UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
26 January 2023
Commission File Number: 001-10691
DIAGEO plc
(Translation
of registrant’s name into English)
16 Great Marlborough Street, London, United Kingdom, W1F 7HS
(Address
of principal executive offices)
Indicate
by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.
Form
20-F X
Form
40-F
Indicate
by check mark whether the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule
101(b)(1):
Indicate
by check mark whether the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule
101(b)(7):
Diageo delivers strong performance while investing in sustainable
long-term growth
|
Delivered strong net sales growth, with growth across all
regions
-
Reported net sales of £9.4 billion, increased 18.4%, primarily
reflecting strong organic net sales growth as well as favourable
impacts from foreign exchange, mainly due to the strengthening of
the US dollar.
-
Organic net sales grew 9.4%, with growth in all regions. Price/mix
of 7.6 percentage points reflects a high single-digit price
contribution to net sales growth, premiumisation and organic volume
growth of 1.8%.
-
Growth was enabled by our diversified footprint, advantaged
portfolio, strong brands and underpinned by favourable industry
trends of premiumisation.
|
|
|
Resilient operating margin despite increased cost
inflation
-
Reported operating profit grew 15.2% to £3.2 billion. Reported
operating margin declined by 92bps, with organic margin expansion
more than offset by exceptional operating items and foreign
exchange.
-
Organic operating profit grew 9.7% and organic operating margin
expanded by 9bps, driven by leverage on operating cost reflecting
disciplined cost management, despite inflation.
- Price
increases and supply productivity savings more than offset the
impact of absolute cost inflation on gross margin.
|
|
|
Advantaged portfolio and premiumisation drove market share
growth
- Growth was delivered across most categories,
primarily scotch, tequila and beer.
-
Premium-plus brands contributed 57% of reported net sales and drove
65% of organic net sales growth.
- Total trade market share grew or
held in over 75%(1) of total net
sales value in measured markets.
|
|
|
Continued optimisation of portfolio through acquisitions and
disposals
-
Acquired Mr Black, a leading Australian premium-priced coffee
liqueur, and Balcones Distilling, a Texas craft distiller and one
of the leading producers of American single malt
whisky.
-
Announced an agreement to acquire Don Papa rum, a super-premium,
dark rum from the Philippines.
-
Agreed to dispose of Guinness Cameroon S.A., disposed of Archers
and completed the disposal and franchising of a portfolio of brands
in India.
|
|
|
Invested to sustain long-term growth
-
Increased organic marketing investment by 6.8%, reflecting strong,
consistent investment in our brands.
-
Invested £0.4 billion of capex in supply capacity,
sustainability, digital capabilities and consumer
experiences.
|
|
|
Cash flow generation
- Net
cash flow from operating activities declined by £0.7 million
to £1.2 billion.
- Free
cash flow of £0.8 billion, declined £0.8 billion.
Operating profit and positive foreign exchange impact were offset
by higher year-on-year working capital outflow primarily due to
lapping a larger increase in creditors, phasing of spend and higher
tax payments.
-
Strong balance sheet, with leverage ratio(2) of 2.5x as at
31 December 2022, at the lower end of our target range, as a result
of strong profit performance.
|
|
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Continued progress in delivering Society 2030 ESG goals and doing
business the right way
- Launched 'Drops of Advice', a new global festive
responsible drinking campaign.
- Announced plans for a hydrogen powered furnace in
the UK to create the world's first net zero glass bottles to be
produced at scale.
-
Diageo North America was named in the Top 10 Inclusive Companies
for 2022.
-
Included in Dow Jones World Sustainability Index for the fifth
consecutive year.
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|
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Continued creation of long-term shareholder value
-
Increased basic eps by 19.7% to 100.9 pence and pre-exceptional eps
by 15.2% to 98.6 pence.
-
Increased declared interim dividend by 5% to 30.83 pence per
share.
- Total shareholder return was 5%, in the top half
of our peer group.
-
Expect to complete remaining £0.3 billion of current programme
to return up to £4.5 billion of capital to shareholders in
February 2023 and return up to an additional £0.5 billion in
fiscal 23.
|
|
See page 46 for explanation and reconciliation of non-GAAP
measures, including organic net sales, organic marketing
investment, organic operating profit, free cash flow, eps before
exceptionals, ROIC, adjusted net debt, adjusted EBITDA and tax rate
before exceptional items.
(1)Internal
estimates incorporating Nielsen, Association of Canadian
Distillers, Dichter & Neira, Frontline, INTAGE, IRI, ISCAM,
NABCA, Scentia, State Monopolies, TRAC, IPSOS and other third-party
providers. All analysis of data has been applied with a tolerance
of +/- 3 bps. Percentages represent percent of markets by total
Diageo net sales contribution that have held or gained total trade
share fiscal year to date. Measured markets indicate a market where
we have purchased any market share data. Market share data may
include beer, wine, spirits or other elements. Measured market net
sales value sums to 86% of total Diageo net sales value in the
first half of fiscal 23.
(2)Ratio
of adjusted net borrowings to adjusted EBITDA. For further details
see page 53.
Ivan Menezes, Chief Executive, said:
We have made a strong start to fiscal 23. Organic net sales grew
9%, with growth across all regions, organic volume grew 2%, and
organic operating profit grew 10%. In a challenging cost
environment, our organic operating margin increased 9 basis points
whilst we also continued to invest for the future. Today, Diageo is
36%(1) larger
than it was prior to Covid-19, reflecting the strength of our
diversified footprint and advantaged portfolio. I want to thank my
nearly 28,000 colleagues for their tireless work, focus and agility
which has helped us to achieve these results.
Sales growth was supported by our continued focus on premiumising
our portfolio, bolstered by strong global premiumisation trends,
with our super-premium-plus brands growing organic net sales 12%.
As category growth trends continue to normalise following Covid-19,
winning quality market share remains a key focus. I am pleased to
say that we gained or held share in 75%(2) of
total net sales value in our measured markets, demonstrating our
strong commercial execution.
We have delivered targeted price increases across all regions,
enabled by our expertise in revenue growth management and supported
by strong consumer demand for our brands. This, combined with our
culture of everyday efficiency, has allowed us to increase our
investments. We are investing in world-class brand building,
digital and data capabilities and our ambitious 2030 sustainability
plan to create a stronger and more resilient business for the
long-term.
As we look to the second half of fiscal 23, whilst the operating
environment remains challenging, I remain confident in the
resilience of our business and our ability to navigate volatility.
We believe we are well-positioned to deliver our medium-term
guidance of consistent organic net sales growth in the range of 5%
to 7% and sustainable organic operating profit growth in the range
of 6% to 9% for fiscal 23 to fiscal 25.
Financial performance
|
|
Volume (equivalent units)
|
Operating profit
|
|
Earnings per share (eps)
|
|
EU136.8m
|
|
|
£3,161m
|
|
|
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100.9p
|
|
|
|
(F22 H1: EU 140.2 m)
|
|
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(F22 H1: £2,743m)
|
|
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(F22 H1: 84.3p)
|
|
|
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Reported movement
|
(2)%
|
↓
|
Reported movement
|
15%
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↑
|
|
Reported movement
|
20%
|
↑
|
|
Organic
movement(3)
|
2%
|
↑
|
Organic
movement(3)
|
10%
|
↑
|
|
Eps
before exceptional items(3)
|
15%
|
↑
|
|
|
|
|
|
|
|
|
|
|
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Net sales
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Net cash from operating activities
|
|
Interim dividend per share
|
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£9,420m
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|
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£1,248m
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|
|
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30.83p
|
|
|
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(F22 H1: £7,957m)
|
|
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(F22 H1: £1,947m)
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|
|
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(F22 H1: 29.36p)
|
|
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Reported movement
|
18%
|
↑
|
F23 H1
free cash flow(3) £817m
|
|
|
|
Increase
|
5%
|
↑
|
|
Organic
movement(3)
|
9%
|
↑
|
F22 H1
free cash flow(3) £1,575m
|
|
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(1)Global H1 F23 net sales value 36% ahead of H1 F19 on a constant
basis, see page 47 for
explanation.
(2)Internal
estimates incorporating Nielsen, Association of Canadian
Distillers, Dichter & Neira, Frontline, INTAGE, IRI, ISCAM,
NABCA, Scentia, State Monopolies, TRAC, IPSOS and other third-party
providers. All analysis of data has been applied with a tolerance
of +/- 3 bps. Percentages represent percent of markets by total
Diageo net sales contribution that have held or gained total trade
share fiscal year to date. Measured markets indicate a market where
we have purchased any market share data. Market share data may
include beer, wine, spirits or other elements. Measured market net
sales value sums to 86% of total Diageo net sales value in the
first half of fiscal 23.
(3)See page 46 for explanation and
reconciliation of non-GAAP measures.
Key financial information
Six months ended 31 December 2022
Summary financial information
|
|
F23 H1
|
F22 H1
|
Organic growth
%
|
Reported growth
%
|
Volume
|
EUm
|
136.8
|
140.2
|
2
|
(2)
|
Net sales
|
£ million
|
9,420
|
7,957
|
9
|
18
|
Marketing
|
£ million
|
1,577
|
1,351
|
7
|
17
|
Operating profit before exceptional items
|
£ million
|
3,194
|
2,743
|
10
|
16
|
Exceptional
operating items(1)
|
£ million
|
(33)
|
-
|
|
|
Operating profit
|
£ million
|
3,161
|
2,743
|
|
15
|
Share of associate and joint venture profit after tax
|
£ million
|
172
|
190
|
|
(9)
|
Non-operating
exceptional items(1)
|
£ million
|
16
|
(31)
|
|
|
Net finance charges
|
£ million
|
(292)
|
(180)
|
|
|
Exceptional
taxation credit/(charge)(1)
|
£ million
|
70
|
-
|
|
|
Tax rate including exceptional items
|
%
|
21.3
|
23.3
|
|
(9)
|
Tax rate before exceptional items
|
%
|
23.4
|
23.0
|
|
2
|
Profit attributable to parent company's shareholders
|
£ million
|
2,295
|
1,965
|
|
17
|
Basic earnings per share
|
pence
|
100.9
|
84.3
|
|
20
|
Basic earnings per share before exceptional items
|
pence
|
98.6
|
85.6
|
|
15
|
Interim dividend
|
pence
|
30.83
|
29.36
|
|
5
|
(1)For further details on
exceptional items see pages 22 and 34.
Reported growth by region
|
Volume
|
Net sales
|
Marketing
|
Operating profit before exceptional items
|
Operating profit
|
|
%
|
EUm
|
%
|
£ million
|
%
|
£ million
|
%
|
£ million
|
%
|
£ million
|
North America
|
(4)
|
(1.0)
|
19
|
553
|
18
|
101
|
10
|
124
|
8
|
98
|
Europe
|
(1)
|
(0.2)
|
13
|
227
|
7
|
21
|
13
|
81
|
15
|
95
|
Asia Pacific
|
(4)
|
(2.0)
|
20
|
306
|
15
|
39
|
30
|
136
|
25
|
115
|
Latin America and Caribbean
|
7
|
1.0
|
34
|
281
|
42
|
52
|
41
|
138
|
41
|
138
|
Africa
|
(6)
|
(1.2)
|
9
|
75
|
10
|
10
|
2
|
4
|
2
|
4
|
Corporate
|
-
|
-
|
91
|
21
|
50
|
3
|
(26)
|
(32)
|
(26)
|
(32)
|
Diageo
|
(2)
|
(3.4)
|
18
|
1,463
|
17
|
226
|
16
|
451
|
15
|
418
|
Organic growth by region
|
Volume
|
Net sales
|
Marketing
|
Operating profit before exceptional items
|
|
%
|
EUm
|
%
|
£ million
|
%
|
£ million
|
%
|
£ million
|
North America
|
(4)
|
(1.1)
|
3
|
88
|
2
|
13
|
(2)
|
(26)
|
Europe
|
0
|
(0.1)
|
10
|
164
|
3
|
9
|
19
|
106
|
Asia Pacific
|
10
|
3.6
|
17
|
250
|
9
|
24
|
27
|
119
|
Latin America and Caribbean
|
6
|
0.9
|
20
|
167
|
29
|
37
|
20
|
69
|
Africa
|
(5)
|
(1.0)
|
6
|
52
|
8
|
8
|
12
|
23
|
Corporate
|
-
|
-
|
91
|
21
|
33
|
2
|
(23)
|
(30)
|
Diageo
|
2
|
2.3
|
9
|
742
|
7
|
93
|
10
|
261
|
First half of fiscal 19 to first half of fiscal 23
growth
|
|
Reported net sales growth %(1)
|
Net sales growth on a constant basis %(1)
|
|
Organic volume CAGR %(2)
|
Organic net sales CAGR %(2)
|
North America
|
49
|
38
|
|
2
|
8
|
Europe
|
21
|
27
|
|
4
|
7
|
Asia Pacific
|
31
|
32
|
|
2
|
7
|
Latin America and Caribbean
|
64
|
64
|
|
6
|
15
|
Africa
|
15
|
32
|
|
3
|
8
|
Corporate
|
57
|
57
|
|
6
|
13
|
Diageo
|
36
|
36
|
|
3
|
8
|
(1)For further details on first
half of fiscal 19 to first half of fiscal 23 growth on a constant
basis see pages 47-50.
(2)First
half of fiscal 19 to first half of fiscal 23 CAGR indicative, and
the impact from disposals, acquisitions and re-classifications may
not be fully captured.
See page 46 for explanation and
reconciliation of non-GAAP measures.
Net sales (£ million)
Reported net sales grew 18.4%
Organic net sales grew 9.4%
Reported net sales grew18.4%, driven by strong organic growth and a
positive favourable foreign exchange impact.
Organic net sales growth of 9.4% reflects organic volume growth of
1.8% and 7.6 percentage points of positive price/mix. All regions
delivered growth, despite lapping strong double-digit growth.
Price/mix was primarily driven by price increases across all
regions.
Net sales
|
£ million
|
F22 H1
|
7,957
|
Exchange(1)
|
669
|
Acquisitions and disposals
|
(33)
|
Hyperinflation(2)
|
85
|
Volume
|
142
|
Price/mix
|
600
|
F23 H1
|
9,420
|
(1)Exchange
rate movements reflect the adjustment to recalculate the reported
results as if they had been generated at the prior period weighted
average exchange rates.
(2)See pages 35 and 47-50 for details of hyperinflation
adjustment.
Operating profit (£ million)
Reported operating profit grew 15.2%
Organic operating profit grew 9.7%
Reported operating profit grew 15.2%, mainly driven by growth in
organic operating profit and positive impact from exchange rate
movements. This was partially offset by the negative impact of
exceptional operating items, primarily driven by the supply chain
agility programme and the negative impact of acquisitions and
disposals.
Organic operating profit grew 9.7%, ahead of organic net sales
growth, driven by growth across all regions except North
America.
Operating profit
|
£ million
|
F22 H1
|
2,743
|
Exceptional
operating items(1)
|
(33)
|
Exchange
|
201
|
Acquisitions and disposals
|
(19)
|
FVR(2)
|
(12)
|
Hyperinflation(3)
|
20
|
Organic movement
|
261
|
F23 H1
|
3,161
|
(1)For
further details on exceptional operating items see pages 22 and
34.
(2)Fair value remeasurements. For further details
see page 22.
(3)See
pages 35 and 47-50 for details of hyperinflation
adjustment.
Operating margin (%)
Reported operating margin declined by 92bps
Organic operating margin expanded by 9bps
Reported operating margin declined by 92bps, with organic
operating margin expansion more than offset by exceptional
operating items, negative impact of foreign exchange,
acquisitions and disposals and other items.
Organic operating margin expanded by 9bps, reflecting disciplined
cost management despite inflation. Strong operating margin
expansion in Asia Pacific and Europe was partially offset by a
decline in North America.
Organic gross margin declined by 79bps, primarily driven by cost
pressure. Price increases and supply productivity savings more than
offset the absolute impact of cost inflation.
Operating margin
|
ppt
|
F22 H1
|
34.5
|
Exceptional
operating items(1)
|
(0.35)
|
Exchange
|
(0.31)
|
Acquisitions and disposals
|
(0.08)
|
Other(2)
|
(0.27)
|
Gross margin
|
(0.79)
|
Marketing
|
0.41
|
Other operating items
|
0.47
|
F23 H1
|
33.6
|
(1)For
further details on exceptional operating items see pages 22 and
34.
(2)Fair value remeasurements and
hyperinflation adjustment. For further details on fair value
remeasurements see page 22. See pages 35 and 47-50 for details of
hyperinflation adjustment.
Basic earnings per share (pence)
Basic eps increased 19.7% from 84.3 pence to 100.9
pence
Basic eps before exceptional items(1) increased
15.2% from 85.6 pence to 98.6 pence
Basic eps increased 16.6 pence, mainly driven by organic operating
profit growth and favourable foreign exchange impact, partially
offset by higher tax and increased finance charges.
Basic eps before exceptional items increased 13 pence.
Basic earnings per share
|
pence
|
F22 H1
|
84.3
|
Exceptional
items after tax(2)
|
3.6
|
Exchange on operating profit
|
8.6
|
Acquisitions
and disposals(3)
|
(0.8)
|
Organic operating profit
|
11.1
|
Associates and joint ventures
|
(0.8)
|
Finance
charges(4)
|
(3.5)
|
Tax(5)
|
(4.0)
|
Share buyback
|
1.5
|
Non-controlling interests
|
0.5
|
FVR(6)
|
(0.5)
|
Hyperinflation
(operating profit)(7)
|
0.9
|
F23 H1
|
100.9
|
(1)See page 46 for explanation of the calculation and use of
non-GAAP measures.
(2)For further details on exceptional items see pages 22 and
34.
(3)Includes finance charges net of tax.
(4)Excludes finance charges related to acquisitions, disposals,
share buybacks and includes finance charges related to
hyperinflation adjustments (F23 H1 - £(6) million; F22 H1 -
£1 million).
(5)Excludes tax related to acquisitions, disposals and share
buybacks.
(6)Fair value remeasurements. For further details see page
22.
(7)Operating profit hyperinflation adjustment movement was £20
million compared to the first half of fiscal 22 (F23 H1 - £20
million; F22 H1 - £nil).
Net cash from operating activities and free cash flow (£
million)
Generated £1,248 million net cash from operating
activities(1) and
£817 million free cash flow
Net cash from operating activities was £1,248 million, a
decrease of £699 million compared to the first half of fiscal
22. Free cash flow decreased by £758 million
to £817
million.
Free cash flow decreased as strong growth in operating profit and a
favourable foreign exchange impact was more than offset by a higher
year-on-year working capital outflow, higher cash tax and interest
paid, and increased capital investment.
The higher year-on-year working capital outflow was due to the
normalisation of creditors relative to the first half of fiscal 22,
as our growth rate began to moderate in the first half of fiscal
23. Creditors increased significantly in the first half of fiscal
22 due to accelerated growth as markets recovered from the impact
of Covid-19. Working capital has also been impacted by the phasing
of spend in the half, and the increase was also driven by higher
investment in inventory, including maturing stock, to deliver
supply chain resilience and to support future growth of the
business. This higher investment was also impacted by
inflation.
The additional cash tax payments were the result of increased
profit impacting tax instalments, higher
balancing payments and adverse FX movements on
our tax liabilities. Higher interest cost reflects the higher
interest rate environment globally.
Free cash flow
|
£ million
|
F22 H1 Net cash from operating activities
|
1,947
|
F22 H1 Capex and movements in loans and other
investments
|
(372)
|
F22 H1 Free cash flow
|
1,575
|
Exchange(2)
|
201
|
Operating
profit(3)
|
238
|
Working
capital(4)
|
(855)
|
Capex
|
(54)
|
Tax
|
(258)
|
Interest
|
(38)
|
Other(5)
|
8
|
F23 H1 Free cash flow
|
817
|
F23 H1 Capex and movements in loans and other
investments
|
431
|
F23 H1 Net cash from operating activities
|
1,248
|
(1)Net
cash from operating activities excludes net capex (F23 H1 -
£(429) million; F22 H1 - £(375) million) and movements in
loans and other investments.
(2)Exchange
on operating profit before exceptional items.
(3)Operating profit excludes exchange, depreciation and
amortisation, post employment charges of £(9) million and
other non-cash items.
(4)Working capital movement includes maturing
inventory.
(5)Other items include dividends
received from associates and joint ventures, movements in loans and
other investments and post employment payments.
Return on average invested capital
(%)(1)
ROIC increased 37bps
ROIC increased 37bps, mainly driven by organic operating
profit growth, partially offset by higher tax, increased capex and
maturing stock investment.
Return on average invested capital
|
ppt
|
F22 H1
|
19.3
|
Exchange
|
0.51
|
Acquisitions and disposals
|
(0.31)
|
Organic operating profit
|
2.17
|
Associates and joint ventures
|
(0.35)
|
Tax
|
(0.94)
|
Other
|
(0.71)
|
F23 H1
|
19.7
|
(1)ROIC
calculation excludes exceptional operating items from operating
profit. For further details on ROIC see page 52.
Fiscal 23 outlook
Organic net sales
The strong organic net sales growth delivered in the first half of
fiscal 23 moderated compared to double-digit fiscal 22 levels, as
expected. While we expect the operating environment to continue to
be challenging, we are confident in the resilience of our business
and our ability to navigate continued cost inflation and global
geopolitical and macroeconomic uncertainty.
In North America, organic net sales grew 3% in the first half of
fiscal 23. We expect organic net sales growth to continue to
normalise through the second half of fiscal 23, compared to the
double-digit growth in the prior period. In Europe, we expect
organic net sales growth to moderate in the second half of fiscal
23 as we lap on-trade re-opening recovery. In Asia Pacific, Latin
America and Caribbean and Africa, we expect continued growth
through the second half of fiscal 23, albeit at a moderated pace
relative to the strong growth in fiscal 22.
We believe in the fundamental strength of our business and expect
our advantaged portfolio to benefit from spirits continuing to gain
share of total beverage alcohol (TBA), premiumisation, strategic
pricing actions and continued strong investment in marketing and
innovation. Our portfolio is well-positioned across geographies,
categories and price points. We will use our deep understanding of
consumers to quickly adapt to changes in trends and behaviours,
while investing strongly in marketing and innovation, and
leveraging our revenue growth management capabilities, including
strategic pricing actions.
Organic operating margin
In a challenging inflationary environment, we will continue to
focus on revenue growth management, including strategic pricing
actions. For the second half of fiscal 23, we expect marketing
investment to grow ahead of sales growth. We continue to expect
organic operating margin to benefit from premiumisation trends, our
culture of everyday efficiency and operating leverage, while we
continue to invest strongly in marketing.
Exchange
We are not providing specific guidance in relation to foreign
exchange for fiscal 23. However, using spot exchange rates of
£1=$1.20 and £1=€1.13 as at 31 December 2022, where
sterling has depreciated compared to the actual exchange rates
experienced in fiscal 22, and applying them to last year's P&L
profile for net sales and operating profit, we would see positive
exchange impacts of approximately £950 million and £300
million respectively.
Taxation
We expect the tax rate before exceptional items to continue to be
in the range of 22.0% to 24.0% in fiscal 23.
Effective interest rate
We expect the effective interest rate to be around 4% in fiscal
23.
Capital expenditure and free cash flow
In fiscal 23, we continue to expect capex for the full year to be
in the range of £1.0-1.2 billion. In the second half of fiscal
23, we expect to deliver stronger free cash flow than the first
half, as we lap more normalised working capital movements in the
second half of fiscal 22.
Medium-term guidance, fiscal 23 to fiscal 25
Organic net sales and organic operating profit
We continue to expect to deliver our medium-term guidance of
consistent organic net sales growth in the range of 5% to 7% and
sustainable organic operating profit growth in the range of 6% to
9% for fiscal 23 to fiscal 25.
Notes to the business and financial review
Unless otherwise stated:
-
movements in results are for the six months ended 31 December 2022
compared to the six months ended 31 December 2021;
-
commentary below refers to organic movements unless stated as
reported;
-
volume is in millions of equivalent units (EUm);
-
net sales are sales after deducting excise duties;
-
percentage movements are organic movements unless stated as
reported;
-
growth is organic net sales value movement unless states otherwise;
and
-
share refers to value share, except for India which is volume
share.
See page 46 for explanation of the
calculation and use of non-GAAP measures.
Business review
North America
● Reported net sales grew 19%, primarily driven
by a favourable impact from foreign exchange, mainly due to the
strengthening of the US dollar, and organic growth.
|
● Organic net sales grew 3%, lapping strong
double-digit growth in the first half of fiscal 22, reflecting
growth in all markets and holding share of TBA. Strong price/mix
growth more than offset an organic volume decline.
|
● Growth was primarily driven by tequila, which
grew 24%, as well as double-digit growth in US whiskey and
spirit-based ready to drink. This more than offset the declines in
vodka, Canadian whisky, and scotch.
|
● US Spirits net sales grew 2%, lapping strong
double-digit growth in the first half of fiscal 22. Depletions
value growth was ahead of shipments by approximately one percentage
point with some variations across certain brands.
|
● Diageo Beer Company USA (DBC USA) net sales
grew 3%, reflecting 14% growth in Guinness, partially offset by a
decline in flavoured malt beverages.
|
● Organic operating margin declined by 206bps,
primarily driven by cost inflation and an adverse category mix.
Strategic price increases, productivity savings and lower
discretionary expenditures more than offset the absolute impact of
cost inflation, and mostly offset the adverse impact on gross
margin.
|
● Marketing investment grew 2% ahead of prior
year as we continue to support growth across key categories,
primarily tequila and Canadian whisky.
|
Key financials (£ million):
|
|
F22 H1
|
Exchange
|
Acquisitions
and
disposals
|
Organic movement
|
Other(1)
|
F23 H1
|
Reported movement%
|
Net sales
|
2,964
|
452
|
13
|
88
|
-
|
3,517
|
19
|
Marketing
|
548
|
80
|
7
|
13
|
1
|
649
|
18
|
Operating profit before exceptional items
|
1,295
|
146
|
(6)
|
(26)
|
10
|
1,419
|
10
|
Exceptional
operating items(2)
|
-
|
|
|
|
|
(26)
|
|
Operating profit
|
1,295
|
|
|
|
|
1,393
|
8
|
Markets and categories:
|
|
|
|
|
Global giants, local stars and reserve(5):
|
|
Organic
volume
movement
|
Reported
volume
movement
|
Organic
net sales
movement
|
Reported
net sales
movement
|
|
|
Organic
volume
movement(6)
|
Organic
net sales
movement
|
Reported
net sales
movement
|
|
%
|
%
|
%
|
%
|
|
|
%
|
%
|
%
|
North America
|
(4)
|
(4)
|
3
|
19
|
|
Crown Royal
|
(10)
|
(8)
|
6
|
|
|
|
|
|
|
Don Julio
|
5
|
20
|
38
|
US
Spirits(3)
|
(6)
|
(5)
|
2
|
18
|
|
Casamigos
|
16
|
27
|
46
|
DBC
USA(4)
|
(1)
|
(1)
|
3
|
19
|
|
Johnnie Walker
|
(12)
|
(7)
|
6
|
Canada
|
(1)
|
-
|
7
|
17
|
|
Smirnoff
|
1
|
6
|
21
|
|
|
|
|
|
|
Captain Morgan
|
(3)
|
1
|
15
|
Spirits
|
(4)
|
(4)
|
2
|
17
|
|
Baileys
|
(10)
|
(5)
|
9
|
Beer
|
(1)
|
(1)
|
3
|
18
|
|
Ketel
One(7)
|
(12)
|
(14)
|
(1)
|
Ready to drink
|
10
|
10
|
18
|
34
|
|
Guinness
|
9
|
15
|
31
|
|
|
|
|
|
|
Bulleit
whiskey(8)
|
12
|
19
|
37
|
|
|
|
|
|
|
Buchanan's
|
(20)
|
(12)
|
1
|
(1)Fair value remeasurements. For further details see page
22.
(2)For further details on exceptional operating items see pages 22
and 34.
(3)Reported volume movement has been impacted by acquisitions and /
or disposals. For further details see pages 48-51.
(4)Certain spirits-based ready to drink products in certain states
are distributed through DBC USA and those net sales are captured
within DBC USA.
(5)Spirits brands excluding ready to drink and non-alcoholic
variants.
(6)Organic equals reported volume movement.
(7)Ketel One includes Ketel One vodka and Ketel One
Botanical.
(8)Bulleit whiskey excludes Bulleit Crafted Cocktails.
North America contributed
|
|
North America organic net sales grew
|
37% of Diageo reported net sales in
first half of fiscal 23
|
|
3% in first half of fiscal
23
|
Market highlights - US Spirits
● In
the first half of fiscal 22, the recovery in the on-trade channel,
resilient consumer demand in the off-trade channel and the partial
easing of supply chain constraints on certain products, resulted in
the replenishment of stock levels by distributors and retailers
towards normalised levels on several brands. The impact of lapping
this replenishment resulted in depletions being significantly ahead
of shipments across some brands in the first half of fiscal
23.
●
Tequila net sales grew 24%, gaining share of the spirits market and
the tequila category. Casamigos and Don Julio net sales grew 28%
and 20% respectively, with shipments growing ahead of depletions,
reflecting strong volume growth, as well as a benefit from price
increases.
●
Crown Royal net sales declined 9% while depletions value growth was
positive, supported by our NFL partnership, the permanent launch of
Crown Royal Peach and the return of Crown Royal Salted Caramel.
Market share trajectory continues to improve as the brand recovers
from supply constraints on flavoured variants in the first half of
fiscal 22.
●
Vodka net sales declined 15%. Smirnoff grew 7%, largely driven by
growth of the core variant and flavoured variants, primarily
Smirnoff Spicy Tamarind, which are recruiting younger and more
diverse consumers. Ketel One net sales declined 14% primarily due
to Ketel One Botanical. The Ketel One super-premium core variant
held share of the vodka category and depletions value growth was
positive. Cîroc net sales declined 46% as distributors
adjusted inventory levels in response to lower demand as
multicultural consumers were recruited into other spirits
categories.
●
Scotch net sales declined 5%. Johnnie Walker net sales declined
10%, however gained share of the scotch category driven by
premium-plus variants Johnnie Walker Black Label and Johnnie Walker
Blue Label, despite price increases and supply constraints on
certain pack sizes. Buchanan's net sales declined 12%, however
depletions value growth was positive and the brand gained category
share driven by consistent consumer penetration growth among
multicultural consumers, underpinned by increased marketing
investment. Single malts net sales grew 61%, primarily driven by
Lagavulin.
●
Captain Morgan net sales were flat, driven by growth in Captain
Morgan Original Spiced, supported by successful sports platforms
such as the NFL, which was offset by declines in other
variants.
●
Baileys net sales declined 4%, reflecting a decline in Baileys
Original. Depletions value growth was ahead of net sales driven by
increased media investment and successful holiday
innovation.
●
Bulleit whiskey net sales grew 19%, reflecting strong volume growth
as the brand lapped glass supply constraints in the first half of
fiscal 22, as well as a benefit from price increases. Bulleit
whiskey gained share of both the spirits market and the US whiskey
category, reflecting strong consumer demand and brand
equity.
● Spirit-based ready to
drink(1) net
sales grew 12%, driven by the launch of Cîroc Vodka
Spritz.
(1)Certain
spirits-based ready to drink products in certain states are
distributed through DBC USA and those net sales are captured within
DBC USA.
Europe
● Reported
net sales grew 13%, driven by organic growth and the hyperinflation
adjustment(1) related
to Turkey, partially offset by an unfavourable impact from foreign
exchange.
|
● Organic
net sales grew 10%, with growth across all markets except Eastern
Europe, which was impacted by the winding down of our operations in
Russia.
|
● Growth
was mainly driven by price increases and continued premiumisation,
while holding volume. The on-trade benefitted from continued
recovery, particularly in Southern Europe which was supported by
stronger tourism.
|
● Spirits
net sales grew 9%, with growth across key categories, in particular
scotch and vodka.
|
● Beer
net sales grew 18%. Guinness volume grew 6%, and net sales
increased 19% driven by price increases and further recovery in the
on-trade in Ireland and Great Britain.
|
● Organic
operating margin expanded by 286bps, driven by price increases,
premiumisation and productivity savings. These benefits more than
offset cost inflation.
|
● Marketing
investment grew 3%, focused on key spirits
brands.
|
Key financials (£ million):
|
|
F22 H1
|
Exchange
|
Acquisitions
and
disposals
|
Organic movement
|
Other(2)
|
Hyperinflation(1)
|
F23 H1
|
Reported movement
%
|
Net sales
|
1,752
|
(13)
|
(9)
|
164
|
-
|
85
|
1,979
|
13
|
Marketing
|
307
|
3
|
-
|
9
|
-
|
9
|
328
|
7
|
Operating profit before exceptional items
|
613
|
(15)
|
(8)
|
106
|
(22)
|
20
|
694
|
13
|
Exceptional
operating items(3)
|
-
|
|
|
|
|
|
14
|
|
Operating profit
|
613
|
|
|
|
|
|
708
|
15
|
Markets and categories:
|
|
|
|
|
Global giants and local stars(5):
|
|
Organic
volume
movement
|
Reported
volume
movement
|
Organic
net sales
movement
|
Reported
net sales
movement
|
|
|
Organic
volume
movement(6)
|
Organic
net sales
movement
|
Reported
net sales
movement
|
|
%
|
%
|
%
|
%
|
|
|
%
|
%
|
%
|
Europe(4)
|
-
|
(1)
|
10
|
13
|
|
Guinness
|
6
|
19
|
19
|
|
|
|
|
|
|
Johnnie Walker
|
12
|
23
|
26
|
Great
Britain(4)
|
(9)
|
(8)
|
1
|
1
|
|
Baileys
|
1
|
3
|
4
|
Northern Europe
|
8
|
8
|
10
|
11
|
|
Smirnoff
|
2
|
16
|
18
|
Southern
Europe(4)
|
7
|
2
|
14
|
13
|
|
Captain Morgan
|
(3)
|
4
|
6
|
Ireland(4)
|
5
|
6
|
20
|
21
|
|
Tanqueray
|
(1)
|
3
|
4
|
Eastern
Europe(4)
|
(18)
|
(17)
|
(3)
|
6
|
|
Yenì Raki
|
(4)
|
6
|
36
|
Turkey
|
4
|
4
|
31
|
48
|
|
J&B
|
(4)
|
1
|
3
|
|
|
|
|
|
|
|
|
|
|
Spirits
|
(1)
|
(1)
|
9
|
13
|
|
|
|
|
|
Beer
|
5
|
5
|
18
|
19
|
|
|
|
|
|
Ready to drink
|
3
|
3
|
11
|
14
|
|
|
|
|
|
(1)See pages
35 and 47-50 for details
of hyperinflation adjustment.
(2)Fair
value remeasurements. For further details see page
22.
(3)Exceptional items are in
respect of Diageo's decision, announced on 28 June 2022, to wind
down its operations in Russia over the following six months. For
further details on exceptional operating items see pages
22 and 34.
(4)Reported
volume movement has been impacted by acquisitions and / or
disposals. For further details see pages 48-51.
(5)Spirits
brands excluding ready to drink and non-alcoholic
variants.
(6)Organic equals reported volume movement, except
for Smirnoff which had reported volume movement of
3%, Captain Morgan of (2)%
and Tanqueray which was flat.
Europe contributed
|
|
Europe organic net sales grew
|
21% of Diageo reported net sales in
first half of fiscal 23
|
|
10% in first half of fiscal
23
|
Market highlights
●
Great Britain net sales grew 1%, mostly driven by strong
performance in Guinness, supported by price increases and further
recovery of the on-trade. Spirits net sales declined, while gaining
share, lapping strong double-digit growth in the first half of
fiscal 22. Growth in vodka was more than offset by a decline in
gin.
●
Northern Europe net sales grew 10%. Growth was broad-based, led by
scotch with strong market share growth.
●
Southern Europe net sales grew 14%, reflecting continued recovery
in the on-trade and tourism. Growth was mainly driven by strong
performance in scotch followed by gin, vodka and rum.
●
Ireland net sales grew 20%, reflecting continued recovery in the
on-trade. Growth was mostly driven by price increases and volume
growth in Guinness.
●
Eastern Europe net sales declined 3%, due to the suspension of
exports to and sales in Russia as announced in March 2022. In the
rest of the market, spirits grew double-digit primarily driven by
Johnnie Walker premium variants.
●
Turkey net sales grew 31%, with volume growth of 4%. Net sales
growth was driven by price increases in response to inflation and
increased excise duties. Growth was driven by scotch, raki and
vodka.
Asia Pacific
● Reported
net sales grew 20%, primarily reflecting strong organic growth and
a favourable impact from foreign exchange.
|
● Organic
net sales grew 17%, with strong growth in most markets, notably
South East Asia, Travel Retail Asia and Middle East and
India.
|
● Spirits grew 20%, primarily driven by
double-digit growth in scotch and IMFL whisky(1).
|
● Organic
operating margin expanded by 258bps as the benefits from the
continued recovery of Travel Retail, price increases, and marketing
and operational efficiencies more than offset cost
inflation.
|
● Marketing investment grew 9%, with focused
investment in scotch in South East Asia, Greater China and
India.
|
Key financials (£ million):
|
|
F22 H1
|
Exchange
|
Acquisitions
and
disposals
|
Organic
movement
|
F23 H1
|
Reported
movement
%
|
Net sales
|
1,531
|
89
|
(33)
|
250
|
1,837
|
20
|
Marketing
|
263
|
15
|
-
|
24
|
302
|
15
|
Operating profit before exceptional items
|
451
|
26
|
(9)
|
119
|
587
|
30
|
Exceptional
operating items(2)
|
-
|
|
|
|
(21)
|
|
Operating profit
|
451
|
|
|
|
566
|
25
|
Markets and categories:
|
|
|
|
|
Global giants, local stars and reserve(4):
|
|
Organic
volume
movement
|
Reported
volume
movement
|
Organic
net sales
movement
|
Reported
net sales
movement
|
|
|
Organic
volume
movement(5)
|
Organic
net sales
movement
|
Reported
net sales
movement
|
|
%
|
%
|
%
|
%
|
|
|
%
|
%
|
%
|
Asia
Pacific(3)
|
10
|
(4)
|
17
|
20
|
|
Johnnie Walker
|
27
|
42
|
46
|
|
|
|
|
|
|
Shui
Jing Fang(6)
|
(5)
|
(7)
|
-
|
India(3)
|
7
|
(9)
|
11
|
10
|
|
McDowell's
|
-
|
2
|
9
|
Greater China
|
2
|
2
|
2
|
9
|
|
The Singleton
|
40
|
37
|
46
|
Australia
|
(5)
|
(5)
|
3
|
9
|
|
Guinness
|
13
|
22
|
27
|
South East Asia
|
44
|
44
|
51
|
56
|
|
Smirnoff
|
18
|
21
|
30
|
North Asia
|
31
|
31
|
29
|
26
|
|
Windsor
|
56
|
55
|
56
|
Travel Retail Asia and Middle East
|
88
|
88
|
126
|
124
|
|
Baileys
|
7
|
13
|
25
|
|
|
|
|
|
|
|
|
|
|
Spirits(3)
|
9
|
(5)
|
20
|
22
|
|
|
|
|
|
Beer
|
15
|
15
|
21
|
27
|
|
|
|
|
|
Ready to drink
|
(1)
|
(1)
|
5
|
10
|
|
|
|
|
|
(1)Indian-Made
Foreign Liquor (IMFL) whisky.
(2)For
further details on exceptional operating items see pages 22 and
34.
(3)Reported
volume movement has been impacted by acquisitions and / or
disposals. For further details see pages 48-51.
(4)Spirits
brands excluding ready to drink and non-alcoholic
variants.
(5)Organic
equals reported volume movement.
(6)Growth
figures represent total Chinese white spirits of which Shui Jing
Fang is the principal brand.
Asia Pacific contributed
|
|
Asia Pacific organic net sales grew
|
20% of Diageo reported net sales in
first half of fiscal 23
|
|
17% in first half of fiscal
23
|
Market highlights
● India
net sales grew 11%, with volume growth of 7%, driven by strong
consumer demand and continued premiumisation. IMFL whisky grew 13%
and scotch grew double-digit, driven by Johnnie Walker and Black
Dog.
●
Greater China net sales grew 2%, driven by scotch, mostly offset by
a decline in Chinese white spirits which continued to be impacted
by on-trade restrictions. Scotch grew 20%, driven by strength in
Taiwan and mainland China, with strong performance in the
super-premium-plus segment.
●
Australia net sales grew 3%, primarily driven by price increases.
Growth was led by beer and ready to drink.
●
South East Asia net sales grew 51%, benefitting from a strong
return in the on-trade and tourism, following the easing of
Covid-19 restrictions. Scotch grew 49%, mostly driven by
Johnnie Walker premium variants and scotch malts.
●
North Asia (Korea and Japan) net sales grew 29%, benefitting from
the recovery of the on-trade. Growth was primarily driven by
double-digit growth in Johnnie Walker premium-plus variants and
Windsor.
●
Travel Retail Asia and Middle East net sales grew triple-digit
primarily driven by Johnnie Walker premium-plus
variants.
Latin America and Caribbean
● Reported
net sales grew 34%, primarily reflecting strong organic growth. Net
sales were favourably impacted by foreign exchange, mainly due to a
strengthening of the Mexican peso and Brazilian
real.
|
● Organic
net sales grew 20%, with 6% volume growth. Strong double-digit
growth, particularly in Brazil, Central America and Caribbean (CCA)
and Mexico, primarily driven by price increases and
premiumisation.
|
● Spirits
net sales grew 22%, primarily driven by strong double-digit growth
in scotch, tequila and vodka.
|
● Organic
operating margin expanded by 1bp. Prices increases, premiumisation
and leverage on operating costs offset increases in marketing
investment, cost inflation and negative market
mix.
|
● Marketing
investment grew 29%, ahead of organic net sales growth with
investment in key markets and brands.
|
Key financials (£ million):
|
|
F22 H1
|
Exchange
|
Acquisitions
and
disposals
|
Organic movement
|
F23 H1
|
Reported movement
%
|
Net sales
|
819
|
111
|
3
|
167
|
1,100
|
34
|
Marketing
|
125
|
14
|
1
|
37
|
177
|
42
|
Operating profit
|
333
|
69
|
-
|
69
|
471
|
41
|
Markets and categories:
|
|
|
|
|
Global giants, local stars and reserve(3):
|
|
Organic
volume
movement
|
Reported
volume
movement
|
Organic
net sales
movement
|
Reported
net sales
movement
|
|
|
Organic
volume
movement(4)
|
Organic
net sales
movement
|
Reported
net sales
movement
|
|
%
|
%
|
%
|
%
|
|
|
%
|
%
|
%
|
Latin
America and Caribbean(1)
|
|
|
|
|
|
Johnnie Walker
|
12
|
24
|
37
|
6
|
7
|
20
|
34
|
|
Buchanan's
|
4
|
16
|
25
|
|
|
|
|
|
|
Don Julio
|
31
|
58
|
86
|
Brazil(1)(2)
|
13
|
17
|
33
|
68
|
|
Old Parr
|
25
|
39
|
50
|
Mexico(1)
|
(4)
|
(3)
|
16
|
40
|
|
Smirnoff
|
17
|
19
|
34
|
CCA
|
7
|
7
|
22
|
31
|
|
Black & White
|
7
|
30
|
48
|
South
LAC(1)(2)
|
8
|
-
|
15
|
6
|
|
Baileys
|
(17)
|
(6)
|
4
|
Andean(1)
|
(12)
|
(11)
|
8
|
6
|
|
Tanqueray
|
(6)
|
(3)
|
10
|
|
|
|
|
|
|
|
|
|
|
Spirits(1)
|
6
|
7
|
22
|
36
|
|
|
|
|
|
Beer
|
1
|
1
|
14
|
24
|
|
|
|
|
|
Ready to drink
|
1
|
1
|
6
|
20
|
|
|
|
|
|
(1)Reported
volume movement has been impacted by acquisitions and / or
disposals. For further details see pages 48-51.
(2)From
1 July 2022 Uruguay and Paraguay domestic channels moved on a
management basis from PUB (Paraguay, Uruguay and Brazil) to PEBAC
(Peru, Ecuador, Bolivia, Argentina and Chile) and the new cluster
has been called South LAC. This reflects how management reviews
performance.
(3)Spirits
brands excluding ready to drink and non-alcoholic
variants.
(4)Organic
equals reported volume movement.
Latin America and Caribbean contributed
|
|
Latin America and Caribbean organic net sales grew
|
12% of Diageo reported net sales in
first half of fiscal 23
|
|
20% in first half of fiscal
23
|
Market highlights
● Brazil
net sales grew 33%, with strong volume growth, primarily driven by
continued momentum leading to market share gains. Growth in scotch
was driven by double-digit growth in Johnnie Walker and
triple-digit growth in Old Parr, underpinned by increased marketing
investment. Strong double-digit growth in vodka was driven by
Smirnoff and Cîroc.
●
Mexico net sales grew 16%, mainly driven by tequila and scotch.
Tequila grew strongly, largely driven by price increases, lapping
of aged liquid supply constraints in the first half of fiscal 22
and supported by increased marketing investment. In scotch, growth
was primarily driven by Johnnie Walker.
●
CCA (Central America and Caribbean) net sales grew 22%, with volume
growth of 7%. Growth was driven by price increases and
premiumisation, continuing momentum in the on-trade and further
tourism recovery in the Caribbean. Scotch net sales grew
double-digit, driven by Johnnie Walker and Old Parr.
●
Andean (Colombia and Venezuela) net sales grew 8%, primarily driven
by Buchanan's, supported by price increases.
●
South LAC (Argentina, Bolivia, Chile, Ecuador, Paraguay, Peru and
Uruguay) net sales grew 15%, with volume growth of 8%, primarily
driven by double-digit growth in Argentina and Ecuador, with strong
performance in premium-plus scotch.
Africa
● Reported
net sales grew 9%, primarily driven by organic growth and a
favourable impact from foreign exchange.
|
● Organic
net sales grew 6%, with growth across all markets supported by
price increases, partially offset by an organic volume
decline.
|
● Spirits
net sales grew 15%, driven by double-digit growth in both
mainstream and international spirits, particularly
scotch.
|
● Beer
net sales grew 2%, primarily driven by Guinness and Malta Guinness
which grew 7% and 5% respectively. This growth was offset by a slow
down in Kenya following price and duty
increases.
|
● Organic
operating margin expanded by 126bps, primarily driven by price
increases, productivity savings, positive mix and lapping one-off
costs, partially offset by cost inflation and increased marketing
investment.
|
● Marketing
investment grew 8%, to support premiumisation, key categories and
route to consumer opportunities.
|
Key financials (£ million):
|
|
F22 H1
|
Exchange
|
Acquisitions
and
disposals
|
Organic movement
|
F23 H1
|
Reported movement
%
|
Net sales
|
868
|
30
|
(7)
|
52
|
943
|
9
|
Marketing
|
102
|
3
|
(1)
|
8
|
112
|
10
|
Operating profit
|
176
|
(23)
|
4
|
23
|
180
|
2
|
Markets and categories:
|
|
|
|
|
Global giants and local stars(2):
|
|
Organic
volume
movement
|
Reported
volume
movement
|
Organic
net sales
movement
|
Reported
net sales
movement
|
|
|
Organic
volume
movement(3)
|
Organic
net sales
movement
|
Reported
net sales
movement
|
|
%
|
%
|
%
|
%
|
|
|
%
|
%
|
%
|
Africa(1)
|
(5)
|
(6)
|
6
|
9
|
|
Guinness
|
(5)
|
7
|
10
|
|
|
|
|
|
|
Johnnie Walker
|
22
|
22
|
23
|
East Africa
|
(4)
|
(4)
|
2
|
10
|
|
Smirnoff
|
(19)
|
7
|
10
|
Africa
Regional Markets(1)
|
(1)
|
(6)
|
8
|
(5)
|
|
|
|
|
|
Nigeria
|
(6)
|
(6)
|
8
|
19
|
|
Other beer:
|
South Africa
|
(16)
|
(16)
|
10
|
12
|
|
|
|
|
|
|
|
|
|
|
|
Malta
Guinness
|
(15)
|
5
|
(5)
|
Spirits(1)
|
-
|
1
|
15
|
19
|
|
Senator
|
(15)
|
(4)
|
2
|
Beer(1)
|
(11)
|
(13)
|
2
|
3
|
|
Tusker
|
2
|
6
|
14
|
Ready to drink
|
(6)
|
(6)
|
3
|
9
|
|
Serengeti
|
7
|
9
|
26
|
(1)Reported
volume movement has been impacted by acquisitions and / or
disposals. For further details see pages 48-51.
(2)Spirits
brands excluding ready to drink and non-alcoholic
variants.
(3)Organic equals reported volume movement, except for Malta
Guinness, which had reported volume movement of (17)%.
Africa contributed
|
|
Africa organic net sales grew
|
10% of Diageo reported net sales in
first half of fiscal 23
|
|
6% in first half of fiscal
23
|
Market highlights
●
East Africa net sales grew 2%, driven by growth in spirits,
partially offset by a decline in beer following price and duty
increases. Spirits growth was primarily driven by scotch,
particularly Johnnie Walker.
●
Africa Regional Markets net sales grew 8%. Spirits growth was
primarily driven by strong growth in Johnnie Walker premium
variants. Growth in beer was primarily driven by Malta Guinness
supported by price increases.
●
Nigeria net sales grew 8%. Spirits growth was driven by Orijin,
which benefitted from improved route to consumer and marketing
investment. Beer growth was led by Guinness, primarily driven by
price increases.
●
South Africa net sales grew 10%, driven by Johnnie Walker premium
variants and Smirnoff, partially offset by a decline in
gin.
Category and brand review
● Spirits
net sales grew 10%, with 3% volume growth. Growth was across most
categories, including double-digit performance in scotch, tequila
and IMFL whisky.
|
● Scotch
net sales grew 19%, with 7% volume growth. Growth was led by
Johnnie Walker, with strong growth of 21% and single malts also
grew strongly at 28%.
|
● Tequila
net sales grew 28%, with 15% volume growth, with Don Julio and
Casamigos growing strongly in North
America.
|
● Vodka net sales declined 2% overall, with flat
volume. A decline in North America was partially offset by growth
across all other regions, including double-digit growth in Europe,
Latin America and Caribbean and Asia Pacific.
|
● Rum
net sales grew 5%, driven by Captain Morgan growth across all
regions.
|
● Beer net sales grew 9%, with growth in all
regions and double-digit growth of Guinness in Ireland, Great
Britain and North America.
|
● Ready
to drink net sales grew 8%, with growth in all regions, including
double-digit growth in North America and
Europe.
|
Key categories
|
Organic
volume
movement(1)
%
|
Organic
net sales
movement
%
|
Reported
net sales
movement
%
|
Spirits(2)
|
3
|
10
|
20
|
Scotch
|
7
|
19
|
27
|
Tequila
|
15
|
28
|
48
|
Vodka(3)(4)
|
-
|
(2)
|
8
|
Canadian whisky
|
(6)
|
(8)
|
6
|
Rum(3)
|
(1)
|
5
|
13
|
Liqueurs
|
(3)
|
(1)
|
5
|
Gin(3)
|
-
|
3
|
9
|
IFML whisky
|
7
|
13
|
8
|
Chinese white spirits
|
(5)
|
(7)
|
-
|
US whiskey
|
1
|
12
|
29
|
Beer
|
(6)
|
9
|
13
|
Ready to drink
|
-
|
8
|
16
|
(1)Organic
equals reported volume movement except for spirits (2)%, tequila
17%, vodka (1)%, liqueurs (1)%, IMFL whisky (12)%, beer
(7)%.
(2)Spirits
brands excluding ready to drink and non-alcoholic
variants.
(3)Vodka,
rum and gin include IMFL variants.
(4)Vodka
includes Ketel One Botanical.
Scotch
27% of Diageo's reported net sales and grew 19%
● Double-digit
growth across all regions, except for a marginal decline in North
America. Particularly strong performance in Asia Pacific and Latin
America and Caribbean, driven by Johnnie Walker. Growth also
reflects continued recovery of Travel Retail with triple-digit
growth in Asia Pacific.
●
Johnnie Walker net sales grew 21%, with strong double-digit growth
in all regions except North America.
-
Johnnie Walker Black Label grew 26%, with particularly strong
growth in Asia Pacific, which grew 52%.
-
Johnnie Walker Blue Label grew 11%, supported by the return of
Travel Retail.
-
Johnnie Walker Red Label grew 17%, with strong double-digit growth
in Latin America and Caribbean and Asia Pacific.
●
Scotch malts grew 28%, primarily driven by strong double-digit
growth in Asia Pacific and North America.
● Primary
scotch brands grew 14%, primarily driven by double-digit growth of
Black & White and Black Dog in India.
Tequila
11% of Diageo's reported net sales and grew 28%
● Growth
reflects the strong performance of Don Julio and Casamigos which
grew 26% and 29% respectively, driven by North
America.
Vodka
9% of Diageo's reported net sales and declined 2%
● Growth
across most regions, and strong market share gains in Europe were
offset by a decline in North America.
●
Smirnoff net sales grew 11%, with resilient growth in all regions,
particularly Europe and North America.
●
Ketel One net sales declined 11%, driven by North
America.
●
Cîroc net sales declined 34%, driven by North
America.
Canadian
whisky
6% of Diageo's reported net sales and declined 8%
● Decline
was driven by Crown Royal in North America
Rum
5% of Diageo's reported net sales and grew 5%
● Captain
Morgan grew 5% with growth across all regions.
●
Zacapa grew 11% with growth across all regions.
Liqueurs
5% of Diageo's reported net sales and declined
1%
● Decline
was driven by Godiva.
●
Baileys was flat in the period, with growth in Europe offset by a
decline in North America.
Gin
5% of Diageo's reported net sales and grew 3%
● Growth
across all regions except North America.
●
Tanqueray net sales declined, with growth in Europe and Asia
Pacific offset by declines in other regions.
●
Gordon's grew in all regions, except for Europe where net sales
were flat.
IMFL whisky
4% of Diageo's reported net sales and grew 13%
● Growth
was mainly driven by Royal Challenge, Signature and McDowell's
No.1.
Chinese white spirits
3% of Diageo's reported net sales and declined 7%
● Decline
in Chinese white spirits due to continued impact from Covid-19
on-trade restrictions.
US whiskey
2% of Diageo's reported net sales and grew 12%
● Double-digit
growth in Bulleit whiskey, driven by North America and positive
market share momentum across the category.
●
Performance is lapping a decline in the first half of fiscal 2022
when performance was impacted by glass supply
constraints.
Beer
14% of Diageo's reported net sales and grew 9%
● Growth
was primarily driven by Guinness growth of 17% net sales and volume
growth of 2%, particularly in Europe, our Brand Homes and North
America.
●
Beer in Africa grew 2%, driven by Guinness, which grew
7%.
●
Net sales of Smirnoff flavoured malt beverages declined in North
America.
Ready to drink
4% of Diageo's reported net sales and grew 8%
● Growth
in all regions, double-digit growth across North America and
Europe.
●
Growth was primarily driven by double-digit growth in Smirnoff Ice,
Bundaberg and Captain Morgan Spiced ready to drink.
Global giants, local stars and reserve(1):
|
Organic
volume
movement(2
)%
|
Organic
net sales
movement
%
|
Reported
net sales
movement
%
|
Global giants
|
|
|
|
Johnnie Walker
|
14
|
21
|
29
|
Guinness
|
2
|
17
|
22
|
Smirnoff
|
2
|
11
|
21
|
Baileys
|
(3)
|
-
|
7
|
Captain Morgan
|
(1)
|
5
|
14
|
Tanqueray
|
(6)
|
(2)
|
6
|
Local stars
|
|
|
|
Crown Royal
|
(10)
|
(8)
|
6
|
Shui
Jing Fang(3)
|
(5)
|
(7)
|
-
|
Buchanan's
|
(3)
|
6
|
16
|
McDowell's
|
-
|
2
|
9
|
Old Parr
|
23
|
34
|
44
|
Black & White
|
11
|
28
|
42
|
J&B
|
(5)
|
1
|
4
|
Yenì Raki
|
(4)
|
6
|
36
|
Windsor
|
56
|
55
|
56
|
Bundaberg
|
(1)
|
6
|
12
|
Ypióca
|
(8)
|
7
|
28
|
Reserve
|
|
|
|
Don Julio
|
12
|
26
|
45
|
Casamigos
|
17
|
28
|
48
|
Scotch malts
|
11
|
28
|
34
|
Ketel
One(4)
|
(10)
|
(11)
|
2
|
Bulleit
whiskey(5)
|
9
|
17
|
33
|
Cîroc vodka
|
(30)
|
(34)
|
(27)
|
|
|
|
|
(1)Brands
excluding ready to drink, non-alcoholic variants and beer except
Guinness.
(2)Organic
equals reported volume movement.
(3)Growth
figures represent total Chinese white spirits of which Shui Jing
Fang is the principal brand.
(4)Ketel
One includes Ketel One vodka and Ketel One Botanical.
(5)Bulleit whiskey excludes Bulleit Crafted Cocktails.
Global
giants
40% of Diageo's reported net sales and grew 13%.
Local
stars
19% of Diageo's reported net sales and grew 1%.
Reserve
28% of Diageo's reported net sales and grew 12%.
Additional financial information
Six months ended 31 December 2022
|
31 December 2021
|
Exchange
(a)
|
Acquisitions and disposals
(b)
|
Organic movement(1)
|
Fair value remeasurement
(d)
|
Hyperinflation(1)
|
31 December 2022
|
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
Sales
|
11,753
|
737
|
(214)
|
830
|
-
|
113
|
13,219
|
Excise duties
|
(3,796)
|
(68)
|
181
|
(88)
|
-
|
(28)
|
(3,799)
|
Net sales
|
7,957
|
669
|
(33)
|
742
|
-
|
85
|
9,420
|
Cost of sales
|
(2,955)
|
(273)
|
23
|
(341)
|
(3)
|
(49)
|
(3,598)
|
Gross profit
|
5,002
|
396
|
(10)
|
401
|
(3)
|
36
|
5,822
|
Marketing
|
(1,351)
|
(116)
|
(7)
|
(93)
|
(1)
|
(9)
|
(1,577)
|
Other operating items
|
(908)
|
(79)
|
(2)
|
(47)
|
(8)
|
(7)
|
(1,051)
|
Operating profit before exceptional items
|
2,743
|
201
|
(19)
|
261
|
(12)
|
20
|
3,194
|
Exceptional operating items (c)
|
-
|
|
|
|
|
|
(33)
|
Operating profit
|
2,743
|
|
|
|
|
|
3,161
|
Non-operating items (c)
|
(31)
|
|
|
|
|
|
16
|
Net finance charges
|
(180)
|
|
|
|
|
|
(292)
|
Share of after tax results of associates and joint
ventures
|
190
|
|
|
|
|
|
172
|
Profit before taxation
|
2,722
|
|
|
|
|
|
3,057
|
Taxation (e)
|
(634)
|
|
|
|
|
|
(650)
|
Profit for the period
|
2,088
|
|
|
|
|
|
2,407
|
(1) For the definition of organic movement and
hyperinflation see pages 46-47.
(a) Exchange
The impact of movements in exchange rates on reported figures for
net sales and operating profit was principally in respect of the
translation exchange impact of the weakening of sterling against
the US dollar, Brazilian real and the Mexican peso, partially
offset by strengthening of sterling against the Turkish
lira.
The effect of movements in exchange rates and other movements on
profit before exceptional items and taxation for the six months
ended 31 December 2022 is set out in the table below.
|
Gains/(losses)
|
|
£ million
|
Translation impact
|
201
|
Transaction impact
|
-
|
Operating profit before exceptional items
|
201
|
Net
finance charges - translation impact
|
(13)
|
Net
finance charges - transaction impact
|
1
|
Net finance charges
|
(12)
|
Associates - translation impact
|
1
|
Profit before exceptional items and taxation
|
190
|
|
Six months ended 31 December 2022
|
Six months ended31
December 2021
|
Exchange rates
|
|
|
Translation
£1 =
|
$1.18
|
$1.36
|
Transaction
£1 =
|
$1.29
|
$1.30
|
Translation
£1 =
|
€1.16
|
€1.17
|
Transaction
£1 =
|
€1.15
|
€1.15
|
(b) Acquisitions and disposals
The acquisitions and disposals movement was primarily attributable
to the disposal of the USL Popular brands in the six months ended
31 December 2022.
See pages 24, 38-39 and 48-51 for
further details.
(c) Exceptional items
Exceptional operating items in the six months ended 31
December 2022 were £33 million loss (2021
- £nil).
In the six months ended 31 December 2022, an exceptional charge of
£47 million was accounted for in respect of the supply chain
agility programme announced in July 2022. With this five-year
spanning programme, Diageo expects to strengthen its supply chain,
improve its resilience and agility, drive efficiencies, deliver
additional productivity savings and make its supply operations more
sustainable. Total implementation cost of the programme is expected
to be up to £500 million over the five-year period, which will
comprise non‐cash items and one‐off expenses, the
majority of which are expected to be recognised as exceptional
operating items. No restructuring cash expenditure was incurred in
the period.
In the six months ended 31 December 2022, Diageo released
unutilised provisions of £14 million from the £50 million
exceptional charge taken in the year ended 30 June 2022 in respect
of winding down its operations in Russia.
Non-operating items in the six months ended 31
December 2022 were £16 million gain (2021 - £31 million
loss).
On 8 September 2022, Diageo announced the sale of its Archers
brand. The transaction resulted in an exceptional gain
of £20
million.
On 30 September 2022, Diageo announced the completion of the sale
of the Popular brands of its USL business. The aggregate
consideration for the disposal was £87 million, the disposed
net asset included £31 million net working capital and
£22 million brand, and £16 million goodwill was
derecognised. The transaction resulted in an exceptional gain of
£4 million and the respective share of
non-controlling interest amounted to £9 million. Popular
brands contributed £225 million to sales and £5
million to operating profit including transaction costs of £4
million in the six months ended 31 December
2022.
In the six months ended 31 December 2022, ZAR 46 million (£2
million) of deferred consideration was paid to Diageo in respect of
the sale of United National Breweries, the full amount of which
represented a non-operating gain (2021 - a gain of £2
million).
On 14 July 2022, Diageo announced the agreement to sell Guinness
Cameroon S.A., its brewery in Cameroon, to Castel Group. As
regulatory clearance has been received, completion of the sale is
highly probable and is expected in the second half of fiscal 23. As
a result, the assets and liabilities of the brewing business of
Guinness Cameroon S.A. were classified as held for sale. In the six
months ended 31 December 2022, transaction costs relating to the
prospective sale amounted to £2 million.
On 29 September 2022, the group acquired the part of the entire
issued share capital of Mr Black Spirits Pty Ltd, owner of the Mr
Black Australian premium cold brew coffee liqueur, that it did not
already own. As a result of Mr Black becoming a subsidiary of the
group, in the six months ended 31 December 2022, a loss of £8
million arose, being the difference between the book value of the
associate prior to the transaction and its fair value plus
transaction costs.
In the six months ended 31 December 2021, a loss of ETB 2,254
million (£33 million) was recognised as a non-operating item
attributable to the sale of Meta Abo Brewery Share Company in
Ethiopia.
Exceptional tax credits of £70 million (2021 -
£nil) in the six months ended 31 December 2022 include tax
credits of £57 million in respect of the deductibility of fees
paid to Diageo plc for guaranteeing externally issued debt of US
group entities.
See page 46 for the definition of
exceptional items.
(d) Fair value remeasurement
The adjustment to cost of sales reflects the elimination of fair
value changes for biological assets in respect of growing agave
plants of £nil for the six months ended 31 December 2022 and
£3 million gain for the six months ended 31 December 2021. The
adjustments to marketing and other operating expenses were the
elimination of fair value changes to contingent consideration
liabilities and earn out arrangements in respect of prior year
acquisitions of £13 million gain for the six months ended 31
December 2022 and £22 million gain for the six months ended 31
December 2021.
(e) Taxation
The reported tax rate for the six months ended 31 December 2022 was
21.3% compared with 23.3% for the six months ended 31 December
2021.
For the six months ended 31 December 2022, income tax expense was
recognised based on management's best estimate of the weighted
average annual income tax rate expected for the full financial year
applied to the pre-tax income of the interim period in line with
the relevant accounting standard.
Included in the tax charge of £650 million in the six months
ended 31 December 2022 is an exceptional tax credit of £70
million, which includes a tax credit of £57 million in respect
of the deductibility of fees paid to Diageo plc for guaranteeing
externally issued debt of US group entities. Following engagement
with the tax authorities, guarantee fees for the periods ended 30
June 2012 to 30 June 2022 will be fully deductible.
The tax rate before exceptional items for the six months ended 31
December 2022 was 23.4% compared with 23.0% for the six months
ended 31 December 2021.
We expect the tax rate before exceptional items for the year ending
30 June 2023 to be in the range of 22%-24%.
(f)
Dividend
The group aims to increase the dividend each year. The decision in
respect of the dividend is made with reference to the dividend
cover as well as current performance trends, including sales and
profit after tax together with cash generation. Diageo targets
dividend cover (the ratio of basic earnings per share before
exceptional items to dividend per share) within the range of
1.8-2.2 times. For the year ended 30 June 2022, dividend cover was
2.0 times. The group will keep future returns of capital, including
dividends, under review through the year ending 30 June 2023 to
ensure Diageo's capital is allocated in the best way to maximise
value for the business and stakeholders.
An interim dividend of 30.83
pence per share will be paid to holders of ordinary shares and US
ADRs on register as of 3 March 2023. The ex-dividend date is 2
March 2023. This represents an increase of 5% on last year's
interim dividend. The interim dividend will be paid to holders of
ordinary shares on 13 April 2023 and to holders of US ADRs on 18
April 2023. A dividend
reinvestment plan is available to holders of ordinary shares in
respect of the interim dividend and the plan notice
date is 17 March
2023.
(g) Return of capital
Diageo's current return of capital programme, initially approved by
the Board on 25 July 2019, seeks to return up to £4.5 billion
to shareholders and is expected to be completed by 24 February
2023. Under the first three phases of the programme which ended on
31 January 2020, 11 February 2022 and 5 October 2022 respectively,
Diageo repurchased shares with an aggregate value of approximately
£3.86 billion. On 1 November 2022, the company announced the
fourth and final phase of the programme with a value of up to
£0.64 billion returned to shareholders, via share buybacks, to
be completed no later than 24 February 2023. At 31 December 2022,
£316 million had been completed as part of the fourth
phase.
On 25 January 2023, Diageo received Board approval to undertake an
additional share buyback programme returning up to £0.5
billion to shareholders, to be completed before the end of the
financial year; precise timing is subject to future
announcement.
In the six months ended 31 December 2022, the company purchased
14.8 million ordinary shares at a cost of £554 million
(including transaction costs of £7 million) (2021 - £538
million including transaction costs of £3 million). All shares
purchased under the share buyback programme were cancelled. A
financial liability of £215 million was established at 31
December 2022 (2021 - £184 million) representing the 5.9
million shares (2021 - 4.7 million shares) that were expected to be
purchased by 26 January 2023.
Movements in net borrowings and equity
Movements in net borrowings
|
2022
|
2021
|
|
£ million
|
£ million
|
Net borrowings at 30 June
|
(14,137)
|
(12,109)
|
Free cash flow (a)
|
817
|
1,575
|
Acquisitions (b)
|
(113)
|
(110)
|
Investment in associates (b)
|
(31)
|
(24)
|
Sale of businesses and brands (c)
|
99
|
2
|
Share buyback programme (d)
|
(554)
|
(538)
|
Net sale of own shares for share schemes (e)
|
9
|
42
|
Purchase of treasury shares in respect of subsidiaries
|
-
|
(13)
|
Dividend paid to non-controlling interests
|
(79)
|
(51)
|
Net movements in bonds (f)
|
1,534
|
(769)
|
Net movements in other borrowings (g)
|
(28)
|
38
|
Equity dividend paid
|
(1,065)
|
(1,040)
|
Net increase/(decrease) in cash and cash
equivalents
|
589
|
(888)
|
Net (increase)/decrease in
bonds and other borrowings
|
(1,508)
|
729
|
Exchange differences (h)
|
(50)
|
(31)
|
Other non-cash items (i)
|
(63)
|
(32)
|
Net borrowings at 31
December
|
(15,169)
|
(12,331)
|
(a) See page 52 for the analysis of free
cash flow.
(b) Diageo completed two acquisitions in the six months ended 31
December 2022: (i) on 29 September 2022, the acquisition of the
remaining issued share capital of Mr Black Spirits Pty Ltd, owner
of Mr Black, the Australian premium cold brew coffee liqueur, that
it did not already own; and (ii) on 2 November 2022, the
acquisition of the entire issued share capital of Balcones
Distilling, a Texas craft distiller and one of the leading
producers of American single malt whisky in the United
States.
In the six months ended 31 December 2022, Diageo paid £18
million in respect of prior year acquisitions.
In the six months ended 31 December 2021, Diageo paid £110
million in relation to past acquisitions including the final
earn-out payment on 17 September 2021 in respect of the Casamigos
acquisition amounting to $113 million (£83
million).
(c) In the six months ended 31 December 2022, sale of businesses
and brands represents the disposal of the USL Popular brands and
the Archers brand net of transaction costs.
(d) See page 23 for details of Diageo's
return of capital programmes.
(e) Net sale of own shares comprised receipts from employees on the
exercise of share options of £28 million (2021 - £56
million) less purchase of own shares for the future settlement of
obligations under the employee share option schemes of £19
million (2021 - £14 million).
(f) In the six months ended 31 December 2022, the group issued
bonds of $2,000 million (£1,788 million - net of discount and
fee) and repaid bonds of $300 million (£254
million).
In the six months ended 31 December 2021, the group repaid bonds of
€900 million (£769 million).
(g) In the six months ended 31 December 2022, the net movements in
other borrowings principally arose from cash movement of foreign
currency swaps and forwards and repayment of lease liabilities
offset by the increase in bank loans.
In the six months ended 31 December 2021, the net movements in
other borrowings principally arose from cash movement of foreign
exchange swaps and forwards partially offset by the repayment of
lease liabilities.
(h) In the six months ended 31 December 2022, exchange losses
arising on net borrowings of £50 million were primarily driven
by adverse exchange movements on euro denominated borrowings and
unfavourable exchange movements on cash and cash equivalents
partially offset by favourable movements on foreign currency swaps
and forwards.
In the six months ended 31 December 2021, the exchange differences
arising on net borrowings of £31 million were primarily in
respect of adverse exchange movements on US dollar denominated
borrowings, partially offset by favourable movement on euro
denominated borrowings, cash and cash equivalents, foreign currency
swaps and forwards.
(i) In the six months ended 31 December 2022, other non-cash
items were principally in respect of the reclassification of cash
and cash equivalents in Guinness Cameroon S.A. to assets and
liabilities held for sale.
In the six months ended 31 December 2021, other non-cash items are
principally in respect of additional leases entered into during the
period.
Movements in equity
|
2022
|
2021
|
|
£ million
|
£ million
|
Equity at 30 June
|
9,514
|
8,431
|
Profit
for the period
|
2,407
|
2,088
|
Exchange adjustments (a)
|
(92)
|
29
|
Remeasurement of post employment benefit plans net of
taxation
|
(382)
|
453
|
Hyperinflation adjustments net of taxation (b)
|
86
|
-
|
Associates' transactions with non-controlling
interests
|
(12)
|
-
|
Dividend to non-controlling interests
|
(63)
|
(26)
|
Equity dividend paid
|
(1,066)
|
(1,040)
|
Share buyback programme (c)
|
(652)
|
(631)
|
Other reserve movements
|
126
|
27
|
Equity at 31 December
|
9,866
|
9,331
|
(a) Exchange movements in the six months ended 31 December 2022
primarily arose from exchange loss driven by the euro, the US
dollar and the Mexican peso, partially offset by gains in Indian
rupee and Turkish lira. Exchange movements in the six months ended
31 December 2021 primarily arose from exchange gains driven by the
US dollar and the Indian rupee partially offset by losses in
Turkish lira.
(b) See page 35 for details of
hyperinflation adjustments.
(c) See page 23 for details of Diageo's
return of capital programmes.
Post employment benefit plans
The net surplus of the group's post employment benefit plans
decreased by £472 million from £1,151 million at 30 June
2022 to £679 million at 31 December 2022. The decrease in net
surplus was predominantly attributable to the unfavourable actual
change in the market value of assets held by the post employment
benefit plans in the UK and Ireland, that was partially offset by
the favourable change in the discount rate assumptions in the UK
and US due to the increase in returns from 'AA' rated corporate
bonds used to calculate the discount rates on the liabilities of
the post employment benefit plans (UK from 3.8% to
4.8%; US
from 4.4% to 4.9% ).
The net operating profit charge before exceptional items decreased
by £9 million from £49 million for the six months ended
31 December 2021 to £40 million for the six months ended 31
December 2022.
Following a remeasurement of the Diageo Lifestyle Plan, Diageo made
a £16 million one-off deficit contribution to satisfy
minimum funding requirements.
Total cash contributions by the group to all post employment
benefit plans in the year ending 30 June 2023 are estimated to be
approximately £90 million.
Condensed consolidated income statement
|
|
Six months ended 31 December 2022
|
Six months ended 31 December 2021
|
|
Notes
|
£ million
|
£ million
|
Sales
|
2
|
13,219
|
11,753
|
Excise duties
|
|
(3,799)
|
(3,796)
|
Net sales
|
2
|
9,420
|
7,957
|
Cost of sales
|
|
(3,624)
|
(2,955)
|
Gross profit
|
|
5,796
|
5,002
|
Marketing
|
|
(1,577)
|
(1,351)
|
Other operating items
|
|
(1,058)
|
(908)
|
Operating profit
|
2
|
3,161
|
2,743
|
Non-operating items
|
3
|
16
|
(31)
|
Finance income
|
4
|
257
|
130
|
Finance charges
|
4
|
(549)
|
(310)
|
Share of after tax results of associates and joint
ventures
|
|
172
|
190
|
Profit before taxation
|
|
3,057
|
2,722
|
Taxation
|
5
|
(650)
|
(634)
|
Profit for the period
|
|
2,407
|
2,088
|
|
|
|
|
Attributable to:
|
|
|
|
Equity shareholders of the parent company
|
|
2,295
|
1,965
|
Non-controlling interests
|
|
112
|
123
|
|
|
2,407
|
2,088
|
|
|
|
|
Weighted average number of shares
|
|
million
|
million
|
Shares in issue excluding own shares
|
|
2,274
|
2,331
|
Dilutive potential ordinary shares
|
|
7
|
8
|
|
|
2,281
|
2,339
|
|
|
|
|
|
|
pence
|
pence
|
Basic earnings per share
|
|
100.9
|
84.3
|
Diluted earnings per share
|
|
100.6
|
84.0
|
|
|
|
|
Condensed consolidated statement of comprehensive
income
|
Six months ended
31 December 2022
|
Six months ended 31 December 2021
|
|
£ million
|
£ million
|
Other comprehensive income
|
|
|
Items that will not be recycled subsequently to the income
statement
|
|
|
Net remeasurement of post employment benefit plans
|
|
|
Group
|
(527)
|
585
|
Associates
and joint ventures
|
10
|
4
|
Tax on post employment benefit plans
|
135
|
(136)
|
Changes in the fair value of equity investments at fair value
through other comprehensive income
|
(3)
|
7
|
|
(385)
|
460
|
Items that may be recycled subsequently to the income
statement
|
|
|
Exchange differences on translation of foreign
operations
|
|
|
Group
|
(126)
|
74
|
Associates
and joint ventures
|
91
|
(45)
|
Non-controlling
interests
|
(39)
|
46
|
Net investment hedges
|
(18)
|
(46)
|
Tax on exchange differences - group
|
(2)
|
(5)
|
Effective portion of changes in fair value of cash flow
hedges
|
|
|
Hedge
of foreign currency debt of the group
|
60
|
66
|
Transaction
exposure hedging of the group
|
148
|
(87)
|
Commodity
price risk hedging of the group
|
(7)
|
12
|
Hedges
by associates and joint ventures
|
14
|
(10)
|
Recycled
to income statement - hedge of foreign currency debt of the
group
|
(29)
|
(53)
|
Recycled
to income statement - transaction exposure hedging of the
group
|
(64)
|
26
|
Recycled
to income statement - commodity price risk hedging of the
group
|
(35)
|
(18)
|
Tax on effective portion of changes in fair value of cash flow
hedges
|
(17)
|
12
|
Hyperinflation adjustments
|
108
|
(3)
|
Tax on hyperinflation adjustments
|
(22)
|
1
|
|
62
|
(30)
|
Other comprehensive (loss)/income, net of tax, for
the period
|
(323)
|
430
|
Profit for the period
|
2,407
|
2,088
|
Total comprehensive income for the period
|
2,084
|
2,518
|
|
|
|
Attributable to:
|
|
|
Equity shareholders of the parent company
|
2,011
|
2,349
|
Non-controlling interests
|
73
|
169
|
Total comprehensive income for the period
|
2,084
|
2,518
|
Condensed consolidated balance sheet
|
|
31 December 2022
|
30 June 2022
|
31 December 2021
|
|
Notes
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
Non-current assets
|
|
|
|
|
|
|
|
Intangible assets
|
|
12,130
|
|
11,902
|
|
10,921
|
|
Property, plant and equipment
|
|
5,972
|
|
5,848
|
|
5,091
|
|
Biological assets
|
|
119
|
|
94
|
|
75
|
|
Investments in associates and joint ventures
|
|
3,925
|
|
3,652
|
|
3,473
|
|
Other investments
|
|
42
|
|
37
|
|
50
|
|
Other receivables
|
|
28
|
|
37
|
|
28
|
|
Other financial assets
|
|
399
|
|
345
|
|
319
|
|
Deferred tax assets
|
|
106
|
|
114
|
|
83
|
|
Post employment benefit assets
|
|
1,060
|
|
1,553
|
|
1,544
|
|
|
|
|
23,781
|
|
23,582
|
|
21,584
|
Current assets
|
|
|
|
|
|
|
|
Inventories
|
6
|
7,552
|
|
7,094
|
|
6,235
|
|
Trade and other receivables
|
|
3,874
|
|
2,933
|
|
3,328
|
|
Assets held for sale
|
12
|
182
|
|
222
|
|
16
|
|
Corporate tax receivables
|
5
|
166
|
|
149
|
|
151
|
|
Other financial assets
|
|
398
|
|
251
|
|
66
|
|
Cash and cash equivalents
|
7
|
2,766
|
|
2,285
|
|
1,780
|
|
|
|
|
14,938
|
|
12,934
|
|
11,576
|
Total assets
|
|
|
38,719
|
|
36,516
|
|
33,160
|
Current liabilities
|
|
|
|
|
|
|
|
Borrowings and bank overdrafts
|
7
|
(2,305)
|
|
(1,522)
|
|
(1,184)
|
|
Other financial liabilities
|
|
(436)
|
|
(444)
|
|
(388)
|
|
Share buyback liability
|
|
(215)
|
|
(117)
|
|
(184)
|
|
Trade and other payables
|
|
(6,110)
|
|
(5,887)
|
|
(5,327)
|
|
Liabilities held for sale
|
12
|
(76)
|
|
(61)
|
|
(30)
|
|
Corporate tax payables
|
5
|
(266)
|
|
(252)
|
|
(380)
|
|
Provisions
|
|
(113)
|
|
(159)
|
|
(111)
|
|
|
|
|
(9,521)
|
|
(8,442)
|
|
(7,604)
|
Non-current liabilities
|
|
|
|
|
|
|
|
Borrowings
|
7
|
(15,304)
|
|
(14,498)
|
|
(12,693)
|
|
Other financial liabilities
|
|
(771)
|
|
(703)
|
|
(378)
|
|
Other payables
|
|
(353)
|
|
(380)
|
|
(278)
|
|
Provisions
|
|
(266)
|
|
(258)
|
|
(278)
|
|
Deferred tax liabilities
|
|
(2,257)
|
|
(2,319)
|
|
(2,112)
|
|
Post employment benefit liabilities
|
|
(381)
|
|
(402)
|
|
(486)
|
|
|
|
|
(19,332)
|
|
(18,560)
|
|
(16,225)
|
Total liabilities
|
|
|
(28,853)
|
|
(27,002)
|
|
(23,829)
|
Net assets
|
|
|
9,866
|
|
9,514
|
|
9,331
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
Share capital
|
|
719
|
|
723
|
|
737
|
|
Share premium
|
|
1,351
|
|
1,351
|
|
1,351
|
|
Other reserves
|
|
2,193
|
|
2,174
|
|
1,551
|
|
Retained earnings
|
|
3,876
|
|
3,550
|
|
4,019
|
|
Equity attributable to equity shareholders of the parent
company
|
|
|
8,139
|
|
7,798
|
|
7,658
|
Non-controlling interests
|
|
|
1,727
|
|
1,716
|
|
1,673
|
Total equity
|
|
|
9,866
|
|
9,514
|
|
9,331
|
|
|
|
|
|
|
|
|
Condensed
consolidated statement of changes in equity
|
|
|
|
Retained earnings/(deficit)
|
|
|
|
|
Share
capital
|
Share
premium
|
Other reserves
|
Own shares
|
Other retained earnings
|
Total
|
Equity attributable to parent company shareholders
|
Non-controlling interests
|
Total equity
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
At 30 June 2021
|
741
|
1,351
|
1,621
|
(1,877)
|
5,061
|
3,184
|
6,897
|
1,534
|
8,431
|
Profit
for the period
|
-
|
-
|
-
|
-
|
1,965
|
1,965
|
1,965
|
123
|
2,088
|
Other comprehensive (loss)/income
|
-
|
-
|
(74)
|
-
|
458
|
458
|
384
|
46
|
430
|
Total comprehensive (loss)/income for the period
|
-
|
-
|
(74)
|
-
|
2,423
|
2,423
|
2,349
|
169
|
2,518
|
Employee share schemes
|
-
|
-
|
-
|
30
|
36
|
66
|
66
|
-
|
66
|
Share-based incentive plans
|
-
|
-
|
-
|
-
|
30
|
30
|
30
|
-
|
30
|
Share-based incentive plans in respect of associates
|
-
|
-
|
-
|
-
|
2
|
2
|
2
|
-
|
2
|
Share-based payments and purchase of own shares in respect of
subsidiaries
|
-
|
-
|
-
|
-
|
(8)
|
(8)
|
(8)
|
(5)
|
(13)
|
Associates' transactions with non-controlling
interests
|
-
|
-
|
-
|
-
|
1
|
1
|
1
|
-
|
1
|
Unclaimed dividend
|
-
|
-
|
-
|
-
|
3
|
3
|
3
|
1
|
4
|
Change in fair value of put option
|
-
|
-
|
-
|
-
|
(11)
|
(11)
|
(11)
|
-
|
(11)
|
Share buyback programme
|
(4)
|
-
|
4
|
-
|
(631)
|
(631)
|
(631)
|
-
|
(631)
|
Dividend declared for the period
|
-
|
-
|
-
|
-
|
(1,040)
|
(1,040)
|
(1,040)
|
(26)
|
(1,066)
|
At 31 December 2021
|
737
|
1,351
|
1,551
|
(1,847)
|
5,866
|
4,019
|
7,658
|
1,673
|
9,331
|
|
|
|
|
|
|
|
|
|
|
At 30 June 2022
|
723
|
1,351
|
2,174
|
(1,838)
|
5,388
|
3,550
|
7,798
|
1,716
|
9,514
|
Profit
for the period
|
-
|
-
|
-
|
-
|
2,295
|
2,295
|
2,295
|
112
|
2,407
|
Other comprehensive income/(loss)
|
-
|
-
|
15
|
-
|
(299)
|
(299)
|
(284)
|
(39)
|
(323)
|
Total comprehensive income for the period
|
-
|
-
|
15
|
-
|
1,996
|
1,996
|
2,011
|
73
|
2,084
|
Employee share schemes
|
-
|
-
|
-
|
17
|
15
|
32
|
32
|
-
|
32
|
Share-based incentive plans
|
-
|
-
|
-
|
-
|
27
|
27
|
27
|
-
|
27
|
Share-based incentive plans in respect of associates
|
-
|
-
|
-
|
-
|
3
|
3
|
3
|
-
|
3
|
Share-based payments and purchase of own shares in respect of
subsidiaries
|
-
|
-
|
-
|
-
|
1
|
1
|
1
|
1
|
2
|
Associates' transactions with non-controlling
interests
|
-
|
-
|
-
|
-
|
(12)
|
(12)
|
(12)
|
-
|
(12)
|
Unclaimed dividend
|
-
|
-
|
-
|
-
|
1
|
1
|
1
|
-
|
1
|
Change in fair value of put option
|
-
|
-
|
-
|
-
|
(4)
|
(4)
|
(4)
|
-
|
(4)
|
Share buyback programme
|
(4)
|
-
|
4
|
-
|
(652)
|
(652)
|
(652)
|
-
|
(652)
|
Dividend declared for the period
|
-
|
-
|
-
|
-
|
(1,066)
|
(1,066)
|
(1,066)
|
(63)
|
(1,129)
|
At 31 December 2022
|
719
|
1,351
|
2,193
|
(1,821)
|
5,697
|
3,876
|
8,139
|
1,727
|
9,866
|
Condensed consolidated statement of cash flows
|
Six months ended 31 December
2022
|
Six
months ended 31 December
2021
|
|
£ million
|
£ million
|
£ million
|
£ million
|
Cash flows from operating activities
|
|
|
|
|
Profit for the period
|
2,407
|
|
2,088
|
|
Taxation
|
650
|
|
634
|
|
Share of after tax results of associates and joint
ventures
|
(172)
|
|
(190)
|
|
Net finance charges
|
292
|
|
180
|
|
Non-operating items
|
(16)
|
|
31
|
|
Operating profit
|
|
3,161
|
|
2,743
|
Increase in inventories
|
(468)
|
|
(187)
|
|
Increase in trade and other receivables
|
(1,008)
|
|
(976)
|
|
Increase in trade and other payables and provisions
|
111
|
|
653
|
|
Net increase in working capital
|
|
(1,365)
|
|
(510)
|
Depreciation, amortisation and impairment
|
281
|
|
224
|
|
Dividends received
|
5
|
|
1
|
|
Post employment payments less amounts included in operating
profit
|
(23)
|
|
(23)
|
|
Other items
|
7
|
|
34
|
|
|
|
270
|
|
236
|
Cash generated from operations
|
|
2,066
|
|
2,469
|
Interest received
|
66
|
|
41
|
|
Interest paid
|
(248)
|
|
(185)
|
|
Taxation paid
|
(636)
|
|
(378)
|
|
|
|
(818)
|
|
(522)
|
Net cash inflow from operating activities
|
|
1,248
|
|
1,947
|
Cash flows from investing activities
|
|
|
|
|
Disposal of property, plant and equipment and computer
software
|
6
|
|
7
|
|
Purchase of property, plant and equipment and computer
software
|
(435)
|
|
(382)
|
|
Movements in loans and other investments
|
(2)
|
|
3
|
|
Sale of businesses and brands
|
99
|
|
2
|
|
Acquisition
of subsidiaries(1)
|
(113)
|
|
(110)
|
|
Investment
in associates and joint ventures(1)
|
(31)
|
|
(24)
|
|
Net cash outflow from investing activities
|
|
(476)
|
|
(504)
|
Cash flows from financing activities
|
|
|
|
|
Share buyback programme
|
(554)
|
|
(538)
|
|
Net sale of own shares for share schemes
|
9
|
|
42
|
|
Purchase of treasury shares in respect of subsidiaries
|
-
|
|
(13)
|
|
Dividends paid to non-controlling interests
|
(79)
|
|
(51)
|
|
Proceeds from bonds
|
1,788
|
|
-
|
|
Repayment of bonds
|
(254)
|
|
(769)
|
|
Cash inflow from other borrowings
|
144
|
|
136
|
|
Cash outflow from other borrowings
|
(172)
|
|
(98)
|
|
Equity dividends paid
|
(1,065)
|
|
(1,040)
|
|
Net cash outflow from financing activities
|
|
(183)
|
|
(2,331)
|
|
|
|
|
|
Net increase/(decrease) in net cash and cash
equivalents
|
|
589
|
|
(888)
|
Exchange differences
|
|
(63)
|
|
14
|
Reclassification to assets held for sale
|
|
(47)
|
|
-
|
Net
cash and cash equivalents at beginning of the period
|
|
2,211
|
|
2,637
|
Net cash and cash equivalents at end of the period
|
|
2,690
|
|
1,763
|
|
|
|
|
|
Net cash and cash equivalents consist of:
|
|
|
|
|
Cash and cash equivalents
|
|
2,766
|
|
1,780
|
Bank overdrafts
|
|
(76)
|
|
(17)
|
|
|
2,690
|
|
1,763
|
(1)For the six months ended 31 December 2022, the previously
reported line item of "Acquisition of businesses" has been replaced
with "Acquisition of subsidiaries" and "Investment in associates
and joint ventures" to show separately the amounts which had
previously been shown combined.
Notes
1. Basis of preparation
These unaudited condensed consolidated interim financial statements
have been prepared in accordance with UK adopted IAS 34 'Interim
Financial Reporting', IAS 34 'Interim Financial Reporting' as
issued by the International Accounting Standards Board ('IASB'),
IAS 34 'Interim Financial Reporting' as adopted by the EU and The
Disclosure Guidance and Transparency Rules sourcebook of the UK's
Financial Conduct Authority. These financial statements should be
read in conjunction with the company's published consolidated
financial statements for the year ended 30 June 2022, which were
prepared in accordance with international accounting standards in
conformity with the requirements of the Companies Act 2006 and
International Financial Reporting Standards adopted by the UK,
IFRSs as adopted by the EU and IFRSs as issued by the IASB,
including interpretations issued by the IFRS Interpretations
Committee. IFRS as adopted by the UK and by the EU differs in
certain respects from IFRS as issued by the IASB, but the
differences have no impact on the group's consolidated financial
statements for the periods presented. The consolidated financial
statements are prepared on a going concern basis under the
historical cost convention, unless stated otherwise.
In preparing these condensed consolidated interim financial
statements, the significant judgements made by management when
applying the group's accounting policies and the significant areas
where estimates were required were the same as those that applied
to the consolidated financial statements for the year ended 30 June
2022, with the exception of changes in estimates disclosed in note
3 Exceptional items and note 13 Contingent liabilities and legal
proceedings. These condensed consolidated interim financial
statements were approved for issue on 25 January 2023.
The financial statements for Diageo plc for the year ending 30 June
2023 will be prepared in accordance with IFRS as adopted by the UK,
IFRSs as adopted by the EU and IFRSs, as issued by the IASB,
including interpretations issued by the IFRS Interpretations
Committee.
The comparative figures for the financial year ended 30 June 2022
are not the company's statutory accounts (within the meaning of
section 434 of the Companies Act 2006) for that financial year.
Those statutory accounts have been reported on by the company's
auditor, PricewaterhouseCoopers LLP, and delivered to the Registrar
of Companies. The report of the auditor (i) was unqualified, (ii)
did not include a reference to any matters to which the auditor
drew attention by way of emphasis without qualifying their report
and (iii) did not contain a statement under section 498 (2) or (3)
of the Companies Act 2006.
Going concern
Management prepared cash flow forecasts which were also sensitised
to reflect severe but plausible downside scenarios taking into
consideration the group's principal risks. In the base case
scenario, management included assumptions for mid-single digit net
sales growth, operating margin improvement and global TBA market
share growth. In light of the ongoing geopolitical volatility, the
base case outlook and plausible downside scenarios incorporated
considerations for a prolonged global recession, supply chain
disruptions, higher inflation and further geopolitical
deterioration. Even under these scenarios, the group's cash
position is still expected to remain strong, as the group's
liquidity was protected by issuing $2,000 million of fixed
rate dollar denominated bonds in the six months ended 31 December
2022. Mitigating actions, should they be required, are all within
management's control and could include reductions in discretionary
spending such as acquisitions and capital expenditure, as well as a
temporary suspension of the share buyback programme and dividend
payments in the next 12 months, or drawdowns on committed
facilities. Having considered the outcome of these assessments, the
Directors are comfortable that the company is a going concern for
at least 12 months from the date of signing the group's condensed
consolidated interim financial statements.
Weighted average exchange rates used in the translation of income
statements were US dollar - £1 = $1.18 (2021 - £1 =
$1.36) and euro - £1 = €1.16 (2021 - £1 =
€1.17). Exchange rates used to translate assets and
liabilities at the balance sheet date were US dollar - £1 =
$1.2 (31 December 2021 - £1 = $1.35; 30 June 2022 - £1 =
$1.21) and euro - £1 = €1.13 (31 December 2021 - £1
= €1.19; 30 June 2022 - £1 = €1.16). The group
uses foreign exchange transaction hedges to mitigate the effect of
exchange rate movements.
New accounting standards and interpretations
The following amendment to the accounting standards, issued by the
IASB and endorsed by the UK and EU, was adopted by the group from 1
July 2022 with no impact on the group's consolidated results,
financial position or disclosures:
- Amendments
to IFRS 3 Updating a Reference to the Conceptual
Framework
-
Amendments to IAS 16 Property, Plant and Equipment: Proceeds before
Intended Use
- Amendments to
IAS 37 Onerous Contracts - Cost of Fulfilling a
Contract
The following standard issued by the IASB has been endorsed by the
UK and EU and has not been adopted by the group:
- IFRS
17 - Insurance contracts (effective from the year ending 30 June
2024) is ultimately intended to replace IFRS 4. Based on a
preliminary assessment, the group believes that the adoption of
IFRS 17 will not have a significant impact on its consolidated
results or financial position.
There are a number of other amendments and clarifications to IFRSs,
effective in future years, which are not expected to significantly
impact the group's consolidated results or financial
position.
2. Segmental information
The segmental information presented is consistent with management
reporting provided to the Executive Committee (the chief operating
decision maker).
The Executive Committee considers the business principally from a
geographical perspective based on the location of third-party sales
and the business analysis is presented by geographical segment. In
addition to these geographical selling segments, a further segment
reviewed by the Executive Committee is the Supply Chain and
Procurement (SC&P) segment, which manufactures products for
other group companies and includes production sites in the United
Kingdom, Ireland, Italy, Guatemala and Mexico, and comprises the
global procurement function.
The group's operations also include the Corporate segment.
Corporate costs are in respect of central costs, including finance,
marketing, corporate relations, human resources and legal, as well
as certain information systems, facilities and employee costs that
are not allocable to the geographical segments or to the
SC&P.
Diageo uses shared services operations to deliver transaction
processing activities for markets and operational entities. These
centres are located in India, Hungary, Colombia and the
Philippines. These captive business service centres also perform
certain central finance activities, including elements of financial
planning and reporting, treasury and HR services. The costs of
shared services operations are recharged to the
regions.
For planning and management reporting purposes, Diageo uses
budgeted exchange rates that are set at the prior year's weighted
average exchange rate. In order to ensure a consistent basis on
which performance is measured through the year, prior period
results are also restated to the budgeted exchange rate. Segmental
information for net sales and operating profit before exceptional
items are reported on a consistent basis with management reporting.
The adjustments required to retranslate the segmental information
to actual exchange rates and to reconcile it to the group's
reported results are shown in the tables below. The comparative
segmental information, prior to retranslation, has not been
restated at the current year's budgeted exchange rates but is
presented at the budgeted rates for the respective
year.
In addition, for management reporting purposes, Diageo presents the
result of acquisitions and disposals completed in the current and
prior year separately from the results of the geographical
segments. The impact of acquisitions and disposals on net sales and
operating profit is disclosed under the appropriate geographical
segments in the tables below at budgeted exchange
rates.
(a) Segmental information for the consolidated income
statement
|
North America
|
Europe
|
Asia
Pacific
|
Latin America
and Caribbean
|
Africa
|
SC&P
|
Eliminate
inter-segment
sales
|
Total
operating
segments
|
Corporate
and other
|
Total
|
Six months ended 31 December 2022
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
Sales
|
3,847
|
3,427
|
3,170
|
1,394
|
1,337
|
1,330
|
(1,330)
|
13,175
|
44
|
13,219
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
At
budgeted exchange rates(1)
|
3,092
|
1,815
|
1,724
|
995
|
916
|
1,318
|
(1,289)
|
8,571
|
44
|
8,615
|
Acquisitions and disposals
|
13
|
7
|
35
|
3
|
-
|
-
|
-
|
58
|
-
|
58
|
SC&P allocation
|
4
|
18
|
3
|
3
|
1
|
(29)
|
-
|
-
|
-
|
-
|
Retranslation to actual exchange rates
|
408
|
54
|
75
|
99
|
26
|
41
|
(41)
|
662
|
-
|
662
|
Hyperinflation
|
-
|
85
|
-
|
-
|
-
|
-
|
-
|
85
|
-
|
85
|
Net sales
|
3,517
|
1,979
|
1,837
|
1,100
|
943
|
1,330
|
(1,330)
|
9,376
|
44
|
9,420
|
Operating profit/(loss)
|
|
|
|
|
|
|
|
|
|
|
At
budgeted exchange rates(1)
|
1,260
|
630
|
557
|
407
|
212
|
39
|
-
|
3,105
|
(158)
|
2,947
|
Acquisitions and disposals
|
(6)
|
2
|
5
|
-
|
-
|
-
|
-
|
1
|
-
|
1
|
SC&P allocation
|
9
|
22
|
2
|
5
|
1
|
(39)
|
-
|
-
|
-
|
-
|
Fair value remeasurements
|
14
|
(1)
|
-
|
-
|
-
|
-
|
-
|
13
|
-
|
13
|
Retranslation to actual exchange rates
|
142
|
21
|
23
|
59
|
(33)
|
-
|
-
|
212
|
1
|
213
|
Hyperinflation
|
-
|
20
|
-
|
-
|
-
|
-
|
-
|
20
|
-
|
20
|
Operating profit/(loss) before exceptional items
|
1,419
|
694
|
587
|
471
|
180
|
-
|
-
|
3,351
|
(157)
|
3,194
|
Exceptional operating items
|
(26)
|
14
|
(21)
|
-
|
-
|
-
|
-
|
(33)
|
-
|
(33)
|
Operating profit/(loss)
|
1,393
|
708
|
566
|
471
|
180
|
-
|
-
|
3,318
|
(157)
|
3,161
|
Non-operating items
|
|
|
|
|
|
|
|
|
|
16
|
Net finance charges
|
|
|
|
|
|
|
|
|
|
(292)
|
Share of after tax results of associates and joint
ventures
|
|
|
|
|
|
|
|
|
|
172
|
Profit before taxation
|
|
|
|
|
|
|
|
|
|
3,057
|
|
North America
|
Europe
|
Asia
Pacific
|
Latin America
and Caribbean
|
Africa
|
SC&P
|
Eliminate
inter-segment
sales
|
Total
operating
segments
|
Corporate
and other
|
Total
|
Six months ended 31 December 2021
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
Sales
|
3,257
|
3,178
|
2,999
|
1,052
|
1,244
|
972
|
(972)
|
11,730
|
23
|
11,753
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
At
budgeted exchange rates(1)
|
2,959
|
1,782
|
1,544
|
822
|
888
|
1,027
|
(979)
|
8,043
|
23
|
8,066
|
Acquisitions and disposals
|
18
|
3
|
-
|
-
|
-
|
-
|
-
|
21
|
-
|
21
|
SC&P allocation
|
6
|
29
|
5
|
6
|
2
|
(48)
|
-
|
-
|
-
|
-
|
Retranslation to actual exchange rates
|
(19)
|
(62)
|
(18)
|
(9)
|
(22)
|
(7)
|
7
|
(130)
|
-
|
(130)
|
Net sales
|
2,964
|
1,752
|
1,531
|
819
|
868
|
972
|
(972)
|
7,934
|
23
|
7,957
|
Operating profit/(loss)
|
|
|
|
|
|
|
|
|
|
|
At
budgeted exchange rates(1)
|
1,288
|
647
|
454
|
333
|
192
|
(8)
|
-
|
2,906
|
(132)
|
2,774
|
Acquisitions and disposals
|
(16)
|
(1)
|
-
|
-
|
-
|
-
|
-
|
(17)
|
-
|
(17)
|
SC&P allocation
|
10
|
(23)
|
(3)
|
9
|
(1)
|
8
|
-
|
-
|
-
|
-
|
Fair value remeasurements
|
5
|
21
|
-
|
-
|
-
|
-
|
-
|
26
|
-
|
26
|
Retranslation to actual exchange rates
|
8
|
(31)
|
-
|
(9)
|
(15)
|
-
|
-
|
(47)
|
7
|
(40)
|
Operating profit/(loss) before exceptional items
|
1,295
|
613
|
451
|
333
|
176
|
-
|
-
|
2,868
|
(125)
|
2,743
|
Exceptional items
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
-
|
Operating profit/(loss)
|
1,295
|
613
|
451
|
333
|
176
|
-
|
-
|
2,868
|
(125)
|
2,743
|
Non-operating items
|
|
|
|
|
|
|
|
|
|
(31)
|
Net finance charges
|
|
|
|
|
|
|
|
|
|
(180)
|
Share of after tax results of associates and joint
ventures
|
|
|
|
|
|
|
|
|
|
190
|
Profit before taxation
|
|
|
|
|
|
|
|
|
|
2,722
|
(1)These items represent the IFRS 8 performance measures for the
geographical and SC&P segments.
(i)The net sales figures for SC&P reported to the Executive
Committee primarily comprise inter-segment sales and these are
eliminated in a separate column in the above segmental analysis.
Apart from sales by the SC&P segment to the geographical
segments, inter-segment sales are not material.
(ii)Approximately 42% of calendar year net sales occurred in the
last four months of calendar year 2022.
(b) Category and geographical analysis
|
Category analysis
|
Geographical analysis
|
Six months ended 31 December 2022
|
Spirits
£ million
|
Beer
£ million
|
Ready to drink
£ million
|
Other
£ million
|
Total
£ million
|
United
States
£ million
|
India
£ million
|
Great
Britain
£ million
|
Rest of
world
£ million
|
Total
£ million
|
Sales(1)
|
10,925
|
1,702
|
478
|
114
|
13,219
|
3,617
|
1,599
|
1,163
|
6,840
|
13,219
|
Six months ended 31 December 2021
|
|
|
|
|
|
|
|
|
|
|
Sales(1)
|
9,680
|
1,520
|
418
|
135
|
11,753
|
3,072
|
1,704
|
1,204
|
5,773
|
11,753
|
(1)The
geographical analysis of sales is based on the location of
third-party sales.
3. Exceptional items
Exceptional items are those that in management's judgement need to
be disclosed separately. See page 46 for the definition of
exceptional items and the criteria used to determine whether an
exceptional item is accounted for as operating or
non-operating.
|
Six months ended 31
December 2022
|
Six months ended 31
December 2021
|
|
£ million
|
£ million
|
Exceptional operating items
|
|
|
Supply chain agility programme
|
(47)
|
-
|
Winding down Russian operations
|
14
|
-
|
|
(33)
|
-
|
Non-operating items
|
|
|
Sale of businesses and brands
|
|
|
Archers
brand
|
20
|
-
|
USL
Popular brands
|
4
|
-
|
United
National Breweries
|
2
|
2
|
Guinness
Cameroon S.A.
|
(2)
|
-
|
Meta
Abo Brewery
|
-
|
(33)
|
Step acquisition - Mr Black
|
(8)
|
-
|
|
16
|
(31)
|
|
|
|
Exceptional items before taxation
|
(17)
|
(31)
|
|
|
|
Items included in taxation
|
|
|
Tax on exceptional operating items
|
12
|
-
|
Tax on exceptional non-operating items
|
1
|
-
|
Exceptional taxation
|
57
|
-
|
|
70
|
-
|
|
|
|
Total exceptional items
|
53
|
(31)
|
|
|
|
Attributable to:
|
|
|
Equity shareholders of the parent company
|
52
|
(31)
|
Non-controlling interests
|
1
|
-
|
Total exceptional items
|
53
|
(31)
|
See page 22 for detailed explanation
on exceptional items.
4. Finance income and charges
|
Six months ended 31 December 2022
|
Six months ended 31 December 2021
|
|
£ million
|
£ million
|
Interest income
|
86
|
61
|
Fair value gain on financial instruments
|
142
|
58
|
Total interest income
|
228
|
119
|
Interest charge on bank loans, bonds and overdrafts
|
(235)
|
(181)
|
Interest charge on leases
|
(8)
|
(5)
|
Fair value loss on financial instruments
|
(142)
|
(59)
|
Interest charge on other borrowings
|
(125)
|
(36)
|
Total interest charges
|
(510)
|
(281)
|
Net interest charges
|
(282)
|
(162)
|
|
|
|
Net finance income in respect of post employment plans in
surplus
|
29
|
10
|
Hyperinflation adjustment in respect of Venezuela (a)
|
-
|
1
|
Total other finance income
|
29
|
11
|
Net finance charge in respect of post employment plans in
deficit
|
(7)
|
(5)
|
Foreign exchange revaluation of monetary items in respect of
Lebanon (a)
|
-
|
(2)
|
Unwinding of discounts
|
(5)
|
(6)
|
Interest charge in respect of direct and indirect tax
|
(17)
|
(8)
|
Change in financial liability (Level 3)
|
-
|
(7)
|
Hyperinflation adjustment in respect of Turkey (a)
|
(6)
|
-
|
Guarantee
fees
|
(1)
|
-
|
Other finance charges
|
(3)
|
(1)
|
Total other finance charges
|
(39)
|
(29)
|
Net other finance charges
|
(10)
|
(18)
|
(a) Hyperinflation adjustment
The group applied hyperinflationary accounting for its operations
in Turkey, Venezuela and Lebanon.
Turkey has been a hyperinflationary environment, the three-year
cumulative inflation for the period ended 31 December 2022 exceeded
100%. Consequently, since March 2022, the group applies
hyperinflationary accounting for its Turkish operation. The group's
consolidated financial statements for the six months ended 31
December 2022 include the results and financial position of its
Turkish operations restated to the measuring unit current at the
end of the period, with hyperinflationary gains and losses in
respect of monetary items being reported in finance charges. The
inflation rate used by the group is the official rate published by
the Turkish Statistical Institute, TurkStat. The movement in the
publicly available official price index for the six months ended 31
December 2022 was 15%.
Venezuela is a hyperinflationary economy where the government
maintains a regime of strict currency controls with multiple
foreign currency rate systems. The exchange rate used to translate
the results of the group's Venezuelan operations was VES/£
1,540 for the six months ended 31 December 2022 (2021 - VES/£
593). These rates reflect management's estimate of the exchange
rate considering inflation and the most appropriate official
exchange rate. Movement in the price index for the six months ended
31 December 2022 was 105% (2021 - 158%). The inflation rate used by
the group is provided by an independent valuer because no reliable,
officially published rate is available for Venezuela.
The following table presents the contribution of the group's
Venezuelan operations to the consolidated income statement, cash
flow statement and net assets for the six months ended 31 December
2022 and 31 December 2021 and
with the amounts that would have resulted if the official reference
exchange rate had been applied:
|
Six months ended 31 December 2022
|
Six months ended 31 December 2021
|
|
At estimated exchange rate
|
At official reference exchange rate
|
At estimated
exchange rate
|
At official reference
exchange rate
|
|
1,540 VES/£
|
21 VES/£
|
593 VES/£
|
6 VES/£
|
|
£ million
|
£ million
|
£ million
|
£ million
|
Net sales
|
-
|
7
|
-
|
8
|
Operating profit
|
-
|
2
|
-
|
2
|
Other finance income - hyperinflation adjustment
|
-
|
-
|
1
|
120
|
Net cash outflow from operating activities
|
-
|
(1)
|
-
|
(3)
|
Net assets
|
20
|
1,467
|
37
|
3,501
|
Sterling amounts presented at the official reference exchange rate
are results of simple mathematical conversion.
The impact of hyperinflationary accounting for Lebanon was
immaterial both in the current and comparative
periods.
5. Taxation
For the six months ended 31 December 2022, the tax charge of
£650 million (2021 - £634 million) comprises a
UK tax charge of £122 million (2021 - £116 million)
and a foreign tax charge of £528 million (2021 - £518
million).
For the six months ended 31 December 2022, income tax expense was
recognised based on management's best estimate of the weighted
average annual income tax rate expected for the full financial year
applied to the pre-tax income of the interim period in line with
the relevant accounting standard.
Included in the tax charge of £650 million in the six months
ended 31 December 2022 is an exceptional tax credit of £70
million, which includes a tax credit of £57 million in
respect of the deductibility of fees paid to Diageo plc for
guaranteeing externally issued debt of US group entities. Following
engagement with the tax authorities, guarantee fees for the periods
ended 30 June 2012 to 30 June 2022 will be fully
deductible.
The group has a number of ongoing tax audits worldwide for which
provisions are recognised in line with the relevant accounting
standard taking into account best estimates and management's
judgements concerning the ultimate outcome of the tax audit. For
the six months ended 31 December 2022, ongoing audits that are
provided for individually are not expected to result in a material
tax liability. The current tax asset of £166 million (30 June
2022 - £149 million) and tax liability of £266 million
(30 June 2022 - £252 million) include £169 million (30
June 2022 - £156 million) of provisions for tax
uncertainties.
On 20 July 2022, HM Treasury released draft legislation to
introduce the OECD's Pillar Two Model Rules into UK law that would
commence for accounting periods starting on or after 31 December
2023 (i.e. year ending 30 June 2025 for Diageo). Diageo is
reviewing available legislation and monitoring the status of
implementation outside the UK to understand the potential impact on
the group.
The tax rate before exceptional items for the six months ended 31
December 2022 was 23.4% compared with 23.0% for the six months
ended 31 December 2021.
6. Inventories
|
31 December 2022
|
30 June 2022
|
31 December 2021
|
|
£ million
|
£ million
|
£ million
|
Raw materials and consumables
|
598
|
489
|
401
|
Work in progress
|
166
|
86
|
68
|
Maturing inventories
|
5,477
|
5,229
|
4,801
|
Finished goods and goods for resale
|
1,311
|
1,290
|
965
|
|
7,552
|
7,094
|
6,235
|
7. Net borrowings
|
31 December 2022
|
30 June 2022
|
31 December 2021
|
|
£ million
|
£ million
|
£ million
|
Borrowings due within one year and bank overdrafts
|
(2,305)
|
(1,522)
|
(1,184)
|
Borrowings due after one year
|
(15,304)
|
(14,498)
|
(12,693)
|
Fair value of foreign currency forwards and swaps
|
534
|
356
|
122
|
Fair value of interest rate hedging instruments
|
(422)
|
(283)
|
4
|
Lease liabilities
|
(438)
|
(475)
|
(360)
|
|
(17,935)
|
(16,422)
|
(14,111)
|
Cash and cash equivalents
|
2,766
|
2,285
|
1,780
|
|
(15,169)
|
(14,137)
|
(12,331)
|
8. Reconciliation of movement in net borrowings
|
Six months ended 31 December 2022
|
Six months ended
31 December 2021
|
|
£ million
|
£ million
|
Net increase/(decrease) in
cash and cash equivalents before exchange
|
589
|
(888)
|
Net (increase)/decrease in
bonds and other borrowings(1)
|
(1,508)
|
729
|
Net increase in net
borrowings from cash flows
|
(919)
|
(159)
|
Exchange differences on net borrowings
|
(50)
|
(31)
|
Other
non-cash items(2)
|
(63)
|
(32)
|
Net
borrowings at beginning of the period
|
(14,137)
|
(12,109)
|
Net borrowings at end of the period
|
(15,169)
|
(12,331)
|
(1)In the six months ended 31
December 2022, net increase in bonds and other borrowings excludes
£2 million cash outflow in respect of derivatives designated
in forward point hedges (2021 -
£2 million).
(2)In the six months ended 31
December 2022, other non-cash items were principally in respect of
the reclassification of cash and cash equivalents in Guinness
Cameroon S.A. to assets and liabilities held for
sale. In the
six months ended 31 December 2021, other non-cash items were
principally in respect of additional leases entered into during the
period.
In the six months ended 31 December 2022, the group issued bonds of
$2,000 million (£1,788 million - net of discount and
fee) consisting of $500 million 5.2% fixed rate notes
due 2025, $750 million 5.3% fixed rate notes due 2027 and
$750 million 5.5% fixed rate notes due 2033, and repaid bonds
of $300 million (£254 million). In the six months ended
31 December 2021, the group repaid bonds of €900 million
(£769 million).
All bonds and commercial papers issued by Diageo plc's 100% owned
subsidiaries are fully and unconditionally guaranteed by Diageo
plc.
9. Financial instruments
Fair value measurements of financial instruments are presented
through the use of a three-level fair value hierarchy that
prioritises the valuation techniques used in fair value
calculations.
The group maintains policies and procedures to value instruments
using the most relevant data available. If multiple inputs that
fall into different levels of the hierarchy are used in the
valuation of an instrument, the instrument is categorised on the
basis of the most subjective input.
Foreign currency forwards and swaps, cross currency swaps and
interest rate swaps are valued using discounted cash flow
techniques. These techniques incorporate inputs at levels 1 and 2,
such as foreign exchange rates and interest rates. These market
inputs are used in the discounted cash flow calculation
incorporating the instrument's term, notional amount and discount
rate, and taking credit risk into account. As significant inputs to
the valuation are observable in active markets, these instruments
are categorised as level 2 in the hierarchy.
Other financial liabilities include a put option, which does not
have an expiry date, held by Industrias Licoreras de Guatemala
(ILG) to sell the remaining 50% equity stake in Rum Creation &
Products Inc., the owner of the Zacapa rum brand, to Diageo. The
liability is fair valued and as at 31 December 2022, an amount
of £217 million (30
June 2022 - £216 million)
is recognised as a liability with changes in the fair value of the
put option included in retained earnings. As the valuation of this
option uses assumptions not observable in the market, it is
categorised as level 3 in the hierarchy. As at 31 December 2022,
because it is unknown when or if ILG will exercise the option, the
liability is measured as if the exercise date is on the last day of
the current financial year considering forecast future performance.
The option is sensitive to reasonably possible changes in
assumptions. If the option were to be exercised as at 30 June 2024,
the fair value of the liability would increase by
approximately £47 million.
Included in other financial liabilities, the contingent
consideration on acquisition of businesses represents the present
value of payments up to £406 million linked
to certain performance targets which are expected to be paid over
the next eight years.
There were no significant changes in the measurement and valuation
techniques, or significant transfers between the levels of the
financial assets and liabilities in the six months ended 31
December 2022.
The group's financial assets and liabilities measured at fair value
are categorised as follows:
|
31 December 2022
|
30 June 2022
|
31 December 2021
|
|
£ million
|
£ million
|
£ million
|
Derivative assets
|
682
|
480
|
381
|
Derivative liabilities
|
(552)
|
(456)
|
(237)
|
Valuation techniques based on observable market input (Level
2)
|
130
|
24
|
144
|
Financial assets - other
|
172
|
184
|
167
|
Financial liabilities - other
|
(575)
|
(587)
|
(483)
|
Valuation techniques based on unobservable market input (Level
3)
|
(403)
|
(403)
|
(316)
|
In the six months ended 31 December 2022 and 31 December 2021, the
decrease in financial assets - other of £12 million (2021
- £29 million) is principally in respect of the
conversion of preference shares to equity in Mr
Black.
The movements in level 3 instruments, measured on a recurring
basis, are as follows:
|
Zacapa
financial
liability
|
Contingent consideration recognised on acquisition of
businesses(1)
|
Zacapa
financial
liability
|
Contingent
consideration recognised on acquisition of businesses(1)
|
|
Six months ended
31 December 2022
|
Six months ended
31 December 2022
|
Six months ended
31 December 2021
|
Six months ended
31 December 2021
|
|
£ million
|
£ million
|
£ million
|
£ million
|
At the
beginning of the period
|
(216)
|
(371)
|
(149)
|
(429)
|
Net gains/(losses) included in the income statement
|
-
|
12
|
(7)
|
18
|
Net (losses)/gains included in exchange in other comprehensive
income
|
(2)
|
(2)
|
(4)
|
(9)
|
Net losses included in retained earnings
|
(4)
|
-
|
(12)
|
-
|
Acquisitions
|
-
|
(5)
|
-
|
-
|
Settlement of liabilities
|
5
|
8
|
3
|
106
|
At the end of the period
|
(217)
|
(358)
|
(169)
|
(314)
|
(1)Included in the balance at 31
December 2022 is £145 million in
respect of the acquisition of Aviation Gin and Davos Brands (2021 -
£163 million), £60 million in
respect of the acquisition of 21Seeds (2021 - £nil),
and £57 million in
respect of the acquisition of Lone River Ranch Water (2021 -
£51 million).
The carrying amount of the group's financial assets and liabilities
is generally the same as their fair value apart from borrowings. At
31 December 2022, the fair value of gross borrowings (excluding
lease liabilities and the fair value of derivative instruments)
was £16,716 million,
and the carrying value was £17,609 million (30
June 2022 - £15,628 million
and £16,020 million,
respectively).
10. Dividends and other reserves
|
Six months ended
31 December 2022
|
Six
months ended
31
December 2021
|
|
£ million
|
£ million
|
Amounts recognised as distributions to equity
shareholders
|
|
|
Final dividend for the year ended 30 June 2022 of 46.82 pence per share (2021 - 44.59 pence)
|
1,066
|
1,040
|
An interim dividend of 30.83 pence per share (2021 - 29.36 pence)
was approved by the Board of Directors on 25 January
2023. As the approval was after the balance sheet date, it was
not included as a liability.
Other reserves of £2,193 million at 31 December 2022
(2021 - £1,551 million) include a capital redemption
reserve of £3,224 million (2021 -
£3,206 million), a hedging reserve surplus of
£96 million (2021 -
£61 million surplus) and an exchange
reserve deficit of £1,127 million (2021 -
£1,716 million deficit). Currency basis spreads included
in the hedging reserve represent the cost of hedging arising as a
result of imperfections of foreign exchange markets. Exclusion of
currency basis spreads would result in a £22 million (2021 -
£22 million) credit to hedging
reserve.
11. Acquisition of businesses
Fair value of assets and liabilities acquired and cash
consideration paid in respect of acquisition of subsidiaries in the
six months ended 31 December 2022 were as
follows:
|
Acquisitions
|
|
£ million
|
Brands
|
45
|
Property, plant and equipment
|
24
|
Inventories
|
24
|
Other working capital
|
1
|
Deferred tax
|
(3)
|
Cash
|
1
|
Fair value of assets and liabilities
|
92
|
Goodwill arising on acquisition
|
22
|
Step acquisition
|
(10)
|
Consideration payable
|
104
|
Satisfied by:
|
|
Cash
consideration paid
|
(96)
|
Contingent
consideration payable
|
(5)
|
Deferred
consideration payable
|
(3)
|
|
(104)
|
Diageo completed two acquisitions in the six months ended 31
December 2022: (i) on 29 September 2022, the acquisition of that
part of the entire issued share capital of Mr Black Spirits Pty
Ltd, owner of the Mr Black Australian premium cold brew coffee
liqueur, that it did not already own; and (ii) on 2 November 2022,
the acquisition of the entire issued share capital of Balcones
Distilling, a Texas craft distiller and one of the leading
producers of American single malt whisky in the United
States. The
fair values of assets and liabilities acquired in respect of the
two acquisitions are provisional and will be finalised in the year
ending 30 June 2023.
Cash consideration paid in respect of the acquisition of businesses
in the six months ended 31 December 2022 were as
follows:
|
Consideration
|
|
£ million
|
Acquisitions in the year
|
|
Subsidiaries
|
|
Cash
consideration paid
|
(96)
|
Cash
acquired
|
1
|
Investments
in associates
|
|
Cash
consideration paid
|
(3)
|
Prior year acquisitions
|
|
Subsidiaries
|
|
Contingent
consideration paid
|
(8)
|
Other
consideration
|
(10)
|
Investments
in associates
|
|
Capital
injection
|
(28)
|
Net cash outflow on acquisition of businesses
|
(144)
|
12. Assets and liabilities held for sale
|
31 December 2022
|
30 June 2022
|
|
£ million
|
£ million
|
Intangible assets
|
-
|
165
|
Property, plant and equipment
|
103
|
12
|
Other investments
|
-
|
1
|
Inventories
|
19
|
21
|
Trade and other receivables
|
13
|
23
|
Cash
|
47
|
-
|
Assets held for sale
|
182
|
222
|
Trade and other payables
|
(61)
|
(18)
|
Corporation tax
|
(2)
|
(6)
|
Deferred tax
|
(5)
|
(35)
|
Provisions
|
(2)
|
-
|
Leases
|
(2)
|
(2)
|
Post employment benefit liabilities
|
(4)
|
-
|
Liabilities held for sale
|
(76)
|
(61)
|
Total
|
106
|
161
|
Assets and liabilities held for sale at 31 December
2022 consisted of Guinness
Cameroon S.A., and as at 30 June 2022 assets and liabilities held
for sale consisted of the Windsor business in Korea and USL's
Popular brands. As at 31 December 2021 there were no assets and
liabilities classified as held for sale.
On 14 July 2022, Diageo announced the agreement to sell Guinness
Cameroon S.A., its brewery in Cameroon, to Castel Group
for £389 million. On
completion, Castel will take over the production and nationwide
distribution of Guinness in Cameroon under a licence and royalty
agreement. The sale is considered to be highly probable as at 31
December 2022 and it is expected to be completed in the year ending
30 June 2023. Consequently, the impacted assets and liabilities
were classified as held for sale at 31 December 2022 and measured
at cost as the lower of cost and fair value less cost of
disposal.
On 27 September 2022, Diageo announced the termination of the
conditional agreement to sell its Windsor business in Korea.
Consequently, the recoverable assets and liabilities attributable
to the business were reclassified out of held for
sale.
On 30 September 2022, Diageo announced the completion of the sale
of the Popular brands of its USL business. The assets and
liabilities attributable to the business were disposed from held
for sale. The aggregate consideration for the disposal
was £87 million, resulting
in an exceptional gain of £4 million.
13. Contingent liabilities and legal proceedings
(a) Guarantees and related matters
As of 31 December 2022, the group has no material unprovided
guarantees or indemnities in respect of liabilities of third
parties.
(b) Acquisition of USL shares from UBHL and related proceedings in
relation to the USL transaction
On 4 July 2013, Diageo completed its acquisition, under a share
purchase agreement with United Breweries (Holdings) Limited (UBHL)
and various other sellers (the SPA), of shares representing 14.98%
in USL, including shares representing 6.98% from UBHL. The SPA was
signed on 9 November 2012 as part of the transaction announced by
Diageo in relation to USL on that day (the Original USL
Transaction). Following a series of further transactions, as of 31
December 2022, Diageo has a 55.94% investment in USL (excluding
2.38% owned by the USL Benefit Trust).
Prior to the acquisition from UBHL on 4 July 2013, the High Court
of Karnataka (High Court) had granted leave to UBHL under the
Indian Companies Act 1956 (the Leave Order) to enable the sale by
UBHL to Diageo to take place (the UBHL Share Sale) notwithstanding
the continued existence of certain winding-up petitions that were
pending against UBHL on the date of the SPA. At the time of the
completion of the UBHL Share Sale, the Leave Order remained subject
to review on appeal. However, as stated by Diageo at the time of
closing, it was considered unlikely that any appeal process in
respect of the Leave Order would definitively conclude on a timely
basis and, accordingly, Diageo waived the conditionality under the
SPA relating to the absence of insolvency proceedings in relation
to UBHL and acquired the 6.98% stake in USL from UBHL at that
time.
Following appeal and counter-appeal in respect of the Leave Order,
this matter is now before the Supreme Court of India which has
issued an order that the status quo be maintained with regard to
the UBHL Share Sale pending a hearing on the matter before it.
Following a number of adjournments, the next date for a substantive
hearing is yet to be fixed.
In separate proceedings, the High Court passed a winding-up order
against UBHL on 7 February 2017, and appeals filed by UBHL against
that order have since been dismissed, initially by a division bench
of the High Court and subsequently by the Supreme Court of
India.
Diageo continues to believe that the acquisition price of INR 1,440
per share paid to UBHL for the USL shares is fair and reasonable as
regards UBHL, UBHL's shareholders and UBHL's secured and unsecured
creditors. However, adverse results for Diageo in the proceedings
referred to above could, absent leave or relief in other
proceedings, ultimately result in Diageo losing title to the 6.98%
stake in USL acquired from UBHL. Diageo believes, including
by reason of its rights under USL's articles of association to
nominate USL's CEO and CFO and the right to appoint, through USL, a
majority of the directors on the boards of USL's subsidiaries as
well as its ability as promoter to nominate for appointment up to
two-thirds of USL's directors for so long as the chairperson of USL
is an independent director, that
it would remain in control of USL and would continue to be able to
consolidate USL as a subsidiary for accounting purposes regardless
of the outcome of this litigation.
There can be no certainty as to the outcome of the existing or any
further related legal proceedings or the time frame within which
they would be concluded.
(c) Continuing matters relating to Dr Vijay Mallya and
affiliates
On 25 February 2016, Diageo and USL each announced that they had
entered into arrangements with Dr Mallya under which he had agreed
to resign from his position as a director and as chairman of USL
and from his positions in USL's
subsidiaries.
Diageo's agreement with Dr Mallya (the February 2016 Agreement)
provided for a payment of $75 million (£63 million) to Dr
Mallya over a five-year period of which $40 million
(£33 million) was paid on signing of the February 2016
Agreement with the balance being payable in equal instalments of
$7 million (£6 million) a year over five years
(2017-2021). All payments were subject to and conditional on Dr
Mallya's compliance with the agreement. The February 2016 Agreement
also provided for the release of Dr Mallya's personal obligations
to indemnify Diageo Holdings Netherlands B.V. (DHN) in respect of
its earlier liability ($141 million (£118 million))
under a backstop guarantee of certain borrowings of Watson Limited
(Watson) (a company affiliated with Dr Mallya).
On account of various breaches and other provisions of agreements
between Dr Mallya and persons connected with him and Diageo and/or
USL, Diageo did not make the five instalment payments due during
the five-year period between 2017 and 2021. In addition, Diageo has
also demanded that Dr Mallya repay the $40 million (£33
million) paid by Diageo in February 2016 and sought compensation
for various losses incurred by the relevant members of the Diageo
group.
On 16 November 2017, Diageo and other relevant members of the
Diageo group commenced claims in the High Court of Justice in
England and Wales (the English High Court) against Dr Mallya in
relation to these matters. At the same time DHN also commenced
claims in the English High Court against Dr Mallya, his son
Sidhartha Mallya, Watson and Continental Administration Services
Limited (CASL) (a company affiliated with Dr Mallya and understood
to hold assets on trust for him and certain persons affiliated with
him) for in excess of $142 million (£118 million) (plus
interest) in relation to Watson's liability to DHN in respect of
its borrowings referred to above and the breach of associated
security documents. Dr Mallya, Sidhartha Mallya and the relevant
affiliated companies filed a defence to these claims, and Dr Mallya
also filed a counterclaim for payment of the two instalment
payments that had by that time been withheld as described
above.
Diageo continues to prosecute its claims and to defend the
counterclaim. As part of these proceedings, Diageo and the other
relevant members of its group filed an application for strike out
and/or summary judgement in respect of certain aspects of the
defence filed by Dr Mallya and the other defendants, including
their defence in relation to Watson and CASL's liability to repay
DHN. The application was successful resulting in Watson being
ordered to pay approximately $135 million (£113 million) plus
various amounts in respect of interest to DHN, with CASL being held
liable as co-surety for 50% of any such amount unpaid by Watson.
These amounts were, contrary to the relevant orders, not paid by
the relevant deadlines and Watson and CASL's remaining defences in
the proceedings were struck out. Diageo and DHN have accordingly
sought asset disclosure and are considering further enforcement
steps against Watson and CASL, both in the United Kingdom and in
other jurisdictions where they are present or hold
assets.
A trial of the remaining elements of these claims was due to
commence on 21 November 2022. However, on 26 July 2021 Dr Mallya
was declared bankrupt by the English High Court pursuant to a
bankruptcy petition presented by a consortium of Indian banks.
Diageo and the relevant members of its group have informed the
Trustee in Bankruptcy of their position as creditors in the
bankruptcy and have engaged with the Trustee regarding their claims
and the status of the current proceedings. An appeal by Dr Mallya
against his bankruptcy (and an appeal by the bank consortium
against orders made in the course of the bankruptcy proceedings)
are pending. In light of the uncertainty posed by the ongoing
bankruptcy proceedings, the trial of Diageo's claim has been
relisted to take place in February 2024.
At this stage, it is not possible to assess the extent to which the
various ongoing proceedings related to the bankruptcy will affect
the remaining elements of the claims by Diageo and the relevant
members of its group.
Upon completion of an initial inquiry in April 2015 into past
improper transactions which identified references to certain
additional parties and matters, USL carried out an additional
inquiry into these transactions (Additional Inquiry) which was
completed in July 2016. The Additional Inquiry, prima facie,
identified transactions indicating actual and potential diversion
of funds from USL and its Indian and overseas subsidiaries to, in
most cases, entities that appeared to be affiliated or associated
with Dr Mallya. All amounts identified in the Additional Inquiry
have been provided for or expensed in the financial statements of
USL or its subsidiaries in the respective prior periods. USL has
filed recovery suits against relevant parities identified pursuant
to the Additional Inquiry. Further, at this stage, it is not
possible for the management of USL to estimate the financial impact
on USL, if any, arising out of potential non-compliance with
applicable laws in relation to such fund diversions.
(d) Other matters in relation to USL
In respect of the Watson backstop guarantee arrangements, the
Securities and Exchange Board of India (SEBI) issued a notice to
Diageo on 16 June 2016 that if there is any net liability incurred
by Diageo (after any recovery under relevant security or other
arrangements, which matters remain pending) on account of the
Watson backstop guarantee, such liability, if any, would be
considered to be part of the price paid for the acquisition of USL
shares under the SPA which formed part of the Original USL
Transaction and that, in that case, additional equivalent payments
would be required to be made to those shareholders (representing
0.04% of the shares in USL) who tendered in the open offer made as
part of the Original USL Transaction. Diageo believes that the
Watson backstop guarantee arrangements were not part of the price
paid or agreed to be paid for any USL shares under the Original USL
Transaction and that therefore SEBI's decision was not consistent
with applicable law, and Diageo appealed against it before the
Securities Appellate Tribunal, Mumbai (SAT). On 1 November 2017,
SAT issued an order in respect of Diageo's appeal in which, amongst
other things, it observed that the relevant officer at SEBI had
neither considered Diageo's earlier reply nor provided Diageo with
an opportunity to be heard, and accordingly directed SEBI to pass a
fresh order after giving Diageo an opportunity to be heard.
Following SAT's order, Diageo made its further submissions in the
matter, including at a personal hearing before a Deputy General
Manager of SEBI. On 26 June 2019, SEBI issued an order reiterating
the directions contained in its previous notice dated 16 June 2016.
As with the previous SEBI notice, Diageo believes that SEBI's
latest order is not consistent with applicable law and has filed
another appeal before the SAT against the order. Diageo's appeal is
currently pending. Diageo is unable to assess if the notices or
enquiries referred to above will result in enforcement action or,
if this were to transpire, to quantify meaningfully the possible
range of loss, if any, to which any such action might give rise to
if determined against Diageo or USL.
(e) USL's dispute with IDBI Bank Limited
Prior to the acquisition by Diageo of a controlling interest in
USL, USL had prepaid a term loan of INR 6,280 million (£63
million) taken through IDBI Bank Limited (IDBI), an Indian bank,
which was secured on certain fixed assets and brands of USL, as
well as by a pledge of certain shares in USL held by the USL
Benefit Trust (of which USL is the sole beneficiary). The maturity
date of the loan was 31 March 2015. IDBI disputed the prepayment,
following which USL filed a writ petition in November 2013 before
the High Court of Karnataka (the High Court) challenging the bank's
actions.
Following the original maturity date of the loan, USL received
notices from IDBI seeking to recall the loan, demanding a further
sum of INR 459 million (£5 million) on account of the
outstanding principal, accrued interest and other amounts, and also
threatening to enforce the security in the event that USL did not
make these further payments. Pursuant to an application filed by
USL before the High Court in the writ proceedings, the High Court
directed that, subject to USL depositing such further amount with
the bank (which amount was duly deposited by USL), the bank should
hold the amount in a suspense account and not deal with any of the
secured assets including the shares until disposal of the original
writ petition filed by USL before the High Court.
On 27 June 2019, a single judge bench of the High Court issued an
order dismissing the writ petition filed by USL, amongst other
things, on the basis that the matter involved an issue of breach of
contract by USL and was therefore not maintainable in exercise of
the court's writ jurisdiction. USL filed an appeal against this
order before a division bench of the High Court, which on 30 July
2019 issued an interim order directing the bank to not deal with
any of the secured assets until the next date of hearing. On 13
January 2020, the division bench of the High Court admitted the
writ appeal and extended the interim stay. This appeal is currently
pending. Based on the assessment of USL's management supported by
external legal opinions, USL continues to believe that it has a
strong case on the merits and therefore continues to believe that
the secured assets will be released to USL and the aforesaid amount
of INR 459 million (£5 million) remains recoverable from
IDBI.
(f) Tax
The international tax environment has seen increased scrutiny and
rapid change over recent years bringing with it greater uncertainty
for multinationals. Against this backdrop, Diageo has been
monitoring developments and continues to engage transparently with
the tax authorities in the countries where Diageo operates to
ensure that the group manages its arrangements on a sustainable
basis.
The group operates in a large number of markets with complex tax
and legislative regimes that are open to subjective interpretation.
In the context of these operations, it is possible that tax
exposures which have not yet materialised (including those which
could arise as a result of tax assessments) may result in losses to
the group. In the circumstances where tax authorities have raised
assessments, challenging interpretations which may lead to a
possible material outflow, these have been included as contingent
liabilities. Where the potential tax exposures are known to us and
have not been assessed, the group considers disclosure of such
matters taking into account their size and nature, relevant
regulatory requirements and potential prejudice of the future
resolution or assessment thereof.
Diageo has a large number of ongoing tax cases in Brazil and India.
Since assessing an accurate value of contingent liabilities in
these markets requires a high degree of judgement, contingent
liabilities are disclosed on the basis of the current known
possible exposure from tax assessment values. While not all of
these cases are individually significant, the current aggregate
known possible exposure from tax assessment values is up to
approximately £568 million for Brazil and up to
approximately £131 million for
India. The group believes that the likelihood that the tax
authorities will ultimately prevail is lower than probable but
higher than remote. Due to the fiscal environment in Brazil and in
India, the possibility of further tax assessments related to the
same matters cannot be ruled out and the judicial processes may
take extended periods to conclude. Based on its current assessment,
Diageo believes that no provision is required in respect of these
issues.
Payments were made under protest in India in respect of the periods 1 April
2006 to 31 March 2019 in relation to tax assessments where the risk
is considered to be remote or possible. These payments have to be
made in order to be able to challenge the assessments and as such
have been recognised as a receivable in the group's balance sheet.
The total amount of payments under protest recognised as a
receivable as at 31 December 2022 is £117 million
(corporate tax payments of £105 million and indirect tax
payments of £12 million).
(g) Information request
In 2021, Diageo received an information request from the US
Securities and Exchange Commission relating to Diageo's business
operations in certain markets and to its policies, procedures and
compliance environment. Diageo is responding to this information
request but is currently unable to assess whether the inquiry will
evolve into any enforcement action or, if this were to transpire,
to quantify meaningfully the possible loss or range of loss, if
any, to which any such action might give rise.
(h) Other
The group has extensive international operations and routinely
makes judgements on a range of legal, customs and tax matters which
are incidental to the group's operations. Some of these judgements
are or may become the subject of challenges and involve
proceedings, the outcome of which cannot be foreseen. In
particular, the group is currently a defendant in various customs
proceedings that challenge the declared customs value of products
imported by certain Diageo companies. Diageo continues to defend
its position vigorously in these proceedings.
Save as disclosed above, neither Diageo, nor any member of the
Diageo group, is or has been engaged in, nor (so far as Diageo is
aware) is there pending or threatened by or against it, any legal
or arbitration proceedings which may have a significant effect on
the financial position of the Diageo group.
14. Related party transactions
The group's significant related parties are its associates, joint
ventures, key management personnel and post employment benefit
plans. In October 2022 Diageo plc provided an interim credit
facility of £1.0 billion to Diageo Pension Trust Limited,
split into two separate agreements of £150 million for
the Diageo Lifestyle Plan and £850 million for the Diageo
Pension Scheme, to support temporary liquidity challenges until 29
December 2022. Subsequently, the Diageo Pension Scheme agreement
was extended to 29 June 2023. At 31 December 2022, the outstanding
balance due from the scheme under the credit facility was
£nil. The movements in the credit facility are included in
movements in loans and other investments on the consolidated
statement of cash flows.
There were no transactions with related parties during the six
months ended 31 December 2022 on terms other than those that
prevail in arm's length transactions.
15. Post balance sheet events
On 17 January 2023, Diageo announced that it had reached an
agreement to acquire Don Papa Rum, a super-premium dark rum from
the Philippines. The upfront consideration is
€260 million (£231 million) with further potential
consideration of up to €178 million (£158 million)
through to 2028 subject to performance, reflecting the brand's
expected growth potential.
Independent review report to Diageo plc
Report on the condensed consolidated interim financial
statements
Our conclusion
We have reviewed Diageo plc's condensed consolidated interim
financial statements (the "interim financial statements") in the
interim results of Diageo plc for the six months ended 31 December
2022 (the "period").
Based on our review, nothing has come to our attention that causes
us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with UK adopted
International Accounting Standard 34 'Interim Financial Reporting',
IAS 34 'Interim Financial Reporting' as issued by the International
Accounting Standards Board ('IASB'), IAS 34 'Interim Financial
Reporting' as adopted by the EU and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority.
The interim financial statements comprise:
●
the condensed consolidated balance sheet as at 31 December
2022;
●
the condensed consolidated income statement and condensed
consolidated statement of comprehensive income for the period then
ended;
●
the condensed consolidated statement of cash flows for the period
then ended;
●
the condensed consolidated statement of changes in equity for the
period then ended; and
●
the explanatory notes to the interim financial
statements.
The interim financial statements included in the interim results of
Diageo plc have been prepared in accordance with UK adopted IAS 34
'Interim Financial Reporting', IAS 34 'Interim Financial Reporting'
as issued by the International Accounting Standards Board ('IASB'),
IAS 34 'Interim Financial Reporting' as adopted by the EU and the
Disclosure Guidance and Transparency Rules sourcebook of the United
Kingdom's Financial Conduct Authority.
Basis for conclusion
We conducted our review in accordance with International Standard
on Review Engagements (UK) 2410, 'Review of Interim Financial
Information Performed by the Independent Auditor of the Entity'
issued by the Financial Reporting Council for use in the United
Kingdom ("ISRE (UK) 2410"). A review of interim financial
information consists of making enquiries, primarily of persons
responsible for financial and accounting matters, and applying
analytical and other review procedures.
A review is substantially less in scope than an audit conducted in
accordance with International Standards on Auditing (UK) and,
consequently, does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit
opinion.
We have read the other information contained in the interim results
and considered whether it contains any apparent misstatements or
material inconsistencies with the information in the interim
financial statements.
Conclusions relating to going concern
Based on our review procedures, which are less extensive than those
performed in an audit as described in the Basis for conclusion
section of this report, nothing has come to our attention to
suggest that the directors have inappropriately adopted the going
concern basis of accounting or that the directors have identified
material uncertainties relating to going concern that are not
appropriately disclosed. This conclusion is based on the review
procedures performed in accordance with ISRE (UK) 2410. However,
future events or conditions may cause the group to cease to
continue as a going concern.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The interim results, including the interim financial statements, is
the responsibility of, and has been approved by the directors. The
directors are responsible for preparing the interim results in
accordance with the Disclosure Guidance and Transparency Rules
sourcebook of the United Kingdom's Financial Conduct Authority. In
preparing the interim results, including the interim financial
statements, the directors are responsible for assessing the group's
ability to continue as a going concern, disclosing, as applicable,
matters related to going concern and using the going concern basis
of accounting unless the directors either intend to liquidate the
group or to cease operations, or have no realistic alternative but
to do so.
Our responsibility is to express a conclusion on the interim
financial statements in the interim results based on our review.
Our conclusion, including our Conclusions relating to going
concern, is based on procedures that are less extensive than audit
procedures, as described in the Basis for conclusion paragraph of
this report. This report, including the conclusion, has been
prepared for and only for the company for the purpose of complying
with the Disclosure Guidance and Transparency Rules sourcebook of
the United Kingdom's Financial Conduct Authority and for no other
purpose. We do not, in giving this conclusion, accept or assume
responsibility for any other purpose or to any other person to whom
this report is shown or into whose hands it may come save where
expressly agreed by our prior consent in writing.
PricewaterhouseCoopers LLP
Chartered Accountants
London
25 January 2023
a.
The maintenance and integrity of the Diageo plc website is the
responsibility of the directors; the work carried out by the
auditors does not involve consideration of these matters and,
accordingly, the auditors accept no responsibility for any changes
that may have occurred to the interim financial statements since
they were initially presented on the website.
b.
Legislation in the United Kingdom governing the preparation and
dissemination of financial statements may differ from legislation
in other jurisdictions.
Additional information
Explanatory notes
Comparisons are to the six months ended 31 December 2021
(2021) unless otherwise stated. Unless otherwise stated, percentage
movements given throughout this document for volume, sales, net
sales, marketing spend, operating profit and operating margin are
organic movements after retranslating current period reported
numbers at prior period exchange rates and after adjusting for the
effect of exceptional operating items and acquisitions and
disposals, excluding fair value remeasurements.
This document includes names of Diageo's products which constitute
trademarks or trade names which Diageo owns or which others own and
license to Diageo for use.
Definitions and reconciliation of non-GAAP measures to GAAP
measures
Diageo's strategic planning process is based on certain non-GAAP
measures, including organic movements. These non-GAAP measures are
chosen for planning and reporting, and some of them are used for
incentive purposes. The group's management believes that these
measures provide valuable additional information for users of the
financial statements in understanding the group's performance.
These non-GAAP measures should be viewed as complementary to, and
not replacements for, the comparable GAAP measures and reported
movements therein.
It is not possible to reconcile the forecast tax rate before
exceptional items, forecast organic net sales growth and forecast
organic operating profit growth to the most comparable GAAP measure
as it is not possible to predict, without unreasonable effort, with
reasonable certainty, the future impact of changes in exchange
rates, acquisitions and disposals and potential exceptional
items.
Volume
Volume is a performance indicator that is measured on an equivalent
units basis to nine-litre cases of spirits. An equivalent unit
represents one nine-litre case of spirits, which is approximately
272 servings. A serving comprises 33ml of spirits, 165ml of wine,
or 330ml of ready to drink or beer. Therefore, to convert volume of
products other than spirits to equivalent units, the following
guide has been used: beer in hectolitres, divide by 0.9; wine in
nine-litre cases, divide by five; ready to drink and certain
pre-mixed products that are classified as ready to drink in
nine-litre cases, divide by ten.
Organic movements
Organic information is presented using sterling amounts on a
constant currency basis excluding the impact of exceptional items,
certain fair value remeasurement, hyperinflation and acquisitions
and disposals. Organic measures enable users to focus on the
performance of the business which is common to both years and which
represents those measures that local managers are most directly
able to influence.
Calculation of organic movements
The organic movement percentage is the amount in the row titled
'Organic movement' in the tables below, expressed as a percentage
of the relevant absolute amount in the row titled ' Six months
ended 31 December 2021 adjusted'. Organic operating margin is
calculated by dividing operating profit before exceptional items by
net sales after excluding the impact of exchange rate movements,
certain fair value remeasurements, hyperinflation and acquisitions
and disposals.
(a) Exchange rates
Exchange in the organic movement calculation reflects the
adjustment to recalculate the reported results as if they had been
generated at the prior period weighted average exchange
rates.
Exchange impacts in respect of the external hedging of intergroup
sales by the markets in a currency other than their functional
currency and the intergroup recharging of services are also
translated at prior period weighted average exchange rates and are
allocated to the geographical segment to which they relate.
Residual exchange impacts are reported as part of the Corporate
segment. Results from hyperinflationary economies are translated at
forward-looking rates.
(b) Acquisitions and disposals
For acquisitions in the current period, the post-acquisition
results are excluded from the organic movement calculations. For
acquisitions in the prior period, post-acquisition results are
included in full in the prior period but are included in the
organic movement calculation from the anniversary of the
acquisition date in the current period. The acquisition row also
eliminates the impact of transaction costs that have been charged
to operating profit in the current or prior period in respect of
acquisitions that, in management's judgement, are expected to be
completed.
Where a business, brand, brand distribution right or agency
agreement was disposed of or terminated in the reporting period,
the group, in the organic movement calculations, excludes the
results for that business from the current and prior period. In the
calculation of operating profit, the overheads included in
disposals are only those directly attributable to the businesses
disposed of, and do not result from subjective judgements of
management.
(c) Exceptional items
Exceptional items are those that in management's judgement need to
be disclosed separately. Such items are included within the income
statement caption to which they relate, and are excluded from the
organic movement calculations.
Management believes that that separate disclosure of exceptional
items and the classification between operating and
non-operating items further
helps investors to understand the performance of the group. Changes in estimates
and reversals in relation to items previously recognised as
exceptional are presented consistently as exceptional in the
current year.
Exceptional operating items are those that are considered to be
material and unusual or non-recurring in nature and are part of the
operating activities of the group, such as one-off global
restructuring programmes which can be multi-year, impairment of
intangible assets and fixed assets, indirect tax settlements,
property disposals and changes in post employment
plans.
Gains and losses on the sale or directly attributable to a
prospective sale of businesses, brands or distribution rights, step
up gains and losses that arise when an investment becomes an
associate or an associate becomes a subsidiary and other material,
unusual non-recurring items that are not in respect of the
production, marketing and distribution of premium drinks, are
disclosed as exceptional non-operating items below operating profit
in the income statement.
Exceptional current and deferred tax items comprise material and
unusual or non-recurring items that impact taxation. Examples
include direct tax provisions and settlements in respect of prior
years and the remeasurement of
deferred tax assets and liabilities following tax rate
changes.
(d) Fair value remeasurement
Fair value remeasurement in the organic movement calculation
reflects an adjustment to eliminate the impact of fair value
changes in biological assets, earn-out arrangements that are
accounted for as remuneration and fair value changes relating to
contingent consideration liabilities and equity options that arose
on acquisitions recognised in the income statement.
Growth on a constant basis
Growth on a constant basis is a measure used by the group to
understand the trends of the business and its recovery towards
pre-Covid-19 performance.
2018 (i.e. six months ended 31 December 2018) to 2022 (i.e.
six months ended 31 December 2022) growth on a constant basis for
volume, sales, net sales and operating profit before exceptional
items is calculated by adding up the respective periods' organic
movement in the row titled 'Organic movement' in the tables below,
expressed as a percentage of the relevant absolute amount in the
row titled 'Six months ended 31 December 2018 adjusted'. The most
comparable GAAP financial measure is 'Six months ended 31 December
2018 to six months ended 31 December 2022 reported movement %' in
the tables below which is calculated by combining the reported
movements for the respective periods, expressed as a percentage of
the Six months ended 31 December 2018 reported amount.
Adjustment in respect of hyperinflation
The group's experience is that hyperinflationary conditions result
in price increases that include both normal pricing actions
reflecting changes in demand, commodity and other input costs or
considerations to drive commercial competitiveness, as well as
hyperinflationary elements and that for the calculation of organic
movements, the distortion from hyperinflationary elements should be
excluded.
Cumulative inflation over 100% (2% per month compounded) over three
years is one of the key indicators within IAS 29 to assess whether
an economy is deemed to be hyperinflationary. As a result, the
definition of 'Organic movements' includes price growth in markets
deemed to be hyperinflationary economies, up to a maximum of 2% per
month while also being on a constant currency basis. Corresponding
adjustments have been made to all income statement related lines in
the organic movement calculations.
In the tables presenting the calculation of organic movements,
'hyperinflation' is included as a reconciling item between reported
and organic movements and that also includes the relevant IAS 29
adjustments.
Organic movement calculations for the six months ended 31 December
2022 were as follows:
|
North America
million
|
Europe
million
|
Asia
Pacific
million
|
Latin America
and Caribbean
million
|
Africa
million
|
Corporate
million
|
Total
million
|
Volume (equivalent units)
|
|
|
|
|
|
|
|
Six months ended 31 December 2018 reported
|
25.6
|
25.7
|
49.2
|
12.4
|
17.6
|
-
|
130.5
|
Disposals
|
(1.3)
|
-
|
-
|
-
|
(0.3)
|
-
|
(1.6)
|
Six months ended 31 December 2018 adjusted
|
24.3
|
25.7
|
49.2
|
12.4
|
17.3
|
-
|
128.9
|
Organic movement (2019)
|
0.7
|
(0.3)
|
(0.4)
|
(0.1)
|
0.3
|
-
|
0.2
|
Organic movement (2020)
|
2.0
|
(1.2)
|
(1.4)
|
0.5
|
(0.2)
|
-
|
(0.3)
|
Organic movement (2021)
|
0.2
|
5.4
|
1.7
|
2.0
|
2.6
|
-
|
11.9
|
Six months ended 31 December 2019, six months ended 31 December
2020 and six months ended 31 December 2021 movement on a constant
basis
|
2.9
|
3.9
|
(0.1)
|
2.4
|
2.7
|
-
|
11.8
|
|
|
|
|
|
|
|
|
Volume (equivalent units)
|
|
|
|
|
|
|
|
Six months ended 31 December 2021 reported
|
28.0
|
29.4
|
49.1
|
14.8
|
18.9
|
-
|
140.2
|
Disposals(2)
|
-
|
(0.5)
|
(11.6)
|
-
|
(0.2)
|
-
|
(12.3)
|
Six months ended 31 December 2021 adjusted
|
28.0
|
28.9
|
37.5
|
14.8
|
18.7
|
-
|
127.9
|
Organic movement
|
(1.1)
|
(0.1)
|
3.6
|
0.9
|
(1.0)
|
-
|
2.3
|
Acquisitions and disposals(2)
|
0.1
|
0.4
|
6.0
|
0.1
|
-
|
-
|
6.6
|
Six months ended 31 December 2022 reported
|
27.0
|
29.2
|
47.1
|
15.8
|
17.7
|
-
|
136.8
|
Organic movement %
|
(4)
|
-
|
10
|
6
|
(5)
|
-
|
2
|
|
|
|
|
|
|
|
|
Six months ended 31 December 2018 to six months ended 31 December
2022 reported growth %
|
5
|
14
|
(4)
|
27
|
1
|
-
|
5
|
Six months ended 31 December 2018 to six months ended 31 December
2022 growth on a constant basis %
|
7
|
15
|
7
|
27
|
10
|
-
|
11
|
|
North America
£ million
|
Europe
£ million
|
Asia
Pacific
£ million
|
Latin America
and Caribbean
£ million
|
Africa
£ million
|
Corporate
£ million
|
Total
£ million
|
Sales
|
|
|
|
|
|
|
|
Six months ended 31 December 2021 reported
|
3,257
|
3,178
|
2,999
|
1,052
|
1,244
|
23
|
11,753
|
Exchange
|
48
|
(221)
|
33
|
17
|
6
|
-
|
(117)
|
Disposals(2)
|
-
|
(20)
|
(440)
|
-
|
(9)
|
-
|
(469)
|
Six months ended 31 December 2021 adjusted
|
3,305
|
2,937
|
2,592
|
1,069
|
1,241
|
23
|
11,167
|
Organic movement
|
80
|
269
|
213
|
189
|
58
|
21
|
830
|
Acquisitions and disposals(2)
|
14
|
10
|
225
|
6
|
-
|
-
|
255
|
Exchange
|
448
|
98
|
140
|
130
|
38
|
-
|
854
|
Hyperinflation
|
-
|
113
|
-
|
-
|
-
|
-
|
113
|
Six months ended 31 December 2022 reported
|
3,847
|
3,427
|
3,170
|
1,394
|
1,337
|
44
|
13,219
|
Organic movement %
|
2
|
9
|
8
|
18
|
5
|
91
|
7
|
|
North America
£ million
|
Europe
£ million
|
Asia
Pacific
£ million
|
Latin America
and Caribbean
£ million
|
Africa
£ million
|
Corporate
£ million
|
Total
£ million
|
Net sales
|
|
|
|
|
|
|
|
Six months ended 31 December 2018 reported
|
2,356
|
1,633
|
1,398
|
672
|
821
|
28
|
6,908
|
Exchange
|
(20)
|
(20)
|
3
|
2
|
(4)
|
-
|
(39)
|
Disposals
|
(62)
|
(1)
|
(1)
|
(1)
|
(29)
|
-
|
(94)
|
Six months ended 31 December 2018 adjusted
|
2,274
|
1,612
|
1,400
|
673
|
788
|
28
|
6,775
|
Organic movement (2019)
|
129
|
42
|
62
|
14
|
40
|
(1)
|
286
|
Organic movement (2020)
|
307
|
(163)
|
(48)
|
(9)
|
(3)
|
(16)
|
68
|
Organic movement (2021)
|
338
|
389
|
181
|
258
|
166
|
12
|
1,344
|
Six months ended 31 December 2019, six months ended 31 December
2020 and six months ended 31 December 2021 movement on a constant
basis
|
774
|
268
|
195
|
263
|
203
|
(5)
|
1,698
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
|
|
|
|
|
Six months ended 31 December 2021 reported
|
2,964
|
1,752
|
1,531
|
819
|
868
|
23
|
7,957
|
Exchange(1)
|
44
|
(67)
|
14
|
12
|
4
|
-
|
7
|
Disposals(2)
|
-
|
(16)
|
(68)
|
-
|
(7)
|
-
|
(91)
|
Six months ended 31 December 2021 adjusted
|
3,008
|
1,669
|
1,477
|
831
|
865
|
23
|
7,873
|
Organic movement
|
88
|
164
|
250
|
167
|
52
|
21
|
742
|
Acquisitions and disposals(2)
|
13
|
7
|
35
|
3
|
-
|
-
|
58
|
Exchange(1)
|
408
|
54
|
75
|
99
|
26
|
-
|
662
|
Hyperinflation
|
-
|
85
|
-
|
-
|
-
|
-
|
85
|
Six months ended 31 December 2022 reported
|
3,517
|
1,979
|
1,837
|
1,100
|
943
|
44
|
9,420
|
Organic movement %
|
3
|
10
|
17
|
20
|
6
|
91
|
9
|
|
|
|
|
|
|
|
|
Six months ended 31 December 2018 to six months ended 31 December
2022 reported growth %
|
49
|
21
|
31
|
64
|
15
|
57
|
36
|
Six months ended 31 December 2018 to six months ended 31 December
2022 growth on a constant basis %
|
38
|
27
|
32
|
64
|
32
|
57
|
36
|
|
North America
£ million
|
Europe
£ million
|
Asia
Pacific
£ million
|
Latin America
and Caribbean
£ million
|
Africa
£ million
|
Corporate
£ million
|
Total
£ million
|
Marketing
|
|
|
|
|
|
|
|
Six months ended 31 December 2021 reported
|
548
|
307
|
263
|
125
|
102
|
6
|
1,351
|
Exchange
|
6
|
(2)
|
3
|
1
|
-
|
-
|
8
|
Fair value remeasurement of contingent considerations, equity
option and earn out arrangements
|
1
|
-
|
-
|
-
|
-
|
-
|
1
|
Disposals(2)
|
-
|
-
|
-
|
-
|
(1)
|
-
|
(1)
|
Six months ended 31 December 2021 adjusted
|
555
|
305
|
266
|
126
|
101
|
6
|
1,359
|
Organic movement
|
13
|
9
|
24
|
37
|
8
|
2
|
93
|
Acquisitions and disposals(2)
|
7
|
-
|
-
|
1
|
-
|
-
|
8
|
Exchange
|
74
|
5
|
12
|
13
|
3
|
1
|
108
|
Hyperinflation
|
-
|
9
|
-
|
-
|
-
|
-
|
9
|
Six months ended 31 December 2022 reported
|
649
|
328
|
302
|
177
|
112
|
9
|
1,577
|
Organic movement %
|
2
|
3
|
9
|
29
|
8
|
33
|
7
|
|
North America
£ million
|
Europe
£ million
|
Asia
Pacific
£ million
|
Latin America
and Caribbean
£ million
|
Africa
£ million
|
Corporate
£ million
|
Total
£ million
|
Operating profit before exceptional items
|
|
|
|
|
|
|
|
Six months ended 31 December 2018 reported
|
|
|
|
|
|
|
2,451
|
Exchange
|
|
|
|
|
|
|
(19)
|
Disposal
|
|
|
|
|
|
|
(44)
|
Six months ended 31 December 2018 adjusted
|
|
|
|
|
|
|
2,388
|
Organic movement (2019)
|
|
|
|
|
|
|
110
|
Organic movement (2020)
|
|
|
|
|
|
|
(85)
|
Organic movement (2021)
|
|
|
|
|
|
|
550
|
Six months ended 31 December 2019, six months ended 31 December
2020 and six months ended 31 December 2021 movement on a constant
basis
|
|
|
|
|
|
|
575
|
|
|
|
|
|
|
|
|
Operating profit before exceptional items
|
|
|
|
|
|
|
|
Six months ended 31 December 2021 reported
|
1,295
|
613
|
451
|
333
|
176
|
(125)
|
2,743
|
Exchange(1)
|
4
|
(36)
|
3
|
10
|
10
|
(3)
|
(12)
|
Fair value remeasurement of contingent considerations and equity
option
|
(4)
|
(21)
|
-
|
-
|
-
|
-
|
(25)
|
Acquisitions
and disposals(2)
|
-
|
(10)
|
-14
|
-
|
4
|
-
|
(20)
|
Six months ended 31 December 2021 adjusted
|
1,295
|
546
|
440
|
343
|
190
|
(128)
|
2,686
|
Organic movement
|
(26)
|
106
|
119
|
69
|
23
|
(30)
|
261
|
Acquisitions and disposals(2)
|
(6)
|
2
|
5
|
-
|
-
|
-
|
1
|
Fair value remeasurement of contingent considerations, equity
option and earn out arrangements
|
14
|
(1)
|
-
|
-
|
-
|
-
|
13
|
Exchange(1)
|
142
|
21
|
23
|
59
|
(33)
|
1
|
213
|
Hyperinflation
|
-
|
20
|
-
|
-
|
-
|
-
|
20
|
Six months ended 31 December 2022 reported
|
1,419
|
694
|
587
|
471
|
180
|
(157)
|
3,194
|
Organic movement %
|
(2)
|
19
|
27
|
20
|
12
|
(23)
|
10
|
|
|
|
|
|
|
|
|
Organic operating margin % (3)
|
|
|
|
|
|
|
|
Six months ended 31 December 2022
|
41.0
|
35.6
|
32.4
|
41.3
|
23.2
|
n/a
|
34.2
|
Six months ended 31 December 2021
|
43.1
|
32.7
|
29.8
|
41.3
|
22.0
|
n/a
|
34.1
|
Organic operating margin movement (bps)
|
(206)
|
286
|
258
|
1
|
126
|
n/a
|
9
|
|
|
|
|
|
|
|
|
Six months ended 31 December 2018 to six months ended 31 December
2022 reported growth %
|
|
|
|
|
|
|
30
|
Six months ended 31 December 2018 to six months ended 31 December
2022 growth on a constant basis %
|
|
|
|
|
|
|
35
|
(i)For the reconciliation of
sales to net sales, see page 21.
(ii)Percentages and margin
movements are calculated on rounded figures.
Notes: Information in respect of
the organic movement calculations
(1)The impact of movements in
exchange rates on reported figures for net sales and operating
profit was principally in respect of the translation exchange
impact of the weakening of sterling against the US dollar,
Brazilian real and the Mexican peso, partially offset by
strengthening of sterling against the Turkish
lira.
(2)Acquisitions and disposals that had an effect on volume, sales,
net sales, marketing and operating profit in the six months ended
31 December 2022, are detailed on page 51.
(3)Organic operating margin calculated by dividing Operating profit
before exceptional items by net sales.
In the six months ended 31 December 2022, the acquisitions and
disposals that affected volume, sales, net sales, marketing and
operating profit were as follows, as per footnote (2) on the
previous page:
|
Volume
|
Sales
|
Net sales
|
Marketing
|
Operating
profit
|
|
EUm
|
£ million
|
£ million
|
£ million
|
£ million
|
Six months ended 31 December 2021
|
|
|
|
|
|
Disposals
|
|
|
|
|
|
USL
Popular brands
|
(11.6)
|
(440)
|
(68)
|
-
|
(14)
|
Archers
brand
|
(0.1)
|
(9)
|
(6)
|
-
|
(4)
|
Meta
Abo Brewery
|
(0.2)
|
(9)
|
(7)
|
(1)
|
4
|
Picon
|
(0.4)
|
(11)
|
(10)
|
-
|
(6)
|
|
(12.3)
|
(469)
|
(91)
|
(1)
|
(20)
|
|
|
|
|
|
|
Six months ended 31 December 2022
|
|
|
|
|
|
Acquisitions
|
|
|
|
|
|
Mr
Black
|
-
|
3
|
3
|
1
|
(1)
|
Balcones
|
-
|
3
|
3
|
1
|
(2)
|
Mezcal
Unión
|
0.1
|
6
|
3
|
1
|
-
|
21Seeds
|
0.1
|
8
|
7
|
5
|
(3)
|
|
0.2
|
20
|
16
|
8
|
(6)
|
Disposals
|
|
|
|
|
|
USL
Popular brands
|
6.0
|
225
|
35
|
-
|
5
|
Archers
brand
|
0.4
|
10
|
7
|
-
|
2
|
|
6.4
|
235
|
42
|
-
|
7
|
|
|
|
|
|
|
Acquisitions and disposals
|
6.6
|
255
|
58
|
8
|
1
|
Earnings per share before exceptional
items
Earnings per share before exceptional items is calculated by
dividing profit attributable to equity shareholders of the parent
company before exceptional items by the weighted average number of
shares in issue.
Earnings per share before exceptional items for the six months
ended 31 December 2022 and 31 December 2021 are set out in the
table below:
|
2022
|
2021
|
|
£ million
|
£ million
|
Profit attributable to equity shareholders of the parent
company
|
2,295
|
1,965
|
Exceptional operating and non-operating items
|
17
|
31
|
Exceptional tax items and tax in respect of exceptional operating
and non-operating items
|
(70)
|
-
|
Exceptional items attributable to non-controlling
interests
|
1
|
-
|
Profit attributable to equity shareholders of the parent company
before exceptional items
|
2,243
|
1,996
|
|
|
|
Weighted average number of shares
|
million
|
million
|
Shares in issue excluding own shares
|
2,274
|
2,331
|
Dilutive potential ordinary shares
|
7
|
8
|
Diluted shares in issue excluding own shares
|
2,281
|
2,339
|
|
|
|
|
pence
|
pence
|
Basic earnings per share before exceptional items
|
98.6
|
85.6
|
Diluted earnings per share before exceptional items
|
98.3
|
85.4
|
Free cash flow
Free cash flow comprises the net cash flow from operating
activities aggregated with the net cash received/paid for working
capital loans receivable, cash paid or received for investments and
the net cash expenditure paid for property, plant and equipment and
computer software that are included in net cash flow from investing
activities.
The remaining components of net cash flow from investing activities
that do not form part of free cash flow, as defined by the group's
management, are in respect of the acquisition and sale of
businesses and non-working capital loans to and from
associates.
The group's management regards a portion of the purchase and
disposal of property, plant and equipment and computer software as
ultimately non-discretionary since ongoing investment in plant,
machinery and technology is required to support the day-to-day
operations, whereas acquisition and sale of businesses are
discretionary.
Where appropriate, separate explanations are given for the impacts
of acquisition and sale of businesses, dividends paid and the
purchase of own shares, each of which arises from decisions that
are independent from the running of the ongoing underlying
business.
Free cash flow reconciliations for the six months ended 31 December
2022 and 31 December 2021 are set out in the table
below:
|
2022
|
2021
|
|
£ million
|
£ million
|
Net cash inflow from operating activities
|
1,248
|
1,947
|
Disposal of property, plant and equipment and computer
software
|
6
|
7
|
Purchase of property, plant and equipment and computer
software
|
(435)
|
(382)
|
Movements in loans and other investments
|
(2)
|
3
|
Free cash flow
|
817
|
1,575
|
Return on average invested capital
Return on average invested capital is used by management to assess
the return obtained from the group's asset base and is calculated
to aid evaluation of the performance of the
business.
The profit used in assessing the return on average invested capital
reflects operating profit before exceptional items attributable to
equity shareholders of the parent company plus share of after tax
results of associates and joint ventures after applying the tax
rate before exceptional items for the period. Average invested
capital is calculated using the average derived from the
consolidated balance sheets at the beginning and end of the period.
Average capital employed comprises average net assets attributable
to equity shareholders of the parent company for the period,
excluding net post employment benefit assets/liabilities (net of
deferred tax) and average net borrowings. This average capital
employed is then aggregated with the average restructuring and
integration costs net of tax, and goodwill written off to reserves
at 1 July 2004, the date of transition to IFRS, to obtain
the average total invested capital.
Calculations for the return on average invested capital for the six
months ended 31 December 2022 and 31 December 2021 are set out in
the table below:
|
2022
|
2021
|
|
£ million
|
£ million
|
Operating profit
|
3,161
|
2,743
|
Exceptional operating items
|
33
|
-
|
Profit before exceptional operating items attributable to
non-controlling interests
|
(111)
|
(123)
|
Share of after tax results of associates and joint
ventures
|
172
|
190
|
Tax at
the tax rate before exceptional items of 23.4% (2021 -
23.0%)
|
(788)
|
(675)
|
|
2,467
|
2,135
|
|
|
|
Average net assets (excluding net post employment benefit
assets/liabilities)
|
8,977
|
8,331
|
Average non-controlling interests
|
(1,722)
|
(1,604)
|
Average net borrowings
|
14,653
|
12,220
|
Average integration and restructuring costs (net of
tax)
|
1,639
|
1,639
|
Goodwill at 1 July 2004
|
1,562
|
1,562
|
Average invested capital
|
25,109
|
22,148
|
|
|
|
Return on average invested capital
|
19.7%
|
19.3%
|
Adjusted net borrowings to adjusted EBITDA
Diageo manages its capital structure with the aim of achieving
capital efficiency, providing flexibility to invest through the
economic cycle and giving efficient access to debt markets at
attractive cost levels. The group regularly assesses its debt and
equity capital levels to enhance its capital structure by reviewing
the ratio of adjusted net borrowings to adjusted EBITDA (earnings
before exceptional operating items, interest, tax, depreciation,
amortisation and impairment).
Calculations for the ratio of adjusted net borrowings to adjusted
EBITDA at 31 December 2022 and 31 December 2021 are set out in the
table below:
|
2022
|
2021
|
|
£
million
|
£
million
|
Borrowings due within one year
|
2,305
|
1,184
|
Borrowings due after one year
|
15,304
|
12,693
|
Fair value of foreign currency derivatives and interest rate
hedging instruments
|
(112)
|
(126)
|
Lease liabilities
|
438
|
360
|
Less: Cash and cash equivalents
|
(2,766)
|
(1,780)
|
Net borrowings
|
15,169
|
12,331
|
Post employment benefit liabilities before tax
|
381
|
486
|
Adjusted net borrowings
|
15,550
|
12,817
|
|
|
|
Profit for the year
|
3,657
|
3,226
|
Taxation
|
1,065
|
1,004
|
Net finance charges
|
534
|
353
|
Depreciation, amortisation and impairment (excluding exceptional
intangible impairment)
|
506
|
452
|
Exceptional intangible impairment
|
336
|
-
|
EBITDA
|
6,098
|
5,035
|
Exceptional operating items (excluding impairment)
|
85
|
(2)
|
Non-operating items
|
(30)
|
22
|
Adjusted EBITDA
|
6,153
|
5,055
|
Adjusted net borrowings to adjusted EBITDA
|
2.5
|
2.5
|
(1) EBITDA and adjusted EBITDA are calculated based on the last 12
months.
Tax rate before exceptional items
Tax rate before exceptional items is calculated by dividing the
total tax charge before tax charges and credits in respect of
exceptional items, by profit before taxation adjusted to exclude
the impact of exceptional operating and non-operating items,
expressed as a percentage. The measure is used by management to
assess the rate of tax applied to the group's operations before tax
on exceptional items.
The tax rates from operations before exceptional and after
exceptional items for the six months ended 31 December 2022 and six
months ended 31 December 2021 are set out in the table
below:
|
2022
|
2021
|
|
£ million
|
£ million
|
Tax before exceptional items (a)
|
720
|
634
|
Tax in respect of exceptional items
|
(13)
|
-
|
Exceptional tax credit
|
(57)
|
-
|
Taxation on profit (b)
|
650
|
634
|
|
|
|
Profit before taxation and exceptional items (c)
|
3,074
|
2,753
|
Non-operating items
|
16
|
(31)
|
Exceptional operating items
|
(33)
|
-
|
Profit before taxation (d)
|
3,057
|
2,722
|
|
|
|
Tax rate before exceptional items (a/c)
|
23.4%
|
23.0%
|
Tax rate after exceptional items (b/d)
|
21.3%
|
23.3%
|
Other definitions
Volume share is a brand's retail volume expressed as a percentage
of the retail volume of all brands in its segment. Value share is a
brand's retail sales value expressed as a percentage of the retail
sales value of all brands in its segment. Unless otherwise stated,
share refers to value share.
Net sales are sales less excise duties. Diageo incurs excise duties
throughout the world. In the majority of countries, excise duties
are effectively a production tax which becomes payable when the
product is removed from bonded premises and is not directly related
to the value of sales. It is generally not included as a separate
item on external invoices; increases in excise duties are not
always passed on to the customer and where a customer fails to pay
for a product received, the group cannot reclaim the excise duty.
The group therefore recognises excise duty as a cost to the
group.
Price/mix is the number of percentage points difference between the
organic movement in net sales and the organic movement in volume.
The difference arises because of changes in the composition of
sales between higher and lower priced variants/markets or as price
changes are implemented.
Shipments comprise the volume of products sold to Diageo's
immediate (first tier) customers. Depletions are the estimated
volume of the onward sales made by Diageo's immediate customers.
Both shipments and depletions are measured on an equivalent units
basis.
References to emerging markets include Poland, Eastern Europe,
Turkey, Africa, Latin America and Caribbean, and Asia Pacific
(excluding Australia, Korea and Japan).
References to reserve brands include, but are not limited to,
Johnnie Walker Blue Label, Johnnie Walker Green Label, Johnnie
Walker Gold Label Reserve, Johnnie Walker Aged 18 Years, John
Walker & Sons Collection and other Johnnie Walker super and
ultra-premium brands; The Singleton, Cardhu, Talisker, Lagavulin,
Oban and other malt brands; Buchanan's Special Reserve, Buchanan's
Red Seal; Haig Club whisky; Copper Dog whisky; Roe & Co;
Bulleit Bourbon, Bulleit Rye; Orphan Barrel whiskey; Tanqueray No.
TEN and Tanqueray Malacca gin; Aviation, Chase, Jinzu and Villa
Ascenti gin; Cîroc, Ketel One vodka, Ketel One Botanical; Don
Julio, Casamigos, DeLeón and 21Seeds tequila; Mezcal
Unión mezcal; Zacapa, Bundaberg Master Distillers' Collection
and Pampero Aniversario rum; Shui Jing Fang, Seedlip, Belsazar and
Pierde Almas.
References to global giants include the following brand families:
Johnnie Walker, Smirnoff, Captain Morgan, Baileys, Tanqueray and
Guinness. Local stars include Buchanan's, Bundaberg, Crown Royal,
J&B, McDowell's, Old Parr, Yenм Raki, Black & White,
Shui Jing Fang, Windsor and Ypiуca. Global giants and local
stars exclude ready to drink, non-alcoholic variants and beer
except Guinness. References to Shui Jing Fang represent total
Chinese white spirits of which Shui Jing Fang is the predominant
brand.
References to ready to drink also include ready to serve products,
such as pre-mixed cans in some markets.
References to beer include cider, flavoured malt beverages and some
non-alcoholic products such as Malta Guinness.
The results of Hop House 13 Lager are included in the Guinness
figures.
There is no industry-agreed definition for price tiers and for data
providers such as IWSR, definitions can vary by market. Diageo
bases internal price tier definitions on a segmentation most
consistent with IWSR as the IWSR taxonomy is widely accepted and
provides the industry with a common point of
reference.
References to the disposal of the USL Popular brands includes
non-exhaustively the Haywards, Old Tavern, White Mischief, Honey
Bee, Green Label and Romanov brands.
References to the group include Diageo plc and its consolidated
subsidiaries.
Risk factors
The principal risks and uncertainties facing Diageo are set out on
pages 42 to 46 of the Annual Report for the year ended 30 June 2022
and pages 82 to 92 of Diageo's Annual Report on Form 20-F for the
year ended 30 June 2022. These principal risks and uncertainties
include: climate change & sustainability; regulation, trade
barriers and indirect tax; pandemic and business interruption;
geopolitical and macroeconomic volatility; international direct
tax; supply chain disruption; cyber and IT resilience; business
ethics and integrity; consumer disruption; and product quality and
counterfeit.
The nature and potential impact of the principal risks and
uncertainties facing Diageo did not change in the six months ended
31 December 2022, and are not expected to change in respect of the
second six months of the financial year.
Cautionary statement concerning forward-looking
statements
This document contains 'forward-looking' statements. These
statements can be identified by the fact that they do not relate
only to historical or current facts. In particular, forward-looking
statements include all statements that express forecasts,
expectations, plans, outlook, objectives and projections with
respect to future matters, including the statements set forth in
the 'Fiscal 23 Outlook' section and any other statements with
respect to trends in results of operations, margins, growth rates,
overall market trends, the impact of changes in interest or
exchange rates, the availability or cost of financing to Diageo,
anticipated cost savings or synergies, expected investments, the
completion of any strategic transactions or restructuring
programmes, anticipated tax rates, changes in the international tax
environment, expected cash payments, outcomes of litigation or
regulatory enquiries, anticipated changes in the value of assets
and liabilities related to pension schemes and general economic
conditions. By their nature, forward-looking statements involve
risk and uncertainty because they relate to events and depend on
circumstances that will occur in the future. There are a number of
factors that could cause actual results and developments to differ
materially from those expressed or implied by these forward-looking
statements, including factors that are outside Diageo's
control.
These factors include, but are not limited to:
-
economic, political, social or other developments in countries and
markets in which Diageo operates, including macroeconomic events
that may affect Diageo's customers, suppliers and/or financial
counterparties;
-
the impact of the Covid-19 pandemic, or any other global or
regional public health threats, on Diageo's business, financial
condition, cash flows and results of operation;
-
the elevated geopolitical instability as a result of Russia's
invasion of Ukraine;
- the effects of climate change, or legal,
regulatory or market measures intended to address climate
change;
- changes in consumer preferences and tastes,
including as a result of disruptive market forces, changes in
demographics and evolving social trends (including any shifts in
consumer tastes towards at-home occasions, premiumisation,
small-batch craft alcohol, or lower or no alcohol products and/or
developments in e-commerce);
- changes in the domestic and international tax
environment that could lead to uncertainty around the application
of existing and new tax laws and unexpected tax
exposures;
- changes in the cost of production, including
as a result of increases in the cost of commodities, labour and/or
energy due to inflation and/or supply chain
disruptions;
- any litigation or other similar proceedings
(including with tax, customs, competition, environmental,
anti-corruption or other regulatory
authorities);
- legal and regulatory developments, including
changes in regulations relating to environmental issues and/or
e-commerce;
- the consequences of any failure of internal
controls;
- the consequences of any failure by Diageo or
its associates to comply with anti-corruption, sanctions, trade
restrictions or similar laws and regulations, or any failure of
Diageo's related internal policies and procedures to comply with
applicable law or regulation;
- cyber-attacks or any other disruptions to core
business operations;
- contamination, counterfeiting or other
circumstances which could harm the level of customer support for
Diageo's brands and adversely impact its
sales;
- Diageo's ability to maintain its brand image
and corporate reputation or to adapt to a changing media
environment;
- increased competitive product and pricing
pressures, including as a result of introductions of new products
or categories that are competitive with Diageo's products and
consolidations by competitors and
retailers;
- increased costs for, or shortages of, talent,
as well as labour strikes or disputes;
- Diageo's ability to derive the expected
benefits from its business strategies, including Diageo's
investments in e-commerce and its luxury
portfolio;
- fluctuations in exchange rates and/or interest
rates;
- a tightening of global financial conditions,
including an extended period of constraint in the capital markets
which Diageo may access;
- movements in the value of the assets and
liabilities related to Diageo's pension plans;
- Diageo's ability to renew supply,
distribution, manufacturing or licence agreements (or related
rights) and licences on favourable terms, or at all, when they
expire; or
- any failure by Diageo to protect its
intellectual property rights.
All oral and written forward-looking statements made on or after
the date of this document and attributable to Diageo are expressly
qualified in their entirety by the above cautionary factors, by the
'Risk Factors' section immediately preceding those and by the 'Risk
Factors' included in Diageo's Annual Report on Form 20-F for the
year ended 30 June 2022 filed with the US Securities and Exchange
Commission. Any forward-looking statements made by or on behalf of
Diageo speak only as of the date they are made. Diageo does not
undertake to update forward-looking statements to reflect any
changes in Diageo's expectations with regard thereto or any changes
in events, conditions or circumstances on which any such statement
is based.
This document includes names of Diageo's products, which constitute
trademarks or trade names which Diageo owns, or which others own
and license to Diageo for use. All rights reserved. © Diageo
plc 2023.
Statement of directors' responsibilities
Each of the Directors of Diageo plc confirms that, to the best of
his or her knowledge:
-
the condensed interim financial statements have been prepared in
accordance with UK adopted IAS 34, 'Interim Financial Reporting',
IAS 34 'Interim Financial Reporting' as issued by the International
Accounting Standards Board ('IASB'), IAS 34 'Interim Financial
Reporting' as adopted by the EU and the Disclosure Guidance and
Transparency Rules sourcebook of the United Kingdom's Financial
Conduct Authority;
-
the interim management report includes a fair review of the
information required by DTR 4.2.7 and DTR 4.2.8,
namely:
●
an indication of important events that have occurred during the
first six months and their impact on the condensed set of financial
statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year;
and
●
material related-party transactions in the first six months and any
material changes in the related-party transactions described in the
last annual report.
The Directors of Diageo plc are as follows: Javier Ferrán
(Chairman), Sir Ivan Menezes (Chief Executive), Lavanya
Chandrashekar (Chief Financial Officer), Susan Kilsby (Senior
Independent Director and Chairman of the Remuneration Committee),
Alan Stewart (Non-Executive Director and Chairman of the Audit
Committee) and Non-Executive Directors: Melissa Bethell, Karen
Blackett, Valérie Chapoulaud-Floquet, Sir John Manzoni, Lady
Mendelsohn and Ireena Vittal.
Webcast and presentation slides
At 07:15 (UK
time) on Thursday 26 January
2023, Ivan Menezes, Chief
Executive and Lavanya Chandrashekar, Chief Financial Officer will
present Diageo's interim results as a webcast. This will be
available to view at www.diageo.com. The presentation slides and
script will also be available to download at this
time.
Live Q&A conference call
Ivan Menezes and Lavanya Chandrashekar will be hosting a Q&A
conference call on Thursday 26 January
2023 at 09:30 (UK time). If you would like to listen to the call or
ask a question, please use the dial in details
below.
From the UK:
|
+44 (0) 20 3936 2999
|
From the UK (free call):
|
0800 640 6441
|
From the USA:
|
+1 646 664 1960
|
From the USA (free call):
|
+1 855 9796 654
|
The conference call is for analysts and investors only. To join the
call please use the conference ID code already sent to you or
email investor.relations@diageo.com.
Transcript
Following the Q&A conference call, a transcript will be
available. You can access the transcript below:
https://www.diageo.com/en/investors/results-reports-and-presentations
Investor enquiries to:
|
Durga Doraisamy
|
+44 (0) 7902 126906
|
|
Andy Ryan
|
+44 (0) 7803 854842
|
|
|
investor.relations@diageo.com
|
|
|
|
Media enquiries to:
|
Dominic Redfearn
|
+44 (0) 7971 977759
|
|
Rebecca Perry
|
+44 (0) 7590 809101
|
|
Isabel Batchelor
|
+44 (0) 7731 988857
|
|
|
press@diageo.com
|
Diageo plc LEI:
213800ZVIELEA55JMJ32
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
|
Diageo plc
|
|
(Registrant)
|
|
|
Date:
26 January 2023
|
|
|
|
|
By:___/s/
James Edmunds
|
|
|
|
James Edmunds
|
|
Deputy Company Secretary
|
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