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Guinness owner Diageo WILL pay a dividend to its shareholders despite the global lockdown of pubs


Guinness owner Diageo has warned that the mass closure of pubs and restaurants around the world is having a ‘significant’ impact on its business. 

While listing its global woes sparked by the Covid-19 pandemic, the FTSE 100 listed drinks group confirmed it will still pay an interim dividend to its shareholders, but planned share buyback schemes have been shelved.

The group also said it had donated vast quantities of unused booze to help make over 8million bottles of hand sanitiser for healthcare workers globally.

Impact: Guinness owner Diageo has warned that the mass closure of pubs and restaurants around the world was having a 'significant' impact on its business

Impact: Guinness owner Diageo has warned that the mass closure of pubs and restaurants around the world was having a ‘significant’ impact on its business

Diageo’s shareholders based in the UK will get their 27.41p a share interim dividend announced on 30 January paid to them today, while US investors will get it on 14 April. 

The drinks group’s share price got off to a strong start this morning and is currently up 2.84 per cent or 71.5p to 2,593.5p. 

A string of firms on Britain’s stock exchange have axed their proposed dividends, including big name banks and insurers like Barclays, HSBC, Aviva and Churchill owner Direct Line. 

On Wednesday, supermarket Tesco bucked this trend and revealed it still planned to pay out dividends to its shareholders, despite receiving a business rates holiday worth around £600million.

In a trading update today, Diageo said: ‘Widespread containment actions put in place by governments across the globe in March, including the closure of bars and restaurants, are having a significant impact on the performance of our business.

‘Social distancing measures, including the closure of the on-trade channels, have been introduced in most of our markets. 

‘We are tracking changes in consumer behaviour during this time and adjusting our plans and resources in response.’

Half of all of Diageo’s sales in Europe stem from pubs, bars and restaurants. In Britain and elsewhere in Europe, such outlets have been forced to close, meaning this aspect of Diageo’s trade has temporarily collapsed, it confirmed today.

There has been a boost in sales through supermarkets, but Diageo said it was not sure whether this would be sustained for a lengthy period. 

The lockdown has been dismal for Britain’s pubs and restaurants, with some pub tenants claiming they will not be able to survive unless their rental costs are temporarily scrapped, rather than simply deferred to a later date.  

Strong start: Diageo's share price got off to a strong start this morning

Strong start: Diageo’s share price got off to a strong start this morning

Looking beyond Europe, Diageo said: ‘In mainland China, we are beginning to see a very slow return of on-trade consumption, as restaurants and bars have started to gradually reopen.

‘The significant impact on global travel retail, referred to in our February 26 update, has extended beyond Asia Pacific into other markets in March due to a steep drop in passenger numbers, as well as new travel restrictions imposed by many countries.’

Sales have also taken a dive in North America, India and two production sites in Nigeria have also been temporarily shut.

Diageo’s boss, Ivan Menezes, said: ‘During this challenging time, our top priority is to safeguard the health and well-being of our people, while taking necessary action to protect our business. 

‘I am confident in Diageo’s long-term strategy and our ability to move quickly in this difficult environment. 

‘We will continue to execute with discipline and invest prudently to ensure we are strongly positioned for a recovery in consumer demand.’

Meanwhile, Russ Mould, investment director at AJ Bell, said: ‘Investors will be very thirsty for income as dividends from UK stocks increasingly dry up, so they may well be raising a glass to Diageo’s decision to pay its interim dividend.

‘This move is worth placing in context. The drinks manufacturer was a fair way down the road in terms of doling out the cash, having declared the dividend in January, and, notably, buybacks are off the table for the rest of the year.

‘The company has a lot of debt but not all borrowings are equal and crucially it has no financial covenants attached to any of its debt – or in other words even with a significant drop in earnings there’s seemingly no chance of lenders reacting by issuing penalties or taking assets.’

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