Seagram acquisition delivers

Diageo reports strong financial results but closes NBV unit

IT’S A MIXED BAG of news from Diageo this month.  The global drinks group has released its Year End Trading update with some pleasant results but has also announced that it is to close its New Business Venturesm (NBV) unit.

The NBV arm of Diageo had the remit of expanding the group’s interests into other sectors such as travel or media and was launched at the height of the dotcom boom around the summer of 2000.

However, Bev Ford of the corporate communications department says that this does not mean that Diageo will cease to look for new business opportunities.  "We prefer to say that the NBV unit has been disbanded rather than closed," she says.

"When we set up the unit it was about exploring new opportunities and what we learned was that it was important to drive those capabilities from within the business. So, we have just reabsorbed some of the ventures into existing departments and are still very much looking into expansion."

The division’s managing director, Graham Sumeray is similarly positive about the closure: "This move is very much about concentrating on the core of our business, the manufacture and sale of alcoholic beverages.

Many of the projects that support this stand will be continued, even some of those that are at start up phase – our ‘celebrations’ initiative where we are trying to get people to consider spirits more, for example, and we will be continuing our partnership with toptable.co.uk."

Sumeray is now looking for a general management post within Diageo.  Meanwhile, the rest of the company can remain positive as it releases its Year End Trading Report, which shows continuing strong top and bottom line growth.

Despite difficult market conditions, with SARS and the conflict in Iraq, the full year organic operating profit is anticipated to be marginally better than the 6% achieved in the first half of the year.

Paul Walsh, CEO of Diageo said: "All consumer goods companies have faced an environment of declining consumer confidence and significant global events in the year.  Despite these circumstances, Diageo will deliver consistent performance in top and bottom line organic growth, continued growth in priority brands and improved share.  On a reported basis volume is expected to be up 9% as the Seagram acquisition continues to deliver above our original projections."

Global priority brands such as Smirnoff and Guinness have continued to drive growth and, although weak within the UK and the US, the ready to drink (RTD) category is performing well overall and volumes are expected to be up at the end of the year by about 5%.

The major markets of North America and the UK, continue to be strong, with Smirnoff and Baileys brands remaining popular in both.  The increased excise duty on spirits introduced in Ireland has affected volume performance in this market for Diageo, however, and the figures also report continuing weakness in Latin America.lsh, CEO: "The trading environment remains tough"