Diageo on Track in Fiscal 2021 as Buyback Program Is Reinstated

Although it gave little away in terms of detail, Diageo confirmed that it is on course to meet our full-year expectations, which implies that the markets that are reopening are experiencing fairly high on-trade demand. Management expects operating profit to grow 14% in fiscal 2021 (ending June), bang in line with our forecast. With some markets yet to fully reopen, however, and given the evident pent-up demand for social occasions, we are raising our estimates slightly for fiscal 2022. With the growth engines almost fully lit, the GBP 4.5 billion share-repurchase program, announced in 2019 but paused at the onset of COVID-19, will resume. Management plans to repurchase GBP 500 million by November 2021 and GBP 1 billion by the end of fiscal 2022. We had already modeled the reinstatement of the repurchase program and in fact would not be surprised if repurchases exceeded GBP 1 billion by the end of fiscal 2022.