull point from an historical perspective, it would have to be brand strength. Products such as Johnnie Walker and Smirnoff, and many more besides, have long been market leaders. But that primacy may well have bred a degree of complacency.\u00a0<\/p>\n

Whatever the reasons behind the group\u2019s underperformance, a tonic was obviously needed. So, the ex-boss of Tesco (TSCO), Sir Dave Lewis, was brought in as chief executive at the beginning of this year to shake (or stir) things up.<\/p>\n

The chief executive\u2019s new strategy has seen the group take on the best part of a $1bn (\u00a3746mn) restructuring charge linked to the implementation of a new operating framework, which, among other outcomes, is designed to deliver around $850mn in cost savings (over two years), starting in fiscal 2027. <\/p>\n

With capital discipline much to the fore, fat is being systematically cut from the bone, as evidenced by deals to offload East Africa Breweries and the Royal Challengers Bengaluru cricket team. A steep reduction in the annual dividend is in line with the new dividend policy announced in February.\u00a0<\/p>\n

A great deal of attention will be paid to how Sir Dave contends with Chinese government anti-grift policies, which have weighed on the group\u2019s CWS (Chinese white spirits \u2013 baijiu) interests. You can tell they\u2019ve been a major drag on both Asia-Pacific and group performance by the prevalence of \u201cex-CWS\u201d comparators within the results.\u00a0<\/p>\n

FactSet consensus gives IFRS earnings per share of 114.7\u00a2 for this year, rising to 126\u00a2 in 2028.\u00a0<\/p>\n

The positive market reaction was almost certainly a case of \u201cnot as bad as expected\u201d, given the absence of a rumoured profit reset. But even with further rationalisation measures in train, including reduced marketing costs and job cuts, the turnaround won\u2019t be achieved overnight. Hold.<\/p>\n

Last IC view: Hold, 1,754p, 25 Feb 2026<\/a><\/p>\n

DIAGEO (DGE)\u00a0\u00a0\u00a0\u00a0ORD PRICE:1,743pMARKET VALUE:\u00a3 38.87bnTOUCH:1,743-1,744p12-MONTH HIGH:2,142pLOW: 1,296pDIVIDEND YIELD:2.1%PE RATIO:30NET ASSET VALUE:487\u00a2*NET DEBT:154% \u2020Year to 30 JunTurnover (\u00a3bn)Pre-tax profit (\u00a3bn)Earnings per share (p)Dividend per share (p)202222.44.3914076.18Year to 30 JunTurnover ($bn)Pre-tax profit ($bn)Earnings per share (\u00a2)Dividend per share (\u00a2)202328.35.6419698.5202427.95.46173103.5202528.03.54106103.5202627.82.5678.150.0% change-1-28-26-52Ex-div:15 OctPayment:3 Dec\u00a31 = $1.34. *Includes intangible assets of $13.4bn, or 600\u00a2 a share. \u2020Does not include \u2018other financial liabilities\u2019 of $642mn (net).<\/p>\n","protected":false},"excerpt":{"rendered":"Investors raised a glass to Diageo\u2019s (DGE) keenly anticipated full-year figures and details of its new strategy, as…\n","protected":false},"author":2,"featured_media":98679,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":"","_share_on_mastodon":"0"},"categories":[21250],"tags":[4110,320,21834,703,702],"class_list":["post-98678","post","type-post","status-publish","format-standard","has-post-thumbnail","category-diageo","tag-diageo","tag-ftse-100","tag-results-trading-updates","tag-standard-article","tag-stocks-shares"],"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@UnitedKingdom\/117049641121712705","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts\/98678","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/users\/2"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/comments?post=98678"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/posts\/98678\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/media\/98679"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/media?parent=98678"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/categories?post=98678"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/britain\/wp-json\/wp\/v2\/tags?post=98678"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}