UK & Ireland: Diageo doesn’t expect pub sales volume to return to 2019 levels until at least next year

Diageo’s business in the North does not expect the volume of alcohol it sells in pubs to return to 2019 levels until at least next year, the company said in recently filed accounts, the Irish Times reported on June 24.

The accounts for Diageo Northern Ireland Limited report that in the group’s “severe but plausible” scenario “we do not anticipate that the on-trade business recovers to volumes experienced in the year ending 30th June, 2020, within the next 18-month period”.

In order to mitigate the impact of the Covid-19 pandemic, management at the company could take several measures, including the reduction of non-essential overheads, directors said in commentary accompanying the report.

In the 12-month period reported in this set of accounts the group reduced its marketing expenses alone by almost 36 per cent to £3.75 million (€4.37 mln) .

During the 12-month period, profits fell from £3.4 million to £2.6 million, a drop of more than 23 per cent.

Overall, the company which owns the Guinness brand had an “unfavourable financial year” owing to the Covid-19 pandemic, with turnover slipping by more than £10 million.

The company recorded turnover of £134 million in the 12 months to the end of June 2020, down from £144 million the previous year. Its directors attributed the fall to a decrease in the volume of beer and spirits sold during the year.

However, the accounts noted that turnover for the marketing and selling of spirits actually rose 5.4 per cent to £41 million, although the marketing and selling of beer fell 11.6 per cent to £92 million.

The directors noted that the impact the Covid-19 pandemic will have over the coming one to three years remains “highly uncertain”.

“Significant volatility is likely to continue or increase as markets face challenging economic conditions and higher levels of unemployment, leading to reduced consumer spending.”

Yet, the directors said they have “no reason to believe that a material uncertainty exists that may cast significant doubt about the ability of the company to continue as a going concern”.

The business paid £64 million in excise duties during the year and recorded its cost of sales as being £52 million, a 7 per cent fall on the previous year.

While employee numbers at the drinks giant’s business in Northern Ireland were steady at 118, wages and salaries were cut by almost 15 per cent to £4.1 million.

At the end of the year the company transferred £2.69 million to its reserves while no dividend was paid to the company’s parent. That compared to a dividend payment of £1.4 million the previous year.

Diageo Northern Ireland Limited is controlled by London-headquartered Diageo plc.

25 June, 2021