PDRDF - Diageo: H1 Had Many Moving Parts But Overall Resilience; Buy

• Diageo has strong brands, a diversified portfolio, and a good business model, the benefits of which were shown in H1 FY21 results.
• Compared with a prior-year period unaffected by COVID-19, group net sales grew 0.9% organically, while EBIT was down only 3.4%.
• The EBIT decline was due to a negative mix shift hitting Gross Margin; OpEx Margin improved, showing how costs could be cut in a downturn.
• EPS was down 12.8% in GBP, due to USD and Emerging Markets currency headwinds; but organic sales growth should improve in H2.
• At 2,941.5p, shares are expected to deliver a total return of 44% (12.0% annualized, including a 2.4% Dividend Yield) over 3 years. Buy.

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