Diageo's new boss has pledged to cut $1billion in costs over the next three years to revive the drinks giant. 

The update came just hours before Dave Lewis set out how he will make these savings – worth £740million – through restructuring the company's regional teams and its supply chain, involving 'significant' job cuts. 

Shares soared 8 per cent after the initial update.

The new boss is trying to turn around the fortunes of the FTSE 100 group – whose brands include Guinness, Johnnie Walker whisky and Smirnoff vodka – as it reported a 2 per cent fall in sales over the year to June 30.

Diageo said that despite growth in Europe – where demand for its flagship black stout has been booming – and Africa, weaker trading in North America and Asia Pacific dragged sales down. Volume sales were down 4 per cent over the year.

The business said its final dividend would be 30 cents per share, compared to 62.98 cents per share last year. This brings the full year dividend, which will be proposed to investors at its annual meeting in November, to 50 cents per share.

Lewis, the former Tesco chief executive known as ‘drastic Dave’, refused to reveal how many jobs will be cut on Thursday afternoon. 

‘I don’t want to talk about a number,’ he said, but described it as ‘a significant change’ that ‘changes the cost profile of the business.’

He was asked whether the culture of the company could survive heavy cuts and said: ‘Whilst the impacts are big, nobody's saying to me this is the wrong thing to do.’

‘The culture that Diageo wants is a winning culture. You need to get back to being proud and winning.’

A lot of the changes to the group’s operating structure will focus on core finance, technology and HR teams, Lewis said, rather than ‘brands and marketing.’

This includes fewer 'duplicative' roles across countries as Lewis said ‘massive amounts of complexity and bespoke-ness, country by country’ had become ‘a route to failure.'

His strategy will focus on making Diageo's portfolio more competitive. This includes more investment into the growing category of ‘ready to drink’ canned products. 

The group said on Thursday that this section ‘remains robust, with long-term growth potential, and we have a clear strategy to drive market outperformance.’ 

But Lewis dismissed speculation that the company could acquire another brand to meet its new RTD ambitions. ‘We're not thinking about M&A, and I want people to be really clear about that. We have what we need to turn our business around, so we're not talking about anything in the M&A space.’

Lewis promised further updates on the group’s RTD ‘expression’ of its core spirit brands, saying there was a huge opportunity to reel consumers with ‘absolutely stunning’ pre-made cocktail solutions. Diageo’s spirits-based RTDs grew 15pc last year, even without a major strategic emphasis on them, he said.

And he said he was keen to ‘expand and accelerate’ the growth of Guinness, with Dublin, Ireland - its home - to be the biggest recipient of investment.

Brands Crown Royal, Smirnoff, Captain Morgan are still ‘very big, very important’ for the company, but Lewis said the business had 'not done a great job' with them recently.

The strategy is also thought to include a refresh of prices to appeal to cash-conscious consumers.

For the current financial year, Diageo said it expects ‘broadly flat organic net sales growth, with North America organic net sales down mid-single-digit.’

And it said it expects ‘low-to mid-single-digit’ profit growth, thanks to a bulk of its cost savings taking place in the year ahead, as well as supply chain savings.

Chris Beauchamp, chief market analyst at investing and trading platform IG, said: ‘Desperate times call for desperate measures, which is why Diageo hired Desperate Dave in the first place.

‘The slashing of the dividend is the kind of thing only incoming CEOs with a mandate to save the business are allowed to do without cratering the share price - the market was prepared for it anyway after the half year was given similar treatment to today's full-year figure. Now comes the hard part, convincing and then showing investors that the turnaround plan is going to pay off.'