Diageo, Unilever and Relx Report Decent Results Amid Growing Uncertainties

Diageo Plc (DGE)

Diageo PLC is a London-based global alcoholic beverage company that offers a broad collection of over 200 brands across spirits and beer in more than 180 countries across the world. The group’s operations are differentiated in geographical segments: Latin America and the Caribbean, Africa, Europe and Turkey, North America, Asia Pacific and ISC. These brands include Captain Morgan, Johnnie Walker, Baileys, Don Julio, Cîroc and Ketel One vodkas, J&B, Smirnoff, Crown Royal, Buchanan's and Windsor whiskies, Tanqueray and Guinness amongst others.

Preliminary Results – (as on July 25, 2019) (FY19)

The globally renowned alcoholic beverage company handed a solid performance for the full year ended June 30, 2019. Its sales growth was organically supported by volume growth across the product portfolio and geographical segments. The reported net sale was up by 6% on a YoY basis and stood at £12.89bn; however, growth was partly dented by acquisitions and disposals.

Reported operating profit grew organically by 9.0%, primarily driven by improved price/mix though partially counterbalanced by cost inflation and higher market investments.

Cash flow for the year remained solid, with net cash flow from operating activities up by £164m and free cash increased by £85m to £2.6bn, and basic earnings per share improved by 7.4% to 130.7 pence and at the pre-exceptional basis earnings 10.3% to 130.8 pence.

As on July 25, 2019, the group also approved plans to deliver a return on capital up to £4.5b to its shareholders in the FY20 to FY22 and final dividend for the FY19 increased by 5% and full-year dividend recorded at 68.57pence per share.

Stock Performance

Daily Price Chart (as on July 29, 2019), before the market close. (Source: Thomson Reuters)

At the time of writing (before the market close, at 09:00 AM GMT), shares of the DGE were quoting at GBX 3,325.50 and added 2.0 points or 0.07% against the previous day closing level. In the past one year, the stock has touched a 52w high of GBX 3,500.50 and a 52w low of GBX 2,513.0 respectively. In the year-ago period, the company has delivered a price return of 13.80%, and at the current trading level, the company was offering a dividend yield of 2.12%. Also, the volume has spiked up, as 5-day's average daily volume traded in the company was approximately 13.84% above the 30-day average daily volume traded at the LSE.

Unilever Plc (ULVR)

Unilever Plc is a global company selling fast-moving consumer goods, with two home countries: the Netherlands and the United Kingdom. The company is engaged in the production and marketing of a variety of products from different categories such as home care, food, health, beverages and wellbeing. The company has divided its operations into three reportable segments being Foods & Refreshment, Home Care and Beauty & Personal Care.

Interim Financial Highlights: (H1 FY19, £)

In the exchange filing made by the group as on July 25, 2019, it reported its interim results for the first half of the fiscal year 2019. Led by volume and price, which recorded growth of 1.2% and 2.1% respectively during the period under consideration, the group’s revenue was up by 3.3% against the H1FY18. Underlying Operating margin improved marginally by 50bps on a YoY basis and operating margin expanded by 40bps against the year-ago period. However, turnover during the period under review narrowed by 0.9% primarily on account of sales of the company’s spreads business and partially counterbalanced by 1.1% forex gain.

Performance Impacted on account of poor weather conditions and inflationary pressure.

The company's performance across their operational geographies was mixed in the FY19, with Ice Cream sales in Europe and North America was impacted on account of bad weather condition; however, the group's performance witnessed decent momentum primarily in China and South-East Asia. Despite a performance below the consensus estimates, India recorded decent market growth. Meanwhile, Inflationary pressure in Argentina remained high, and it dragged the consumer demand into a downtrend.

Product Segment Contribution

Unilever’s beauty and personal care division recorded a sales growth of 3.3% led by volume and price improved by 1.7% and 1.6% respective on a YoY basis. Under the division deodorants and new format continued to drive sales. Underlying operating margin of beauty and personal care segment expanded by 100bps on a YoY basis.

The company's Homecare recorded a sales growth of 7.4% on a YoY basis, mainly because of 2.8% and 4.5% surge in the volume and price against the year-ago period. Underlying operating margin of this division expanded by 120bps on account of improved gross margin.

Its food and refreshment business sales were up by 1.3% on a YoY basis, led by a 1.4% growth in the price and partially offset by a 0.1% decline in the volume sold. Underlying operating margin of this division reduced by 40bps, mainly impacted by overheads incurred on account of the sale of their spreads business.

However, the overall performance of the group was below the consensus estimates.

Stock performance

 Daily Price Chart (as on July 29, 2019), before the market close. (Source: Thomson Reuters)

At the time of writing (before the market close, at 09:40 AM GMT), shares of the ULVR were quoting at GBX 4,934.0 and added 34.5 points or 0.70% against the previous day close. In the year-ago period, the stock has delivered a price return of approximately 14.48% and was up by approximately 19.24% on a YTD basis. In the past one year, the stock has registered a 52w high of GBX 5,122.0 and a low of GBX 3,904.94 respectively. At the current trading level, the stock was quoting above its 200-day simple moving average price, and marginally above the 60-day simple moving average price, however, the 14-day and 9-day RSI of the stock was hovering near to an oversold zone. Also, from the volume standpoint, the 5-day average daily volume of the stock was 2.89% above the 30-day average daily volume in the stock traded at the London Stock Exchange.Â

Relx Plc (REL)

RELX PLC (REL) is a London based world’s leading global information services company. The company provides information-based analytics and decision tools to customers using innovative solutions which merge content and data with analytics and technology. The group’s operations are differentiated in four operating segments: Risk & Business Analytics; Exhibitions; Scientific, Technical & Medical; and Legal. The group employees over 30,000 personnel across 40 countries, customers in more than 180 countries around the globe.

Interim results highlights: (H1 FY19, £)

Led by growth recorded in electronic and face-to-face revenues and development in their analytics business, the group’s revenue for the H1FY19 increased by 6% to £3,888m against the £3,653m recorded in the H1 FY18. However, top-line performance in the period under consideration was partially offset by a continued lowering of print revenue. Adjusted operating profit reported a growth of 8% and stood at £1240m against £1149m recorded in the year-ago period. This was primarily driven by revenue growth recorded by the company during the period under review and led by continued innovation in the operating process. Adjusted earnings per share (EPS) surged by 12% to 45.9 pence and up by 8% on a constant currency basis. However, reported EPS in the period under consideration improved by 17% to 39.9 pence.

The board of the Relx Plc has announced an interim dividend for the period under consideration of 13.6 pence per share, up by 10% on a YoY basis.

The management has kept the outlook for the remaining second half of 2019 unchanged and is confident of reporting growth in the revenue, operating margin along with growth in the adjusted earnings per share on a constant currency basis.

Stock Performance

Daily price chart (as on July 29, 2019), before the market close. (Source: Thomson Reuters)

At the time of writing (before the market close, at 09:35 AM GMT), shares of the REL were quoting at GBX 1957.0 and added 22.5 points or 1.16% against the previous day close. In the year-ago period, the stock has delivered a price return of approximately 12.93% and was up by approximately 19.67% on a YTD basis. In the past year, the stock has registered a 52w high of GBX 1984.50 and a low of GBX 1466.50 respectively. At the current trading level, the stock was quoting above its 60-day and 200-day simple moving average prices and the 14-day and 9-day RSI of the stock was also supporting the growth in the stock price hovering in a normal zone. Also, from the volume standpoint, the 5-day average daily volume of the stock was 12.04% above the 30-day average daily volume in the stock traded at the London Stock Exchange.

The bottom line is that despite an increasing uncertainties ranging from global slowdown, trade quarrel, crude headwinds, Brexit related uncertainties, and chance of recession to hit as consumer spending was narrowing across the major nations, these three companies performed well and their large revenue diversification spread across the globe would help them to protect the business during the tough times.