Business Insight

Diageo's NI operation hit £3.5m profit in 2019, but bar closures having "significant impact" in 2020

Diageo's Northern Ireland business recorded a pre-tax profit of £3.5m in 2019.
Ryan McAleer

DIAGEO’S Northern Ireland operation recorded a pre-tax profit of £3.5m last year, but the Guinness owner has warned that its global operations have been hit hard by the coronavirus pandemic.

The drinks giant informed the stock market on Thursday that: “Widespread containment actions put in place by governments across the globe in March, including the closure of bars and restaurants, are having a significant impact on the performance of our business.”

The group behind Smirnoff and Gordon’s gin said that around half of all sales in Europe are from pubs, bars and restaurants. But with Ireland, the UK and others closing venues, this has now collapsed

There has been a boost in sales through supermarkets, but this was cautioned with questions over whether it can be sustained longer term.

The warning came as Diageo posted strong results for its Northern Ireland operation.

New accounts filed with Companies House show turnover increased eight per cent to £144m for the year ending June 2019.

Beer sales accounted for £104.9m (up from £95.7m), while spirits garnered £39.1m in 2019 (up from £37.7m).

Costs also increased by £10m over the year to £140.7m (£130.3m in 2018), including £63.2m paid out in excise duties

It produced a pre-tax profit of £3.5m for the year, a 10.6 per cent improvement on 2018.

Diageo’s Northern Ireland workforce increased by seven to 118 at the end of June 2019, with staff costs topping £7m, up from £6.4m in 2018.

A dividend of £1.4m was paid out for the year, well down on the £6m paid out in 2018.

Diageo Northern Ireland’s tax bill for the year ending June 2019 was £275,000.

Meanwhile, the drinks giant said it is beginning to see "a very slow return of on-trade consumption" in mainland China, as restaurants and bars have started to gradually reopen.

"The significant impact on global travel retail, referred to in our February 26 update, has extended beyond Asia Pacific into other markets in March due to a steep drop in passenger numbers, as well as new travel restrictions imposed by many countries."

Sales have also taken a dive in North America, India and two production sites in Nigeria have also been shut.

But despite the difficulties, Diageo said it was donating alcohol to make more than eight million bottles of sanitiser for frontline healthcare workers around the world, along with support packages for bar staff hit by closures.

To cut costs, the business said: "We are stopping A&P (advertising and promotional) spend that will not be effective in the current environment.

"We are also tightly managing working capital and deferring discretionary capital expenditure projects. We are providing an appropriate level of support to our key suppliers and customers to ensure we are strongly positioned for a recovery in consumer demand."

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