Diageo (DGE)

[idpickering]

Result of AGM.

At the Annual General Meeting of Diageo plc held on Thursday, 28 September 2023 (the "AGM"), all resolutions contained in the Notice of Annual General Meeting 2023 (the "Notice") were passed.

The results of the poll held at the AGM are as follows:

https://www.investegate.co.uk/announcem ... gm/7787064

Ian.

[idpickering]

Diageo launches and prices $1.7 billion USD bonds.

Diageo, a global leader in beverage alcohol, yesterday launched and priced a $1.7 billion SEC-registered bond offering, consisting of $800 million 5.375% fixed rate notes due 2026 and $900 million 5.625% fixed rate notes due 2033.

The issuer of the bonds is Diageo Capital plc, with payment of principal and interest fully and unconditionally guaranteed by Diageo plc. Proceeds from this issuance will be used for general corporate purposes. The bond offering is scheduled to settle on 05 October 2023.

BofA Securities, Deutsche Bank Securities, RBC Capital Markets and Standard Chartered Bank acted as joint active book-running managers on this offering.

https://www.investegate.co.uk/announcem ... ds/7792349

Ian (No holding).

[idpickering]

Diageo plc publishes re-presented US Dollar financial information.

As announced on 1 August 2023 with its Preliminary Results for the financial year ended 30 June 2023, in line with reporting requirements the functional currency of Diageo plc has changed from sterling to US dollar starting 1 July 2023 - with this change being applied prospectively. This is because the group's share of net sales and expenses in the US and other countries whose currencies correlate closely with the US dollar has been increasing over the years, and that trend is expected to continue in line with the group's strategic focus.

Diageo has also decided to change its presentation currency from sterling to US dollar with effect from 1 July 2023, applied retrospectively, as it believes that this change will provide better alignment of the reporting of performance with its business exposures.

https://www.investegate.co.uk/announcem ... ls/7803751

Ian.

[BullDog]

Diageo plc publishes re-presented US Dollar financial information.

As announced on 1 August 2023 with its Preliminary Results for the financial year ended 30 June 2023, in line with reporting requirements the functional currency of Diageo plc has changed from sterling to US dollar starting 1 July 2023 - with this change being applied prospectively. This is because the group's share of net sales and expenses in the US and other countries whose currencies correlate closely with the US dollar has been increasing over the years, and that trend is expected to continue in line with the group's strategic focus.

Diageo has also decided to change its presentation currency from sterling to US dollar with effect from 1 July 2023, applied retrospectively, as it believes that this change will provide better alignment of the reporting of performance with its business exposures.

https://www.investegate.co.uk/announcem ... ls/7803751

Ian.

A kite flying exercise before moving their stock listing from the UK to the USA? Seems a growing trend for companies under valued against their American peers.

I'm considering buying some DGE. The yield is a bit low but the consistent dividend increases and the shares near a year low are tempting me.

[Dod101]

It might be but Unilever reports in Euros and as we all know has recently moved its HO to London . In fact on that subject I am surprised that it does not report in US Dollars as many of its big markets have currencies linked to the US Dollar rather than the Euro.

HSBC reports in US Dollars but that has not influenced it in the least about its main listing.

I doubt that there is much in it one way or the other, but who knows?

Dod

[monabri]

I'm considering buying some DGE. The yield is a bit low but the consistent dividend increases and the shares near a year low are tempting me.

When one looks at the P/E of Brown-Forman it is verging on 2x that of DGE.



https://www.brown-forman.com/

[BullDog]

I'm considering buying some DGE. The yield is a bit low but the consistent dividend increases and the shares near a year low are tempting me.

When one looks at the P/E of Brown-Forman it is verging on 2x that of DGE.



https://www.brown-forman.com/

Yes, I know. Wouldn't surprise me in the slightest if DGE move their primary listing to New York. Company would be worth much more, it seems. Others who might well move are Shell and BP. IMO.

[simoan]

I'm considering buying some DGE. The yield is a bit low but the consistent dividend increases and the shares near a year low are tempting me.

When one looks at the P/E of Brown-Forman it is verging on 2x that of DGE.

https://www.brown-forman.com/

This is a bit of an exaggeration. The forecast PERs are 18x for Diageo and 28x for Brown Forman. However, P/E alone is a fairly useless measure. For FY24, BF.B is forecast to grow earnings 24% vs a 12% fall in earnings for DGE.

The standard way to compare company valuations in the same industry is using EV/EBITDA. On that basis, DGE looks cheap at 15x compared to 23x for BF.B.

[monabri]

When one looks at the P/E of Brown-Forman it is verging on 2x that of DGE.

https://www.brown-forman.com/

This is a bit of an exaggeration. The forecast PERs are 18x for Diageo and 28x for Brown Forman. However, P/E alone is a fairly useless measure. For FY24, BF.B is forecast to grow earnings 24% vs a 12% fall in earnings for DGE.

The standard way to compare company valuations in the same industry is using EV/EBITDA. On that basis, DGE looks cheap at 15x compared to 23x for BF.B.

I was working off current ratios.

(If forecast free cash flows are "pie in the sky" , then isn't everything else (earnings) likewise when it comes to 'forecast' - a forecast being a best guess?)

viewtopic.php?p=619019#p619019

[simoan]

This is a bit of an exaggeration. The forecast PERs are 18x for Diageo and 28x for Brown Forman. However, P/E alone is a fairly useless measure. For FY24, BF.B is forecast to grow earnings 24% vs a 12% fall in earnings for DGE.

The standard way to compare company valuations in the same industry is using EV/EBITDA. On that basis, DGE looks cheap at 15x compared to 23x for BF.B.

I was working off current ratios.

(If forecast free cash flows are "pie in the sky" , then isn't everything else (earnings) likewise when it comes to 'forecast' - a forecast being a best guess?)

viewtopic.php?p=619019#p619019

I was working on FY24 forecasts. Earnings do not always turn into free cashflow and cashflow will vary much more from year to year. Earnings can actually increase greatly but FCF decrease if a company increases Capex e.g. makes an acquisition. That’s why trying to forecast FCF is virtually impossible and not worthwhile.

[tjh290633]

I think that Diageo are doing what AstraZeneca did, changing their accounting currency to one which reflects the majority of their income. The dividends still come in GBP, and are declared as such.

TJH

[Dod101]

I think that Diageo are doing what AstraZeneca did, changing their accounting currency to one which reflects the majority of their income. The dividends still come in GBP, and are declared as such.

TJH

In their statement re this issue (part of their recent results statement) they tell us that they will declare their dividends in US Dollars but ordinary shareholders will continue to be paid in Sterling. ADR holders will continue to be paid in US Dollars. Not, I think, that it matters much.

Dod

[ADrunkenMarcus]

Today marked 25 years since I inherited a small number of Diageo shares. I was then far too young to hold them in my own name.

Since then, the share price has risen from 553p to 3095p - up about 460 percent. Dividends paid total just over 200 percent of the book cost. The share price has compounded a little over 7 percent a year and the dividend a little over 6 percent a year. Slow but steady and a very satisfying result. The share price had topped 4000p in recent years, at which point the return looked even healthier!

Best wishes


Mark.

[monabri]

Today marked 25 years since I inherited a small number of Diageo shares. I was then far too young to hold them in my own name.

Since then, the share price has risen from 553p to 3095p - up about 460 percent. Dividends paid total just over 200 percent of the book cost. The share price has compounded a little over 7 percent a year and the dividend a little over 6 percent a year. Slow but steady and a very satisfying result. The share price had topped 4000p in recent years, at which point the return looked even healthier!

Best wishes


Mark.

I can't claim anything like that return! My average share price is £29.09 ..this value was reached after topping up during Covid (March 2020) when the sp languished in a range of £22 to £25. I brought my holding up to ~4% (currently 4.1%) of my total portfolio. The XIRR over this time is a low 3.8% so hopefully there will be better days ahead. I'd like to top up but funds are limited and there are other "temptations" (although I do seem to have managed to overcome my Guitar buying habit).

[idpickering]

Diageo commences new share buy-back programme.

Diageo plc (Diageo) today announces the commencement of its new share buy-back programme, as announced in Diageo's preliminary results for the fiscal year ended 30 June 2023. This share buy-back programme will return up to $1.0 billion of capital to shareholders and is to be completed before the end of fiscal 24.

Diageo is announcing today that it has entered into a non-discretionary agreement with Merrill Lynch International to enable the company to buy-back shares with an aggregate value of up to $1.0 billion (net of any fees payable to or by Merrill Lynch International under the terms of the agreement). This agreement will commence on 12 October 2023 and will end no later than 26 June 2024. The purpose of the new share buy-back programme is to reduce the share capital of Diageo plc. All shares repurchased under this agreement will be cancelled.

The launch of this new programme follows the successful completion of Diageo's additional return of capital programme during the second half of fiscal 23 that ended on 2 June 2023, in which £0.5 billion of capital was returned to shareholders.

https://www.investegate.co.uk/announcem ... e-/7811362

Ian (No holding).

[ADrunkenMarcus]

I can't claim anything like that return!

Give it time...

At one point, the share price had gone over 4000p and my total return (without dividends reinvested, so just taking capital gain plus dividends per share paid out as cash) was over 800 percent, so Diageo was a nine-bagger. The compounding is really getting going!

Best wishes


Mark.

[monabri]

A snippet from today's Investors Chronicle

https://app.investorschronicle.co.uk/bl ... index.html

"In an IC Interviews podcast with our funds editor Dave Baxter due to air later this month, Train cites the example of Diageo, 45 per cent of whose shareholders are now US-based. He thinks this may put the business on more of a growth footing in the future. That kind of shift risks disappointing income investors but could aid the company’s long-term fortunes."

Interesting, almost half the business is owned by US based investors. I don't think many folk bought for the "yield on offer" but were hoping for a decent long term total return.

[BullDog]

A snippet from today's Investors Chronicle

https://app.investorschronicle.co.uk/bl ... index.html

"In an IC Interviews podcast with our funds editor Dave Baxter due to air later this month, Train cites the example of Diageo, 45 per cent of whose shareholders are now US-based. He thinks this may put the business on more of a growth footing in the future. That kind of shift risks disappointing income investors but could aid the company’s long-term fortunes."

Interesting, almost half the business is owned by US based investors. I don't think many folk bought for the "yield on offer" but were hoping for a decent long term total return.

Interesting too (to me anyway) the shares having not been a lot above the year low, have actually made a little bit of headway recently. Even as almost everything else has been in the stock market equivalent of a blue cross sale. I bought a small holding recently so it's nice to see DGE hold up rather well while everything else has a tantrum.

[ADrunkenMarcus]

Interesting, almost half the business is owned by US based investors. I don't think many folk bought for the "yield on offer" but were hoping for a decent long term total return.

They have the option to adjust accordingly. They could grow the dividend at 4-5 percent per annum against profit / free cashflow growth of 6-7 percent per annum, for example, and provide both a growing dividend per share and a reducing payout ratio over time.

Best wishes


Mark.

[simoan]

Diageo launches and prices $1.7 billion USD bonds.

Diageo, a global leader in beverage alcohol, yesterday launched and priced a $1.7 billion SEC-registered bond offering, consisting of $800 million 5.375% fixed rate notes due 2026 and $900 million 5.625% fixed rate notes due 2033.

The issuer of the bonds is Diageo Capital plc, with payment of principal and interest fully and unconditionally guaranteed by Diageo plc. Proceeds from this issuance will be used for general corporate purposes. The bond offering is scheduled to settle on 05 October 2023.

BofA Securities, Deutsche Bank Securities, RBC Capital Markets and Standard Chartered Bank acted as joint active book-running managers on this offering.

https://www.investegate.co.uk/announcem ... ds/7792349

Ian (No holding).

I’ve been looking at Diageo today and one thing I’m always wary of is debt, particularly with higher interest rates. The credit rating is A3 with Moody’s and has been since 2005. There’s no doubt it’s a high quality company but the current IFRS debt is substantial at 2.75x Net Debt/EBITDA. As such, I thought it worth comparing the recent debt issuance announcement (above) with a very similar one from October 2022 (below):

Diageo, a global leader in beverage alcohol, yesterday launched and priced a $2.0 billion SEC-registered bond offering, consisting of $500 million 5.200% fixed rate notes due 2025; $750 million 5.300% fixed rate notes due 2027 and $750 million 5.500% fixed rate notes due 2033.

The issuer of the bonds is Diageo Capital plc, with payment of principal and interest fully and unconditionally guaranteed by Diageo plc. Proceeds from this issuance will be used for general corporate purposes. The bond offering is scheduled to settle on 24 October 2022

So, amazingly the interest rate on 3 year debt has only increased from 5.200% to 5.375% and that on longer term (10/11 year) debt from 5.500% to 5.625%. in the meantime the Fed funds rate has increased from 3% to 5.33% and the 10 Yr US Treasury is now yielding 4.92%. Seems that continued debt financing is not an issue for Diageo!

All the best, Si