EU CONSUMER CYCLICALS: Diageo: FY25 (to June) results (with image)
(DGELN; A3/A-/A-)
Results are lacklustre, leverage is well above target and likely raters comfort levels. Zero-alcohol growth is continuing at double digit rates and it has spent ample slides on justifying spirits is not as exposed to declining alcohol consumption levels in DM countries (EU below, TBA = Total Beverage Alcohol).
- 4Q -1.1%: NA (40% of group) -2.3% , Europe (20%) flat, APAC (20%) -10%.
- It left FY growth at +1.7% (v+0.9%, p/m +0.8%). Net of disposals and FX sales was $20.2b, -0.1% y/y.
- non-acl growth (includes Guinness 0.0) was +40% this year
- Gross margin expanded +9bps but was more than offset by staff costs and strategic investments which took adj. EBIT -0.7% y/y on a 28.2% margin (-68bps)
- Including exceptional costs EBIT fell -28%/margin contracted 819bps. Exceptionals include:
- impairments totalling $910m + $225m on cost saving programme and another $145m on restructuring supply chains
- FCF was still up $100m at $2.7b on +$700m WC swing
- Keeping dividend unch at $2.3b, no buybacks this year (vs. $1b LY)
- net levered 3.4x (ex. restricting/one-off costs net 3.7x), up from 3.0x last year. adj. EBITDA at $6.6b, -6% y/y.
FY26/12m guidance:
- Organic sales to be similar to FY25 (i.e. +1.7%) given "challenging market". 1H to be down slightly, with growth in 2H.
- adj. EBIT to be up mid-single-digit, again to be 2H skewed and on benefit of its cost saving programme. Includes impact of tariffs (unmitigated a small $200m impact).
- Capex of $1.2-1.3b (vs. $1.5b LY)
- FCF of $3b (LY $2.7b) and includes exceptional cash costs on cost saving programme
- Leverage to come within net 2.5-3.0x target no later than FY28 (June
'2027)
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USDCAD TECHS: Trend Outlook Remains Bearish
- RES 4: 1.4111 High Apr 4
- RES 3: 1.4016 High May 12 and 13 and a key resistance
- RES 2: 1.3920 High May 21
- RES 1: 1.3674/3776 20- and 50-day EMA values
- PRICE: 1.3607 @ 16:12 BST Jul 4
- SUP 1: 1.3557 Low Jul 03
- SUP 2: 1.3540 Low Jun 16 and the bear trigger
- SUP 3: 1.3503 1.618 proj of the Feb 3 - 14 - Mar 4 price swing
- SUP 4: 1.3473 Low Oct 2 2024
The trend needle in USDCAD points south and this week’s move down reinforces current conditions. S/T gains between Jun 16 - 23 appear to have been corrective. Key support and the bear trigger is 1.3540, Jun 16 low. Clearance of this level would resume the downtrend and open 1.3503, a Fibonacci projection. Pivot resistance is at the 50-day EMA, at 1.3776. A clear break of this average would signal scope for a stronger recovery.
AUDUSD TECHS: Bull Cycle Remains In Play
- RES 4: 0.6700 76.4% retracement of the Sep 30 ‘24 - Apr 9 bear leg
- RES 3: 0.6688 High Nov 7 ‘24
- RES 2: 0.6603 High Nov 11 ‘24
- RES 1: 0.6590 High Jul 01
- PRICE: 0.6548 @ 16:05 BST Jul 04
- SUP 1: 0.6521 20-day EMA
- SUP 2: 0.6468/6373 50-day EMA / Low Jun 23 and a reversal trigger
- SUP 3: 0.6357 Low May 12
- SUP 4: 0.6275 Low Apr 14
The trend set-up in AUDUSD remains bullish and the pair is holding on to its recent gains. The latest break higher maintains the bullish price sequence of higher highs and higher lows, the definition of an uptrend. Moving average studies are in a bull-mode position, highlighting a dominant uptrend. Sights are on 0.6603 next, the Nov 11 2024 high. Key short-term support has been defined at 0.6373, the Jun 23 low.
EURJPY TECHS: Northbound
- RES 4: 171.88 High Jul 19 ‘24
- RES 3: 171.28 1.382 proj of the Feb 28 - Mar 18 - Apr 7 price swing
- RES 2: 171.09 High Jul 23 ‘24
- RES 1: 170.61 High Jul 03
- PRICE: 170.22 @ 16:04 BST Jul 04
- SUP 1: 169.04 Low Jul 02
- SUP 2: 167.87 20-day EMA
- SUP 3: 167.13 Low Jun 20
- SUP 4: 165.66 50-day EMA
EURJPY traded higher on Thursday resulting in a print above 170.47, the 76.4% retracement of the Jul 11 - Aug 5 sell-off. A clear break of this price point would strengthen bullish conditions and signal scope for extension. This would open 170.28 next, a Fibonacci projection. The trend is overbought, a pullback would unwind this condition. Support to watch lies at 167.87, the 20-day EMA.
