Diageo's global exposure shows strength while profits drop

Nick Raynor, investment advisor at The Share Centre, explains why the world's biggest drinks makers are listed as a ‘hold' for investors.

"These were a disappointing set of results for Diageo despite pre-tax profit rising 12.5% to £2239m for the year ending 30 June 2010 as this was less than the market expected.

"What is interesting for investors is that it is the company's global diversity that drove overall growth and that is its strength in the current economic climate. The international division reported a 25% rise in operating profit - better than expected.

"Strong growth in Latin America, Africa and Asia mean Diageo are well placed to see continued growth. However lower levels of demand from North America and Europe, where the company gets the majority of its sales, is a concern.

"The dividend at 3.5% is steady but not enough to attract income seekers, this ensures we continue to list Diageo as a ‘hold' for investors."