Analyst Note| Philip Gorham, CFA, FRM |
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.