GLOBAL drinks giant Diageo is raising a glass to investors after it approved a share buyback programme to return up to £2 billion to shareholders after reporting a rise in revenue and profits, driven by its core beer brands and consumers’ thirst for gin.

The maker of Johnnie Walker whisky, Gordon’s gin, Smirnoff vodka and Guinness reported a 3.7 per cent rise in operating profits to £3.7bn on the back of net sales of £12.2bn, up just 0.9%, in the year to June 30 despite currency headwinds.

Growth at Diageo, the world’s largest spirits company, was buoyed by a strong performance in the UK, where sales rose 8% although all regions contributed to broad organic growth, with sales up 5% and volume up 2.5%.

Operation profit was up 7.6%, with operating margins improving by 78 basis points. Diageo said that higher marketing investment was more than offset by productivity efficiencies.

The £2bn buyback to shareholders during the year to June 30, 2019 follows £1.5bn returned last year, and was accompanied by a 5% increase in the final dividend to 65.3p per share.

John Kennedy, the firm’s president for Europe, said: “We’ve had another year of very strong sales growth and expanding operating margins in all regions and within Europe, Great Britain was very strong with Scotland a key part of that growth.”

Mr Kennedy pointed to Diageo’s “heavy and continued” investment in Scotland – £1bn over the last six years in building its Scotch infrastructure to grow exports around the world. Earlier this year, the London-based firm unveiled plans to “transform” its Scotch whisky visitor experiences in a £150 million investment over three years, the centrepiece being a new Johnnie Walker “immersive visitor experience” based in Edinburgh.

It will also upgrade its existing network of 12 distillery visitor centres to create a new generation of Scotch attractions.

In Great Britain, sales grew by 8%, driven by gin with Tanqueray gaining share and Gordon’s benefiting from the launch of its Pink variant. Beer also put in a sound performance with Guinness up 8% supported by strong growth in Hop House 13 Lager.

Sales of Diageo’s Scotch portfolio, which includes flagship brand Johnnie Walker, were up 6%. Mainstream vodka brand Smirnoff declined 2% in line with the vodka category but Guinness had “one of its best years for a long time” with sales up 8%. “It’s the original craft beer with great story behind it,” said Mr Kennedy.

“We’re very excited about Johnnie Walker,” he added. “The brand will be 200 years young in 2020 – it’s the jewel in our crown and we’re working on something special for this anniversary. There’s a lot of activity in Scotch just now and that’s great news for the category.”

Gin, he added, was benefiting from changes in consumer behaviour. “Drinking occasions are changing,” he said. “Gin is a lighter drink so lends itself well to an early-evening occasion. People are looking for lighter products that are still high quality with interesting flavours and ingredients.

“They’re trading up to products that sit within our luxury portfolio which also includes Seroc vodka, Johnnie Walker Blue, Bulleit bourbon and Zacapa rum from Guatemalan.”

Diageo’s chief executive Ivan Menezes said results reflected the “high performance culture we have created in Diageo, the ongoing rigorous execution of our strategy, our focus on the consumer and our ability to move swiftly on trends and insights”.

“The changes we have made in the business and the shifts in culture we continue to drive ensure we are well placed to capture opportunities and deliver sustained growth,” Mr Menezes said. “Our financial performance expectations are unchanged and we expect to continue to invest in the business to deliver our mid-term guidance of consistent mid-single digit organic net sales growth and 175bps of organic operating margin expansion for the three years ending June 30, 2019.”

At Brewin Dolphin Edinburgh, John Moore, senior investment manager, described Diageo’s results as “reassuringly strong”. He said: “With much of the company’s earnings denominated in US dollars, currency shifts along with favourable market conditions in North America and Europe have meant good growth in earnings as well as dividends for sterling-based investors.

“Although uncertainty surrounding Brexit and continued talk about trade tariffs are potential headwinds, we believe that Diageo should be well placed to deal with any challenges like this in the medium term.”