SHARES in Scotch whisky giant Diageo closed up nearly four per cent after it flagged expectations of profit growth of “at least” 14% – ahead of analysts’ forecasts – and resumed a £4.5 billion return of capital to investors.

The Johnnie Walker distiller underlined its continuing recovery from the coronavirus crisis amid strong growth in the US, its biggest market, and the gradual reopening of the on-trade around Europe.

The update from Diageo came on the day rival Edrington Group, owner of whisky brands The Macallan, Highland Park and The Famous Grouse, took full ownership of its UK distribution operation. The Glasgow-headquartered distiller is now the outright owner of Edrington-Beam Suntory UK, the distribution company it had owned in partnership with Beam Suntory for more than a decade.

Beam has taken full control of Maxxium Spain following an equity swap of stakes in firms jointly owned in the UK and Spain.

In a trading update, Diageo signalled its ongoing recovery from coronavirus “across all regions”, after posting a return to organic net sales growth for the half-year ended December 31 in March. It now expects organic operating profit growth to be at least 14% this current financial year, slightly ahead of organic net sales growth.

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Organic operating profits growth of 10.4% was forecast in a company-compiled consensus published in April.

The company, which makes Guinness, Smirnoff vodka and Gordon’s Gin, said its performance has been “particularly strong” in North America on the back of “resilient” consumer demand, while also citing the breadth of its portfolio and marketing and innovation strength.

In Europe, Diageo highlighted its “strong execution” in the off-trade and the benefits of on-trade reopening following coronavirus restrictions in certain markets. And it said it has seen a “continued recovery” in most markets in Africa, Asia Pacific and Latin America, and the Caribbean.

However, Diageo warned that the travel retail market “remains severely impacted”. International travel continues to be limited under measures to stop the spread of Covid-19.

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Diageo declared that its strong performance had allowed it to recommence its return of capital programme that it suspended as the pandemic took hold last April. The programme to return up to £4.5bn to shareholders via share buybacks or special dividends was approved by the board in July 2019.

Having repurchased £1.25bn of shares in January last year, it is now embarking on phase two of the return of capital programme, which will include a share buyback of up to £500m.

Chief executive Ivan Menezes said: “I am very pleased with how our business is recovering in fiscal 21, our strong competitive performance across key markets and our robust cash generation. Our disciplined approach to capital allocation is unchanged. Our priority remains to invest in the business to deliver sustainable and efficient organic growth and to pursue acquisitions that further strengthen our exposure to attractive categories.”

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He added: “When we have excess cash, we have been clear that we will seek to return it to shareholders.”

Shares in Diageo closed up 112.5p, or 3.5%, at 3,302.5p.

Meanwhile, Edrington and Beam say their new distribution structures for the UK and Spain will allow both businesses to “reduce complexity, improve agility, make decisive investments and expand opportunities for employees”.

Each distribution company will become part of larger international companies, in the form of Edrington and Beam Suntory.

Edrington-Beam Suntory UK will become Edrington UK Distribution Ltd, known as Edrington UK, from August. It will be led by current managing director Mark Riley, who will head a 210-strong team headquartered in Glasgow.

Edrington said its new distribution agreements with Beam will take effect from August 2, subject to regulatory approval.

Both distribution companies will distribute their current portfolios of Beam Suntory and Edrington brands.

Huw Pennell, Edrington’s regional managing partner for Europe, said: “As our business sharpens its focus on the rapidly growing opportunities for ultra-premium and prestige spirits, we are excited by the potential to work more closely with the talented Edrington-Beam Suntory UK team to accelerate this strategy while continuing to strengthen our presence of The Famous Grouse in our home market.

“Spain is a priority investment market for Edrington, and we are particularly pleased that this agreement will enable us to continue to work closely with the excellent Maxxium Spain team in Madrid to accelerate the growth of The Macallan in the key cities of Madrid and Barcelona and particularly Brugal rum in its No 1 international market.”

Further to the changes, Edrington will employ more than 1,200 people in the UK. Most of the team will be based in Scotland.

Edrington and Beam will maintain their equal stakes in Russia, their remaining joint venture distribution business.