DGE Diageo Plc

(Rewrites first paragraph, adds more detail and share price)

--Diageo plans an extra GBP660 million of share buybacks

--The company's operating profit rose in the first half of fiscal 2019

--Shares in Diageo rise on news of the expanded buyback program

By Ian Walker

Shares of Diageo PLC (DGE.LN) rose 4.1% Thursday after the company said that it approved a further 660 million pounds ($864 million) of share buybacks as it reported a 4% fall in net profit for the first half of fiscal 2019 as a result of higher taxes.

Still, the world's largest liquor maker, which owns Johnnie Walker whisky and Tanqueray gin, said operating profit--its preferred metric--rose in the period, although organic growth was offset by unfavorable exchange rates.

Operating profit was GBP2.43 billion for the half year ended Dec. 31 compared with GBP2.19 billion a year earlier and analysts' forecasts of GBP2.31 billion.

Diageo made a net profit for the half year of GBP1.98 billion compared with GBP2.06 billion a year earlier, on net sales that rose to GBP6.91 billion from GBP6.53 billion and compared with analysts' expectations of GBP6.78 billion. Net sales exclude excise duties. Net sales rose 5% in North America, the company's biggest region.

Forecasts are taken from FactSet with revenue based on three analysts' projections, and operating profit based on two.

Diageo said the board has approved an increase in its share buyback program, taking the total for the year ending June 30 to GBP3 billion. For the first half of the year Diageo bought back 46.5 million shares under the program worth GBP1.28 billion.

Last November Diageo announced the sale of a portfolio of 19 brands, including Seagram's VO whiskey and cinnamon schnapps Goldschlager, to Sazerac Co. for $550 million, as it pivots toward premium brands and higher-growth products. The sale was completed on Dec. 21.

The company said at the time that it would return net proceeds of about GBP340 million to investors through share buybacks.

"Diageo delivered broad-based volume and organic net sales growth across regions and categories. We continue to expand organic operating margins while increasing investment in our brands ahead of organic net sales growth," Chief Executive Ivan Menezes said Thursday.

He added that the board continues to expect a mid-single-digit rise in organic net sales growth this year and to expand margins for the three years ending June 30 in line with previous guidance of 175 basis points.

The board has declared an interim dividend of 26.10 pence, up from 24.90 pence for the first half of fiscal 2018.

Write to Ian Walker at ian.walker@wsj.com; @IanWalk40289749

(END) Dow Jones Newswires

January 31, 2019 07:16 ET (12:16 GMT)

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