Guinness and Johnnie Walker drinks giant Diageo ramps up cuts as new boss takes the reins

Guinness and Johnnie Walker drinks giant Diageo has cut its outlook once again and slashed the firm’s shareholder dividend payout as new boss Sir Dave Lewis said the group needed to “act more decisively” to boost its flagging performance.

The former Tesco chief executive – who took on the role at the start of the year – said there was “significant work ahead” in turning Diageo around as the group reported a 2.8% drop in underlying operating profits to 3.26 billion dollars (£2.4 billion) for the six months to December 31 as underlying sales also fell 2.8%.

The firm downgraded its full-year guidance for the second time in three months, with sales now expected to fall by 2% to 3% because of ongoing sales troubles in the US and earnings predicted to be flat to a low-single-digit rise.

Diageo is ramping up cost savings and now expects around 50% of its cuts in the current financial year.

In a blow to investors the group said it was more than halving its interim dividend.

Sir Dave is working on an updated strategy for the group, which will be unveiled later in the summer.

He said: “Only several weeks in I can already see significant opportunities for Diageo to act more decisively to enhance its competitiveness and broaden the portfolio offering leading to higher growth.

“To deliver on these opportunities, we need to create more financial flexibility.

“Accordingly, the board has taken the difficult decision to reduce the dividend to a more appropriate level which will accelerate the strengthening of our balance sheet.

“We are confident that this is the right action which will ensure that Diageo can reinforce its position as the leading international spirits business and drive stronger shareholder value over the coming years.”