Two Buzzing Stocks: Diageo Plc And ContourGlobal Plc

Diageo Plc

Diageo Plc (DGE) is a Britain domiciled alcoholic beverage multinational major. Headquartered in Royal Park London, it was the world’s largest distiller until 2017 when the Chinese brewer Kweichow Moutai overtook it. The Company has operations in all six continents with offices in 80 countries and sales in 180 countries. The Company owns some of the most famous liquor brands in the world, namely Smirnoff(vodka), Johnnie Walker & Baileys (liqueur) and Genius.

The stocks of the company are listed on the London Stock Exchange and trade with the ticker name DGE. The stocks of the Company are components of the FTSE 100 Index. The company is also listed on the New York Stock Exchange with ticker name DEO and at the Euronext NV European stock exchange with the ticker name GUI.

Recent News Update

The Company on 12 August 2019 announced that it is has entered into a 50:50 joint venture with Cuba’s state-run Distillery Cuba Ron SA. The venture, to be called Ron Santiago SA, will have the exclusive international rights to market the latter’s famous rum brand, Santiago de Cuba.  This Cuban brand along with another famous Cuban band called Havana Club constitute nearly 9 per cent of the global sales in the premium segment of the international rum market, even though their import and sale are banned in the world’s largest Alcoholic beverage market of the United States of America.

Financial Update for FY 2019 ending June 2019 (£ Million)

Source – Company Annual report publication for FY 2019

The company for the year ended 30 June 2019 reported revenue of £12.867 billion as compared to revenue of £12.163 billion for year ended 30 June 2018. The Gross profit for the year ended 30 June 2019 was £8.001 billion, whereas it was a profit of £7.529 billion for the period ended 30 June 2018. The operating profit for the year ended 30 June 2019 was £4.042 billion, compared to an operating profit of £3.691 billion for the period ended 30 June 2018. The net profit for the year ended 30 June 2019 was £3.337 billion, whereas it was a profit of £3.114 billion for the year ended 30 June 2018. The higher profits for the year were on account of higher revenues, higher finance income, lower operating expenses and non-operating earnings. The earnings per share (diluted) of 130.1 pence was for the FY ended 30 June 2019, whereas for the period ended 30 June 2018 it was 121.1 pence per share. The Company has not declared any dividend for the year ended 30 June 2019.

The share price performance of Diageo Plc at the London Stock Exchange

Daily Chart as on 13 August 2019, before the market close (Source: Thomson Reuters)

On 13 August 2019, at the time of writing of the report (before the market close, GMT 08.56 AM), DGE shares were trading on the London Stock Exchange at GBX 3,419.50, down by 0.13 per cent over the previous day’s closing price of GBX 3,424.00. The stock has a 52- week High of GBX 3,538.00, and a 52-week low of GBX 2,513.00. The total market capitalization of the Company was £81.13 billion.

Outlook

The two brands of rum Havana Club and Santiago de Cuba have a very strong global admirer base. The sales pertaining to these brands have grown stronger over the years even though the global reach of Cuba state-run Distillery Cuba Ron SA is limited. The strategic tie-up which the company has entered with Diageo Plc will give it access to the latter’s robust global marketing and distribution networks, thereby increasing sales manifold.

It is to be noted that the import and sale of these brands from Cuba are banned into the United States of America, as the latter accused the Cuban government of Forcibly Nationalizing Distilleries owned by United States Citizens in Cuba during the communist revolution of 1959. Most recently, the Trump Administration re-enacted a dormant 1996 era law which enables United States citizens to sue any corporation which is profiteering from properties belonging to them in the Communist country prior to the revolution. The United States has also been dissuading international companies from making investments in that country.

The defiance of Diageo Plc and the worldwide popularity of Cuban rum is a testament to the loyalty of the connoisseurs of liquor, who enjoy the brew of these classic brands. The joint venture between Diageo Plc and Cuba Ron SA will not only bring more sales and revenue to the Cuban state-run firm but will also add significant value to Diageo Plc.

ContourGlobal Plc

ContourGlobal Plc (GLO) is an electricity generation company based out of the United Kingdom and has operations in 19 countries. The Company produces nearly 69 per cent of its electricity from conventional sources like coal and natural gas, and about 41 per cent of its generation comes from renewable energy resources like Wind, Solar and hydro resources.

The Company was founded in 2005 in London with its initial public offer (IPO) coming out in November 2017. It has got listed on the London Stock Exchange on 9 November 2017, and its shares trade with the ticker name GLO. The Company is also a constituent of the FTSE 250 index.

Recent News Update

There have been two major dealings in the shares of the Company by two of its directors on 8 August 2019. The Chief Executive (CEO) officer and director of the Company Joseph Brandt bought 47,400 shares of the Company at an average price of GBX 165.51 per share, whereas the average trading price of the stock on the bourses on that day was GBX 164.5 per share. Now 1,736,927 shares are being held by the director of the Company. Another non-executive director Ruth Cairnie also bought 17,285 shares of the Company on 9 August 2019 at an average price of GBX 168 per share.

In other news that came out was that of its first half-yearly report on 8 August 2019.The Company’s revenues grew by 15 per cent, adjusted EBITDA grew by 33 per cent and Free cash flow increased by 53 per cent compared to same period last year. The Company also declared a second quarterly dividend of 3.6901 cents per share on the date of the results, which will be paid to the shareholders on 6 September 2019.

Financial Update for H1 FY2019 ($ million)

Source – Company publication for H1 2019 ended 30 June 2019

The Company for the half-year ended 30 June 2019 reported revenue of $617 million as compared to revenue of $535 million for the half-year period ended 30 June 2018. The Gross profit for the half-year ended 30 June 2019 was $171 million, whereas it was a gross profit of $144 million for the period ended 30 June 2018. The operating profit for the half-year ended 30 June 2019 was $143 million, compared an operating profit of $112 million for the period ended 30 June 2018. The net profit for the half-year ended 30 June 2019 was $6 million, whereas it was a profit of $3 million for the half-year period ended 30 June 2018. The lower net profits for the half-year was on account of higher finance costs incurred during the half-year period ended 30 June 2019. The earnings per share (diluted) of 0.02 cents was for the FY period ended 30 June 2019, whereas, for the period ended 30 June 2018, it was a profit of 0.01 cents per share. The Company has declared a dividend of 3.6901 cents per share for the half-year ended 30 June 2019. The company’s free cash flow from operations for the half-year ended 30 June 2019 stood at $170 million.

The share price performance of ContourGlobal Plc at the London Stock Exchange.

Daily Price Chart as on 13 August 2019, before the market close (Source: Thomson Reuters)

On 13 August 2019, at the time of writing of this report (before the market close, GMT 10.28 am), GLO shares were trading on the London Stock Exchange at GBX 164.54, down by 0.1577 per cent against the previous day’s closing price of GBX 164.8. The stock has a 52-week High of GBX 258.00 and a 52-week low of GBX 142.9. The total market capitalization of the Company was around £1.10 billion.

Outlook

The Company is rapidly expanding into the Renewable energy market. Its financial performance is indicating how profitable the renewable energy sector has become. Recent acquisitions of Acciona concentrated solar power plants situated in Spain, demonstrate the Company’s value proposition towards high technology renewable energy systems.

With the governments around the world giving importance to renewable energy generation, new and more advanced technologies will see the day of light with increased viability. Any entity who is engaged in this sector either as a technology developer, power producer or power distributor will see its fortunes grow in leaps and bounds given the current favorable outlook of this sector.

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