The preliminary results from Diageo show increased profits, writes Jason Butler of NW Brown.

Diageo's preliminary results for the year ending on June 30 were better than expected.

The world's largest spirits company recorded increased revenues and profits, despite growth being partially offset by adverse moves in currency exchange rates.

The company reported net sales of £12.2bn, an increase of 5%, slightly ahead of the 4.3% that had been forecast by management.

Its gin brands have been especially successful in the last year, with Tanqueray gin and the launch of Gordon's pink gin providing a boost. Sales have been helped by a gin boom in western Europe, and the increasing popularity of colourful drinks and cocktails among millennials.

The 14% increase of gin sales was only outperformed by tequila, which saw sales soar by 56%, with much of the growth coming from the US and Mexico. Diageo expanded its portfolio with the $1bn acquisition of George Clooney's premium tequila brand 'Casamigos'. Vodka was the only category to decline in the last year, with Smirnoff sales down 2%.

But management have forecast headwinds for the new financial year. These include exchanges rates, expected to reduce full year sales by up to £70m and operating profit by £10m.

There is also the potential for higher interest rates, which would increase the cost of borrowing, and an increase in tax rate is also expected.

The board announced an additional share buyback programme of up to £2bn as a result of the strong cash flow figures. Having already returned £1.5bn to shareholders over the last year, this move should reassure them about the future prospects for the group.

• Jason Butler of NW Brown is an EDP Business columnist.