Diageo PLC

Diageo PLC (LON: DGE) is a London, the United Kingdom headquartered alcohol company, which is catering with more than 200 brands and 150 production sites in over 180 countries.

On 30^th July 2020, the company will release its preliminary results.

Trading Update (as on 9^th April 2020)
In March 2020, the widespread containment actions, comprising the closure of bars and restaurants, put in place by governments across the world. The company is also working closely with the customers and suppliers to minimise business disruption. The group is donating alcohol for making over 8 million bottles of sanitiser.

Regarding the current trading environment, the management said that the social distancing measures had been introduced in several of the markets, including the closure of the on-trade channels.  During the short-term period, the company is reallocating resources across the group and reducing discretionary expenditure. The group has delivered a robust balance sheet, with 2.8 times of adjusted net debt to EBITDA ratio. As earlier announced, the group has completed the issuance of new sterling and euro bonds for a total consideration of around £1.9 billion.

Key Financial Highlights for the six months ended 31^st December 2019 (£million)
For the first half of 2020, the reported net sales increased by 4.2% to £7.2 billionas compared with the corresponding period of the last year. The operating profit was reported at £2.4 billion in H1 FY20, an increase of 0.5% against the same period last year. Organic operating profit for the first half of 2020 increased by 4.6%, ahead of organic net sales, due to robust price/mix and productivity benefits from everyday cost efficiencies, partly offset by upweighted marketing investment and cost inflation. The pre-exceptional earnings per share surged by 4.2% to 80.2 pence in H1 FY20 against the 77 pence in H1 FY19, due to higher operating profit and the capital return programme.

Share Price Performance
 
Daily Chart as of April9^th, 2020, after the market closed (Source: Thomson Reuters)

On April 09, 2020, Diageo PLC shares closed at GBX 2,633, up by 4.40% against the previous day closing price. Stock's 52 weeks High and Low are GBX 3,633.50/GBX 2,050.60.

Growth Catalysts
For the financial year 2020, the company expect organic net sales increase to be towards the lower end of the range of 4% to 6% mid-term guidance.The company continue to anticipate organic operating profit to increase by approximately 1 percentage point ahead of organic net sales. The company stay focused on building the long-term health of the brands, a culture of everyday efficiency, and supported by data-led insights.

Conclusion
The company is withdrawing the guidance on group organic operating profit growth and organic net sales growth for the financial year 2020. Though the outbreak for COVID-19 adversely impacted the company’s financial performance, the group continue to make an investment in its Brands to be able to get maximum benefits as consumer demand recovers. The company expects growth opportunities from the Asia Pacific and Greater China business as the situation normalises. During this challenging time, the topmost priority is to safeguard the health and well-being of the people, while taking essential action to protect the business. Going forward, Diageo is expecting to generate decent organic net sales growth. The company expect that they will deliver the return to 4.5 billion pounds of capital to shareholders for the financial year 2020 to 2022.

Over the course of 3 years (FY16 - FY19), the company’s revenue surged from GBP 10,485 million in FY16 to GBP 12,867 million in FY19. Compounded annual growth rate (CAGR) stood at 7.06 per cent.

Based on the above rationale, we have given a "HOLD" recommendation at the closing price of GBX 2,633 (as on 9^th April 2020).

Hyve Group PLC

Hyve Group PLC (LON: HYVE) is a London, United Kingdom-headquartered company, which is engaged in the event business. The group hosts and designs various events across Asia, South America, Africa and Europe. It was formerly known as ITE Group PLC.

On 12^th May 2020, the company will release its FY 2020 Interim Results.

Trading Update and Coronavirus Update (as on 8^th April 2020)
The company announced a trading update and the measures it is taking to protect its financial position during the COVID-19 pandemic. As earlier announced on 23^rd January 2020, Hyve delivered a robust performance in the first quarter of the financial year 2020. This growth was driven by double-digit growth in Africa Oil Week and Yugagro on a like-for-like basis, and a successful Chinacoat event in Shanghai. In Q2 FY20, the company has been impacted by the spread of the coronavirus. During the quarter, three of the Hyve's top ten events ran, including Mining Indaba and Bett, both of which stated robust year-on-year growth. Despite an impact from ongoing Brexit and COVID-19 travel restrictions, the spring fair rate of decrease slowed compared to the prior year. The group has cancelled and postponed various events. The management together with Hyve's global leadership team, has taken action to reduce the 20% of pay on a temporary basis. The Board has decided not to pay a dividend in the financial year 2020, and future dividends will be kept under review.

Share Price Performance

Daily Chart as of April9^th, 2020, after the market closed (Source: Thomson Reuters)

On April 09, 2020, Hyve Group PLC shares closed at GBX 29.35, up by 35.57% against the previous day closing price. Stock's 52 weeks High and Low are GBX 110.00/GBX 14.96.

Growth Catalysts
The revenue has grown at CAGR of 18%. The group expect margins to continue to grow and will continue to look for product-led acquisitions and further optimise the portfolio.

Conclusion
The economic conditions within the geographic areas in which the company operates influence the operating and financial performance of the company and can face uncertainty in the medium-to-long term due to the ongoing Brexit.

Hyve Group is a fundamentally decent company with a proven track record.The benefits of diversifying and strengthening the portfolio can also be noticed from the continued progress in the forward bookings, which are increased by 3% to £187 million on a like-for-like basis. Despite uncertainties (both geopolitically and economically) across many of the markets, the company stay confident in attaining the full-year anticipations. The Board is confident that the measures put in place will enable the company to safeguard against COVID-19 outbreak.

In the past year, the Group has made significant strategic acquisitions, which will provide strength to the growth of the company with a considerable contribution in the top line. Despite a small-cap company, the Group has a track record of paying dividends, which is uncommon in many small-cap companies.

Based on the above rationale, we have given a "HOLD" recommendation at the closing price of GBX 29.35 (as on 9^th April 2020).

Disclaimer

PLEASE BE ADVISED THAT YOUR CONTINUED USE OF THIS SITE OR THE INFORMATION PROVIDED HEREIN SHALL INDICATE YOUR CONSENT AND AGREEMENT TO THESE TERMS.
References to ‘Kalkine’, ‘we’, ‘our’ and ‘us’ refer to Kalkine Limited.
This website is a service of Kalkine Limited. Kalkine Limited is a private limited company, incorporated in England and Wales with registration number 07903332.
The article has been prepared for informational purposes only and is not intended to be used as a complete source of information on any particular company. Kalkine is not responsible for material posted on this website and does not guarantee the content, accuracy, or use of the content in this site. No advice or information, whether oral or written, obtained by you from Kalkine or through or from the service shall create any warranty not expressly stated.
Kalkine do not offer financial advice based upon your personal financial situation or goals, and we shall NOT be held liable for any investment or trading losses you may incur by using the opinions expressed in our publications, market updates, news alerts and corporate profiles. Kalkine does not in any way endorse or recommend individuals, products or services that may be discussed on this site. You should discuss your portfolios and the risk tolerance level appropriate for your personal financial situation, with a professional licensed financial planner and adviser.