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
29 July 2021
Commission File Number: 001-10691
DIAGEO plc
(Translation
of registrant’s name into English)
Lakeside Drive, Park Royal, London NW10 7HQ
(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 growth in net sales, operating profit and
cash generation and is well positioned for the future
Delivered strong net sales growth, particularly in North America,
our largest market
|
|
-
|
Reported
net sales (£12.7 billion) increased 8.3%, with strong organic
growth, partially offset by an adverse foreign exchange
impact.
|
|
-
|
Organic
net sales growth of 16.0%, driven by growth across all regions and
a benefit from lapping a reduction of inventory levels by our
customers in fiscal 20.
|
|
-
|
North
America organic growth of 20.2%, reflecting resilient consumer
demand, spirits taking share of total beverage alcohol and the
replenishment of stock levels by distributors and
retailers.
|
|
Operating profit growth ahead of net sales growth
|
|
-
|
Reported
operating profit (£3.7 billion) increased 74.6%, and reported
operating margin increased by 1,112bps, primarily due to a
significant reduction in exceptional operating items.
|
|
-
|
Organic
operating profit growth of 17.7%, following decline in fiscal 20,
with growth in all regions except Europe and Turkey.
|
|
-
|
Organic
operating margin increased 46bps, driven by overhead efficiencies
and lapping one-off expenses, partially offset by gross margin
decline and upweighted marketing spend.
|
|
Responded to increased consumer demand in off-trade channel,
gaining market share
|
|
-
|
Broad-based
growth across categories, including tequila, scotch, Chinese white
spirits and Baileys.
|
|
-
|
Held or
grew off-trade market share in over 85%(i) of total net sales value
in measured markets.
|
|
-
|
On-trade
significantly restricted in many markets due to Covid-19,
particularly impacting beer in Europe.
|
|
Invested in long-term growth despite near-term uncertainty due to
Covid-19
|
|
-
|
Increased
investment in marketing by 23%, ahead of organic net sales
growth.
|
|
-
|
Continued
capex investment in capacity, digital capabilities, consumer
experiences and sustainability.
|
|
-
|
Expanded
gin and ready to drink portfolios with acquisitions, including
Aviation American Gin.
|
|
Maintained strong ESG and stakeholder focus
|
|
-
|
'Raising
the Bar,' our $100 million global on-trade recovery fund, has
already reached c.35,000 outlets in eleven countries.
|
|
-
|
In this
year's survey of our people, 89% of respondents(ii) said they were
proud to work for Diageo.
|
|
-
|
25
ambitious new goals in our 'Society 2030: Spirit of Progress',
10-year sustainability action plan, including net zero carbon
emissions across our direct operations by 2030.
|
|
Excellent cash flow generation
|
|
-
|
Increased
net cash from operating activities by £1.3 billion to
£3.7 billion, and free cash flow by £1.4 billion to
£3.0 billion, driven by growth in operating profit, working
capital management and a delayed 2019 dividend from associates,
partially offset by an adverse foreign exchange
impact.
|
|
-
|
Strong
balance sheet, with leverage ratio of 2.8x at 30 June 2021, back
within our target range.
|
|
Created long-term shareholder value
|
|
-
|
Increased
basic eps by 89.4% to 113.8 pence and pre-exceptional eps by 7.4%
to 117.5 pence.
|
|
-
|
Increased
recommended final dividend by 5% to 44.59 pence per
share.
|
|
-
|
Recommenced
return of capital programme of up to £4.5 billion by the end
of fiscal 24.
|
|
-
|
Delivered
10-year annualised total shareholder return of 13%.
|
|
See Explanatory notes for explanation and reconciliation of
non-GAAP measures.
(i)
Source: Internal estimates incorporating AC Nielsen, Association of
Canadian Distillers, Dichter & Neira, Frontline, Intage, IRI,
ISCAM, NABCA, Scentia, State Monopolies, TRAC 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 off-trade
share. India and Canada share data represents total trade. 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 87% of total
Diageo net sales value in fiscal 21.
(ii)
85% of our global employees completed the survey.
Ivan Menezes, Chief Executive, said:
I am very pleased with the strong financial results we have
delivered in fiscal 21, while continuing to invest in long-term
sustainable growth. We delivered organic net sales growth across
all regions, led by a strong performance in North America, and we
held or gained off-trade market share in over
85%(i) of
our business. These results demonstrate the strength and relevance
of our brands and the extraordinary efforts of our talented
people. I would like to thank all of my colleagues for their
dedication and resilience, and to express my deepest condolences to
all who have lost loved ones this year due to the
pandemic.
I believe that our foundation, built through outstanding
brand-building, active portfolio management, consumer-led
innovation, smart investment in data analytics tools and embedding
a culture of everyday efficiency, has been a key competitive
advantage for Diageo. We were well-positioned to successfully
manage the challenges created by Covid-19, we have responded
quickly to changing consumer trends and we have emerged
stronger.
A key priority has been supporting the hospitality sector through
the pandemic, including our $100 million global fund to enable the
safe re-opening and recovery of pubs and bars. We have also built
on our successful ESG track record with the launch of 'Society
2030: Spirit of Progress', our new 10-year action plan to shape a
more sustainable and inclusive business.
While our business has recovered strongly in fiscal 21, with net
sales growth on a constant basis ahead of fiscal 19 in three of our
five regions, we expect near-term volatility in some markets.
However, I remain optimistic about the growth prospects for our
industry, with spirits continuing to gain share of total beverage
alcohol globally and premiumisation trends remaining strong. I
believe Diageo is very well positioned to capture these exciting
opportunities to drive long-term sustainable growth and shareholder
value.
Financial performance
|
|
Volume (equivalent units)
|
|
Operating profit
|
|
Earnings per share (EPS)
|
|
EU238.4m
|
|
|
|
£3,731m
|
|
|
|
113.8p
|
|
|
|
(2020: EU 217.0 m)
|
|
|
|
(2020: £2,137m)
|
|
|
|
(2020: 60.1p)
|
|
|
|
Reported movement
|
10
|
%
|
↑
|
|
Reported movement
|
75
|
%
|
↑
|
|
Reported movement
|
89
|
%
|
↑
|
|
Organic movement
|
11
|
%
|
↑
|
|
Organic movement
|
18
|
%
|
↑
|
|
EPS before exceptional
items movement
|
7
|
%
|
↑
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
Net cash from operating activities
|
|
Total recommended dividend
per share(iii)
|
|
£12,733m
|
|
|
|
£3,654m
|
|
|
|
72.55p
|
|
|
|
(2020: £11,752m)
|
|
|
|
(2020: £2,320m)
|
|
|
|
(2020: 69.88p)
|
|
|
|
Reported movement
|
8
|
%
|
↑
|
|
2021
increase of £1,334m
|
|
|
|
Increase
|
4
|
%
|
↑
|
|
Organic movement
|
16
|
%
|
↑
|
|
2021
free cash flow(ii) £3,037m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i)
Source: Internal estimates incorporating AC Nielsen, Association of
Canadian Distillers, Dichter & Neira, Frontline, Intage, IRI,
ISCAM, NABCA, Scentia, State Monopolies, TRAC 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 off-trade share. India and Canada share data represents
total trade. Measured markets indicates 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 87% of total Diageo net sales value in fiscal
21.
(ii)
See Explanatory notes for explanation and reconciliation of
non-GAAP measures.
(iii)
Includes recommended final dividend of 44.59p.
Key financial information
For the year ended 30 June 2021
Summary financial information
|
|
2021
|
2020
|
Organic growth
%
|
Reported growth
%
|
Volume
|
EUm
|
238.4
|
217.0
|
|
11
|
|
10
|
|
Net sales
|
£ million
|
12,733
|
|
11,752
|
|
16
|
|
8
|
|
Marketing
|
£ million
|
2,163
|
1,841
|
|
23
|
|
17
|
|
Operating profit before exceptional items
|
£ million
|
3,746
|
|
3,494
|
|
18
|
|
7
|
|
Exceptional
operating items(i)
|
£ million
|
(15)
|
|
(1,357)
|
|
|
|
Operating profit
|
£ million
|
3,731
|
|
2,137
|
|
|
75
|
|
Share of associate and joint venture profit after tax
|
£ million
|
334
|
|
282
|
|
|
18
|
|
Non-operating
exceptional items(i)
|
£ million
|
14
|
|
(23)
|
|
|
|
Net finance charges
|
£ million
|
(373)
|
|
(353)
|
|
|
|
Exceptional
taxation (charge)/credit(i)
|
£ million
|
(84)
|
|
154
|
|
|
|
Tax rate including exceptional items
|
%
|
24.5
|
|
28.8
|
|
(15)
|
|
Tax rate before exceptional items
|
%
|
22.2
|
|
21.7
|
|
|
2
|
|
Profit attributable to parent company's shareholders
|
£ million
|
2,660
|
|
1,409
|
|
|
89
|
|
Basic earnings per share
|
pence
|
113.8
|
|
60.1
|
|
|
89
|
|
Basic earnings per share before exceptional items
|
pence
|
117.5
|
|
109.4
|
|
|
7
|
|
Recommended full year dividend
|
pence
|
72.55
|
|
69.88
|
|
|
4
|
|
(i)
For further details on exceptional items see Summary Income
Statement, (c) Exceptional items and Notes, 3. Exceptional
items
Reported growth by region
|
Volume
|
Net sales
|
Marketing
|
Operating
profit(i)
|
|
%
|
EUm
|
%
|
£ million
|
%
|
£ million
|
%
|
£ million
|
North America
|
10
|
|
4.8
|
|
13
|
|
586
|
|
29
|
|
209
|
|
10
|
|
203
|
|
Europe and Turkey
|
6
|
|
2.5
|
|
-
|
|
(9)
|
|
11
|
|
45
|
|
(16)
|
|
(122)
|
|
Africa
|
10
|
|
3.0
|
|
5
|
|
66
|
|
5
|
|
8
|
|
69
|
|
70
|
|
Latin America and Caribbean
|
22
|
|
4.1
|
|
15
|
|
138
|
|
4
|
|
6
|
|
22
|
|
55
|
|
Asia Pacific
|
9
|
|
7.0
|
|
10
|
|
218
|
|
15
|
|
53
|
|
21
|
|
107
|
|
Corporate
|
-
|
|
-
|
|
(47)
|
|
(18)
|
|
17
|
|
1
|
|
(41)
|
|
(61)
|
|
Diageo
|
10
|
|
21.4
|
|
8
|
|
981
|
|
17
|
|
322
|
|
7
|
|
252
|
|
Organic growth by region
|
Volume
|
Net sales
|
Marketing
|
Operating
profit(i)
|
|
%
|
EUm
|
%
|
£ million
|
%
|
£ million
|
%
|
£ million
|
North America
|
11
|
|
5.1
|
|
20
|
|
929
|
|
34
|
|
248
|
|
17
|
|
352
|
|
Europe and Turkey
|
7
|
|
2.9
|
|
4
|
|
108
|
|
13
|
|
56
|
|
(5)
|
|
(38)
|
|
Africa
|
18
|
|
4.8
|
|
20
|
|
258
|
|
14
|
|
22
|
|
101
|
|
113
|
|
Latin America and Caribbean
|
22
|
|
4.1
|
|
30
|
|
275
|
|
18
|
|
28
|
|
63
|
|
153
|
|
Asia Pacific
|
9
|
|
7.0
|
|
14
|
|
308
|
|
16
|
|
60
|
|
22
|
|
113
|
|
Corporate
|
-
|
|
-
|
|
(47)
|
|
(18)
|
|
100
|
|
3
|
|
(43)
|
|
(66)
|
|
Diageo
|
11
|
|
23.9
|
|
16
|
|
1,860
|
|
23
|
|
417
|
|
18
|
|
627
|
|
Fiscal 21 growth compared to fiscal 19
on a constant basis(ii)
|
2019 to 2021
Reported growth %(ii)
|
2019 to 2021
Growth on a constant basis %(ii)
|
Net sales
|
|
|
North America
|
17
|
|
24
|
|
Europe and Turkey
|
(13)
|
|
(9)
|
|
Africa
|
(12)
|
|
4
|
|
Latin America and Caribbean
|
(7)
|
|
9
|
|
Asia Pacific
|
(7)
|
|
(4)
|
|
Corporate
|
(62)
|
|
(62)
|
|
Diageo
|
(1)
|
|
6
|
|
(i)
Before exceptional operating items.
(ii)
For further details on fiscal 21 growth compared to fiscal 19 on a
constant basis see Explanatory notes, 2019 to 2021 growth on
constant basis
See
Explanatory notes for explanation and reconciliation of non-GAAP
measures.
Net sales (£ million)
Reported net sales grew 8.3%
Organic net sales grew 16.0%
(i
Reported net sales grew by 8.3%, driven by strong organic growth,
partially offset by unfavourable foreign exchange.
Organic net sales growth of 16.0%, following a decline in fiscal
20, reflects organic volume growth of 11.2% and positive price mix
of 4.8%. All regions grew organic net sales, driven by strong
consumer demand in the off-trade channel and a partial recovery of
the on-trade channel in key markets. Growth was particularly strong
in North America. Positive price mix was primarily driven by strong
premiumisation trends, particularly in North America and Greater
China, and price increases in Latin America and Caribbean. Net
sales benefitted from lapping a reduction in inventory levels by
our customers in fiscal 20 and the replenishment of stock levels by
distributors and retailers in North America in fiscal 21, partially
offset by continued destocking in Travel Retail.
Net sales
|
£ million
|
2020
|
11,752
|
|
Exchange(i)
|
(800)
|
|
Acquisitions and disposals
|
(65)
|
|
Reclassification(ii)
|
(14)
|
|
Volume
|
1,296
|
|
Price/mix
|
564
|
|
2021
|
12,733
|
|
(i)
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.
(ii) For the year ended 30 June 2021,
£14 million has been reclassified from cost of goods sold to
excise duties.
Operating profit (£ million)
Reported operating profit grew 74.6%
Organic operating profit grew 17.7%
Reported operating profit increased 74.6%, primarily due to a
significant reduction in exceptional operating items compared to
fiscal 20, and growth in organic operating profit. This was
partially offset by the negative impact from adverse exchange rate
movements.(i)
Organic operating profit grew 17.7%, ahead of organic net sales,
driven by growth in all regions except Europe and
Turkey.
Operating profit
|
£ million
|
2020
|
2,137
|
|
Exceptional
operating items(ii)
|
1,342
|
|
Exchange
|
(306)
|
|
Acquisitions and disposals
|
(31)
|
|
FVA(iii)
|
(38)
|
|
Organic movement
|
627
|
|
2021
|
3,731
|
|
(i)
For further details on exchange rate movements see Summary Income
Statement, (a) Exchange.
(ii)
For further details on exceptional operating items see Summary
Income Statement, (c) Exceptional items and Notes, 3. Exceptional
items
(iii)
For further details on fair value remeasurements see Summary Income
Statement (d) Fair value remeasurement.
Operating margin (%)
Reported operating margin increased 1,112bps
Organic operating margin increased 46bps
Reported operating margin increased 1,112bps, mainly driven by a
significant reduction in exceptional operating items compared to
fiscal 20 and to a lesser extent by an increase in organic
operating margin. This was partially offset by unfavourable
exchange and fair value remeasurement.
Organic operating margin increased 46bps, driven by overhead
efficiencies and lapping one-off expenses in fiscal 20 related to
the operating environment disruption, partially offset by gross
margin decline and upweighted marketing spend. In fiscal 21, we
have upweighted marketing investment in the markets and categories
with positive growth momentum, quickly responding to channel shifts
and the increase in at-home occasions.
Gross margin declined 40bps driven by adverse mix, especially in
our Guinness business, which was impacted by channel and market
mix. Supply productivity and improved fixed cost absorption from
volume growth largely offset inflation and one-off costs in the
year.
Operating margin
|
ppt
|
2020
|
18.2
|
|
Exceptional
operating items(i)
|
11.43
|
|
Exchange
|
(0.46)
|
|
Acquisitions and disposals
|
(0.07)
|
|
Other(ii)
|
(0.24)
|
|
Gross margin
|
(0.40)
|
|
Marketing
|
(0.91)
|
|
Other operating items
|
1.77
|
|
2021
|
29.3
|
|
(i)
For further details on exceptional operating items see Summary
Income Statement (c) Exceptional items and Notes, 3. Exceptional
items
(ii) Fair
value remeasurements and reclassification. For
the year ended 30 June 2021, £14 million has been reclassified
from cost of goods sold to excise duties. For
further details on fair value remeasurements see Summary Income
Statement (d) Fair
value
remeasurement.
Basic earnings per share (pence)
Basic eps increased 89.4% from 60.1 pence to 113.8
pence
Basic eps before exceptional items increased 7.4% from 109.4 pence
to 117.5 pence
Basic eps increased 53.7 pence due to significantly lower
exceptional items after tax and an increase in organic operating
profit. This increase was partially offset by the impact from
unfavourable exchange and higher tax charges.
Basic eps before exceptional items increased 8.1 pence, primarily
driven by an increase in organic operating profit, partially offset
by unfavourable exchange and to a lesser extent increased
tax.
(
Basic earnings per share
|
pence
|
2020
|
60.1
|
|
Exceptional
items after tax(i)
|
45.6
|
|
Exchange on operating profit
|
(13.1)
|
|
Acquisitions
and disposals(ii)
|
(1.4)
|
|
Organic operating profit
|
26.7
|
|
Associates and joint ventures
|
2.2
|
|
Finance
charges(iii)
|
0.1
|
|
Tax(iv)
|
(4.0)
|
|
Share
buyback(ii)
|
0.1
|
|
Non-controlling interests
|
(1.0)
|
|
FVA(v)
|
(1.5)
|
|
2021
|
113.8
|
|
(i)
For further details on exceptional items see Summary Income
Statement (c) Exceptional items and Notes, 3. Exceptional
items.
(ii)
Includes finance charges net of tax.
(iii)
Excludes finance charges related to acquisitions, disposals and
share buyback.
(iv)
Excludes tax related to acquisitions, disposals and share
buyback.
(v)
For further details on fair value remeasurements see Summary Income
Statement (d) Fair value remeasurement.
Free cash flow (£ million)
Generated £3,654 million net cash from operating
activities(i) and
£3,037 million free cash flow.
Net cash from operating activities was £3,654 million, an
increase of £1,334 million compared to fiscal 20. Free cash
flow increased by £1,403 million to £3,037
million.
This was driven by an increase in operating profit, working capital
management and receipt of a delayed 2019 dividend from associates,
partially offset by an unfavourable movement in foreign exchange.
Working capital benefitted from a large increase in creditors
relative to the end of June 2020, when the creditor balance was
particularly low as a result of reduced volumes and cost control
measures. Creditors increased in fiscal 21 due to improved business
performance and increased investment in marketing. Debtors and
inventory levels also increased but to a lesser
extent.
Free cash flow
|
£ million
|
2020
|
1,634
|
|
Exchange(ii)
|
(306)
|
|
Operating
profit(iii)
|
655
|
|
Working
capital(iv)
|
659
|
|
Capex
|
73
|
|
Tax
|
49
|
|
Interest
|
(43)
|
|
Other(v)
|
316
|
|
2021
|
3,037
|
|
(i)
Net cash from operating activities excludes net capex and movements
in loans and other investments (2021 - £(617) million; 2020 -
£(686) million).
(ii)
Exchange on operating profit before exceptional items.
(iii) Operating profit excludes exchange,
depreciation and amortisation, post employment charges and other
non-cash items.
(iv) Working capital movement includes maturing
inventory.
(v)
Other items include post employment payments, dividends received
from associates and joint ventures, and movements in loans and
other investments.
Return on average invested capital
(%)(i)
ROIC increased 112bps
ROIC increased 112bps against fiscal 20 driven mainly by organic
operating profit growth, partially offset by increased tax and
unfavourable exchange.
Return on average invested capital
|
ppt
|
2020
|
12.4
|
|
Exchange
|
(0.83)
|
|
Acquisitions and disposals
|
(0.33)
|
|
Organic operating profit
|
2.79
|
|
Associates and joint ventures
|
0.19
|
|
Tax
|
(0.87)
|
|
Other
|
0.17
|
|
2021
|
13.5
|
|
(i)
ROIC calculation excludes exceptional operating items from
operating profit.
Fiscal 22 outlook
Net sales
We expect organic net sales momentum to continue into fiscal 22. We
believe we are well positioned to continue to benefit from
resilience in the off-trade and recovery in the on-trade. However,
we expect near-term volatility to remain, including the potential
impact of any future waves of Covid-19, and for disruption in
Travel Retail to continue.
In North America, we expect momentum to continue, with market
growth returning towards historical levels of mid-single digits. We
expect off-trade consumption growth to slow but we expect to
benefit from lapping a weak on-trade comparator. We will continue
to invest ahead in marketing and innovation to underpin organic net
sales growth in our well-positioned portfolio of premium
brands
In Europe and Turkey, following a partial on-trade recovery in
fiscal 21, we expect stronger growth to the extent that the
on-trade restrictions continue to ease, particularly benefitting
our Guinness business.
In Africa, Latin America and Caribbean and Asia Pacific, we will
continue to invest smartly in marketing as our business continues
to recover, recognising that volatility in these markets is likely
to persist.
Operating margin
In fiscal 22, we expect organic operating margin to benefit from a
further recovery in sales volumes, positive channel mix and
premiumisation trends, while we continue to invest in marketing and
commercial capabilities particularly in North America and China. We
believe our focus on everyday efficiency and revenue growth
management will help to mitigate against rising inflationary
pressures.
Exchange
We are not able to provide specific guidance in relation to fiscal
22, however, if we applied exchange rates of £1=$1.39 and
£1=€1.16, where sterling has further strengthened
compared to the actual exchange rates experienced in fiscal 21, net
sales and operating profit would have been further negatively
impacted in fiscal 21 by approximately £325 million and
£110 million respectively. We believe this is indicative that,
at these rates, there will be an additional negative impact on net
sales and operating profit in fiscal 22.
Taxation
The tax rate before exceptional items was 22.2% in fiscal 21 and
we
expect it to be in the range of 22.0% to 24.0% in fiscal
22. For further details on
taxation see Summary income statement, (e) Taxation and Notes, 5.
Taxation..
Effective interest rate
The effective interest rate was 2.7% in fiscal 21 and we expect it
to be in the range of 2.7% to 3.0% in fiscal 22.
Capital expenditure
Capital expenditure was £626 million in fiscal 21 and we
expect it to be in the range of £800 million to
£850 million in fiscal 22.
Notes to the business and financial review
Unless otherwise stated:
- movements
in results are for the fiscal year ended 30 June 2021 compared to
the fiscal year ended 30 June 2020
- commentary
below refers to organic movements
- volume
is in millions of equivalent units (EUm)
- net
sales are sales after deducting excise duties
- percentage
movements are organic movements
- share
refers to value share
See Explanatory notes for explanation of the calculation and use
of non-GAAP measures.
Business review
North America
●
|
Net sales growth of 20%, following slower growth of 2% in fiscal
20, driven primarily by US Spirits.
|
●
|
Strong growth primarily reflects resilient consumer demand, spirits
category continuing to take share of total beverage alcohol and the
replenishment of stock levels by distributors and
retailers.
|
●
|
Spirits growth of 21% reflects particularly strong performance in
tequila and broad-based growth across all other spirits categories
supported by consumer led marketing and
innovation.
|
●
|
Beer growth of 10% primarily driven by flavoured malt
beverages.
|
●
|
Organic operating margin decreased 124bps, primarily reflecting
increased investment in marketing, adverse category mix and
inflationary impact of agave.
|
Key financials £ million:
|
|
2020
|
Exchange
|
Acquisitions
and
disposals
|
Organic movement
|
Other(i)
|
2021
|
Reported movement%
|
Net sales
|
4,623
|
|
(353)
|
|
10
|
|
929
|
|
-
|
|
5,209
|
|
13
|
Marketing
|
727
|
|
(52)
|
|
12
|
|
248
|
|
1
|
|
936
|
|
29
|
Operating profit before exceptional items
|
2,034
|
|
(131)
|
|
(19)
|
|
352
|
|
1
|
|
2,237
|
|
10
|
Exceptional
operating items(ii)
|
54
|
|
|
|
|
|
-
|
|
|
Operating profit
|
2,088
|
|
|
|
|
|
2,237
|
|
7
|
Markets:
|
|
|
|
|
|
Global giants, local stars and reserve(v):
|
|
Organic
volume
movement
|
Reported
volume
movement
|
Organic
net sales
movement
|
Reported
net sales
movement
|
|
|
Organic
volume
movement(vi)
|
Organic
net sales
movement
|
Reported
net sales
movement
|
|
%
|
%
|
%
|
%
|
|
|
%
|
%
|
%
|
North
America(iii)
|
11
|
|
10
|
|
20
|
|
13
|
|
|
Crown Royal
|
10
|
|
12
|
|
5
|
|
|
|
|
|
|
|
Smirnoff
|
4
|
|
4
|
|
(2)
|
|
US Spirits
|
13
|
|
14
|
|
24
|
|
16
|
|
|
Johnnie Walker
|
8
|
|
15
|
|
8
|
|
DBC USA
|
10
|
|
10
|
|
12
|
|
5
|
|
|
Captain Morgan
|
6
|
|
5
|
|
(1)
|
|
Canada
|
3
|
|
3
|
|
4
|
|
1
|
|
|
Don Julio
|
72
|
|
68
|
|
57
|
|
|
|
|
|
|
|
Ketel
One(vii)
|
9
|
|
1
|
|
(6)
|
|
Spirits
|
11
|
|
10
|
|
21
|
|
13
|
|
|
Guinness
|
-
|
|
2
|
|
(4)
|
|
Beer(iv)
|
8
|
|
8
|
|
10
|
|
3
|
|
|
Baileys
|
16
|
|
28
|
|
21
|
|
Ready
to drink(iv)
|
55
|
|
48
|
|
101
|
|
89
|
|
|
Bulleit
|
8
|
|
9
|
|
2
|
|
|
|
|
|
|
|
Cîroc vodka
|
25
|
|
26
|
|
18
|
|
|
|
|
|
|
|
Casamigos
|
115
|
|
125
|
|
110
|
|
|
|
|
|
|
|
Tanqueray
|
5
|
|
5
|
|
(1)
|
|
(i)
For further details on fair value remeasurements see Summary Income
Statement (d) Fair value remeasurement.
(ii)
For further details on exceptional items see Summary Income
Statement (c) Exceptional items and Notes, 3. Exceptional
items.
(iii)
Reported volume and net sales growth include impacts from the
disposal of a portfolio of 19 brands to Sazerac in a prior period
and the acquisition of Aviation Gin LLC ('Aviation American Gin'),
Davos Brands LLC ('Davos Brands'), Far West
Spirits
LLC ('Lone River') and Loyal 9 Cocktails in fiscal
21.
(iv)
Flavoured malt beverages have been reclassified from ready to drink
to beer from 1 July 2020. This reflects the nature of these
products and how management reviews performance. Movements reported
in the table above are on a like for like basis.
(v)
Spirits brands excluding ready to drink and non-alcoholic
variants.
(vi)
Organic equals reported volume movement.
(vii)
Ketel One includes Ketel One vodka and Ketel One
Botanical.
|
|
|
North America contributed
|
|
North America organic net sales grew
|
41% of
Diageo reported net sales in fiscal 21
|
|
20% in fiscal 21
|
Market highlights
US Spirits
Strong growth in tequila and broad based growth across all other
categories
Net sales increased 24%, reflecting resilient consumer demand,
spirits category continuing to take share of total beverage alcohol
and lapping a softer fiscal 20. Shipments were ahead of depletions
by approximately 5 percentage points, due to the replenishment of
stock levels by distributors, following a reduction by distributors
of inventories in fiscal 20.
The tequila category benefitted from strong growth with its broad
occasion appeal. Net sales increased 87% with Don Julio growing 69%
and Casamigos growing 126% with both gaining spirits market and
tequila category share. The acceleration of growth in our tequila
portfolio reflects some benefit of price increases on Casamigos.
This strong performance was delivered despite constraints on the
supply of certain aged variants of our brands.
Crown Royal net sales increased 13% largely driven by continued
momentum in Crown Royal Peach, Crown Royal Regal Apple and Crown
Royal Vanilla. Crown Royal gained category share but growth was
impacted by constraints in the supply of aged liquid.
Scotch grew 18%. Johnnie Walker net sales grew 19% benefitting from
premiumisation trends with strong growth in Johnnie Walker super
deluxe variants as well as Johnnie Walker Black Label. Buchanan's
net sales increased 40% driven by commercial interventions in key
states and a more effective media plan to recruit target consumers.
Scotch malts declined 13%, lapping successful Game of Thrones
innovations.
Vodka net sales grew 8%. Cîroc net sales increased 27% driven
by strong growth in the core variant as well as key flavour
variants resulting from refreshed activations to re-engage
consumers. Smirnoff sales increased 5% as growth in new flavour
variants including Smirnoff Pink Lemonade more than offset the
decline in Smirnoff No.21 Red. Ketel One net sales increased 2%
largely driven by Ketel One Botanical. Captain Morgan net sales
grew 7%, largely driven by growth in Captain Morgan Spiced and the
launch of Captain Morgan Sliced Apple.
Bulleit net sales increased 10% with upweighted marketing
investment driving strong performance in the off-trade
channel.
Baileys net sales grew 31% driven by strong volume growth, price
increases on Baileys Original and the successful launches of
Baileys Deliciously Light, Baileys Apple Pie limited time offer and
Baileys Colada limited time offer.
Spirit based ready to drink innovations delivered a strong
contribution driven primarily by the launch of Crown Royal
Cocktails and Ketel One Botanical Vodka Spritz.
Diageo Beer Company USA
Continued growth of flavoured malt
beverages
Net sales grew 12%. Flavoured malt beverages net sales increased
17%. Beer net sales, excluding flavoured malt beverages, increased
5% as off-trade beer sales growth more than offset lower keg sales
from the on-trade slow down due to Covid-19.
Canada
Growing despite strong prior year performance
Net sales grew 4%, lapping a strong fiscal 20, with growth mainly
in Baileys and ready to drink. This more than offset the decline in
beer due to its higher on-trade exposure.
Marketing
Focussed investment in growth drivers
Marketing grew 34%, ahead of net sales, driven by investment across
our brands behind opportunities in the off-trade and e-commerce
channels, informed by our marketing analytics tools.
Europe and Turkey
●
|
Net sales increased 4%, following a significant decline in fiscal
20, primarily reflecting strong consumer demand in the off-trade
channel and market share gains. The on-trade remained
impacted.
|
●
|
Growth was primarily driven by Northern Europe, Turkey and Great
Britain.
|
●
|
Southern Europe experienced slower growth, and Ireland declined
significantly, due to the higher exposure to the on-trade in those
markets.
|
●
|
Spirits net sales grew 11%, with broad-based growth across scotch,
Baileys, rum, gin and raki.
|
●
|
Beer net sales declined 21%, driven by Guinness in Ireland and
Great Britain, as a result of higher exposure to the
on-trade.
|
●
|
Travel Retail Europe declined 56%, reflecting the continued
restrictions on international travel.
|
●
|
Operating margin declined 265bps due to the adverse mix impact from
on-trade closures and growth in marketing investment ahead of net
sales.
|
Key financials £ million:
|
|
2020
|
Exchange
|
Acquisitions
and
disposals
|
Organic movement
|
Other(i)
|
2021
|
Reported movement
%
|
Net sales
|
2,567
|
|
(85)
|
|
(32)
|
|
108
|
|
-
|
|
2,558
|
|
-
|
|
Marketing
|
428
|
|
(9)
|
|
(2)
|
|
56
|
|
-
|
|
473
|
|
11
|
|
Operating profit before exceptional items
|
757
|
|
(49)
|
|
(12)
|
|
(38)
|
|
(23)
|
|
635
|
|
(16)
|
|
Exceptional
operating items(ii)
|
(62)
|
|
|
|
|
|
(15)
|
|
|
Operating profit
|
695
|
|
|
|
|
|
620
|
|
(11)
|
Markets:
|
|
|
|
|
|
Global giants and local stars(v):
|
|
Organic
volume
movement
|
Reported
volume
movement
|
Organic
net sales
movement
|
Reported
net sales
movement
|
|
|
Organicvolumemovement(vi)
|
Organic
net sales
movement
|
Reported
net sales
movement
|
|
%
|
%
|
%
|
%
|
|
|
%
|
%
|
%
|
Europe
and Turkey(iii)
|
7
|
|
6
|
|
4
|
|
-
|
|
|
Guinness
|
(11)
|
|
(19)
|
|
(19)
|
|
|
|
|
|
|
|
Johnnie Walker
|
12
|
|
10
|
|
4
|
|
Great Britain
|
13
|
|
12
|
|
7
|
|
7
|
|
|
Baileys
|
17
|
|
19
|
|
19
|
|
Northern Europe
|
17
|
|
17
|
|
22
|
|
23
|
|
|
Smirnoff
|
(4)
|
|
(2)
|
|
(3)
|
|
Southern Europe
|
1
|
|
2
|
|
1
|
|
3
|
|
|
Captain Morgan
|
18
|
|
17
|
|
16
|
|
Eastern Europe
|
13
|
|
12
|
|
6
|
|
(4)
|
|
|
Yenì Raki
|
2
|
|
(3)
|
|
(24)
|
|
Ireland
|
(8)
|
|
(17)
|
|
(23)
|
|
(30)
|
|
|
Tanqueray
|
13
|
|
16
|
|
17
|
|
Turkey
|
17
|
|
17
|
|
28
|
|
(3)
|
|
|
JeB
|
-
|
|
(1)
|
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
Spirits
|
10
|
|
9
|
|
11
|
|
7
|
|
|
|
|
|
|
Beer(iv)
|
(12)
|
|
(18)
|
|
(21)
|
|
(25)
|
|
|
|
|
|
|
Ready
to drink(iv)
|
13
|
|
13
|
|
14
|
|
13
|
|
|
|
|
|
|
(i)
For further details on fair value remeasurements see Summary Income
Statement (d) Fair value remeasurement.
(ii)
For further details on exceptional operating items see Summary
Income Statement (c) Exceptional items and Notes, 3. Exceptional
items.
(iii)
From 1 July 2020, Europe and Turkey are managed as six individual
markets: Great Britain, Ireland, Northern Europe, Southern Europe,
Eastern Europe and Turkey, each with end-to-end accountability.
This reflects how management reviews performance.
(iv)
Flavoured malt beverages have been reclassified from ready to drink
to beer from 1 July 2020. This reflects the nature of these
products and how management reviews performance. Movements reported
in the table above are on a like for like basis.
(v)
Spirits brands excluding ready to drink and non-alcoholic
variants.
(vi)
Organic equals reported volume movement.
|
|
|
Europe and Turkey contributed
|
|
Europe and Turkey organic net sales grew
|
20% of
Diageo reported net sales in fiscal 21
|
|
4% in
fiscal 21
|
Market highlights
Great Britain
Strong off-trade growth
Net sales increased 7% primarily driven by strong consumer demand
in the off-trade. The e-commerce channel experienced strong growth
as consumption shifted to the at-home occasion. Spirits growth of
16% was driven by scotch, Baileys, vodka and gin, supported by
innovation, including Gordon's Sicilian Lemon and Captain Morgan
Tiki. Beer declined 16% due to the significant impact of lost sales
in the on-trade being only partially offset by strong growth in the
off-trade channel.
Northern Europe
Strong off-trade growth
Net sales increased 22%, reflecting strong off-trade growth
primarily driven by scotch and Baileys. Baileys grew 30%,
benefiting from innovation, including Baileys Salted Caramel.
Scotch sales grew 24% driven by Johnnie Walker and scotch
malts.
Southern Europe
Slower growth due to higher on-trade exposure
Net sales increased 1%. The slower pace of recovery reflects the
continued impact of on-trade restrictions and reduced tourism.
Growth was mainly driven by rum, partially offset by a decline in
vodka.
Eastern Europe(i)
Growth mainly driven by Russia
Net sales increased 6%, mainly driven by strong growth in Russia,
partially offset by decreased sales in Lebanon as a result of
on-trade restrictions and political instability.
Ireland
Severe on-trade restrictions drove net sales decline
Net sales declined 23%, primarily due to a decline in Guinness net
sales of 32% as a result of continued on-trade restrictions.
Spirits grew 14% driven by strong off-trade growth, particularly in
Baileys and Gordon's.
Turkey
Strong scotch and raki performance
Net sales increased 28%, driven partially by inflation and
excise-led price increases. Scotch sales grew 94% driven by strong
off-trade momentum, particularly in Johnnie Walker. Raki grew 10%,
driven by our more premium variant Tekirdağ Raki, partially
offset by decreased sales of Yenì Raki,
reflecting increased category premiumisation.
Travel Retail Europe
Significant impact from international travel
restrictions
Net sales declined 56%.
Marketing
Increased investment behind growth drivers
Investment increased 13%, ahead of net sales, driven by upweighted
media spend and strong activation in the off-trade and e-commerce
channels.
(i)
The Diageo Eastern Europe market includes the Middle East and North
Africa (MENA).
Africa
●
|
Net sales grew 20%, following a decline in fiscal 20, driven by
Nigeria, East Africa and Africa Regional Markets.
|
●
|
Strong performance reflects resilience in consumer demand in the
off-trade and partial recovery of the on-trade, despite ongoing
Covid-19 restrictions.
|
●
|
Slower growth in South Africa, due to trade restrictions and
periodic bans on alcohol sales.
|
●
|
Beer net sales grew 19% primarily driven by Guinness and Malta
Guinness.
|
●
|
Spirits net sales grew 21% mainly driven by growth in mainstream
spirits.
|
●
|
Operating margin improved 586bps, lapping a significant decline in
fiscal 20. Margin improvement was driven by net sales recovery,
positive price/mix and productivity initiatives, partially offset
by market mix.
|
Key financials £ million:
|
|
2020
|
Exchange
|
Acquisitions
and
disposals
|
Organic movement
|
2021
|
Reported movement
%
|
Net sales
|
1,346
|
|
(150)
|
|
(42)
|
|
258
|
|
1,412
|
|
5
|
|
Marketing
|
160
|
|
(13)
|
|
(1)
|
|
22
|
|
168
|
|
5
|
|
Operating profit before exceptional items
|
101
|
|
(43)
|
|
-
|
|
113
|
|
171
|
|
69
|
|
Exceptional
operating items(i)
|
(145)
|
|
|
|
|
-
|
|
|
Operating profit
|
(44)
|
|
|
|
|
171
|
|
489
|
Markets:
|
|
|
|
|
|
Global giants and local stars(iv):
|
|
Organic
volume
movement
|
Reported
volume
movement
|
Organic
net sales
movement
|
Reported
net sales
movement
|
|
|
Organicvolumemovement(v)
|
Organic
net sales
movement
|
Reported
net sales
movement
|
|
%
|
%
|
%
|
%
|
|
|
%
|
%
|
%
|
Africa(ii)
|
18
|
|
10
|
|
20
|
|
5
|
|
|
Guinness
|
30
|
|
32
|
|
22
|
|
|
|
|
|
|
|
Johnnie Walker
|
(5)
|
|
4
|
|
(2)
|
|
East Africa
|
13
|
|
13
|
|
13
|
|
2
|
|
|
Smirnoff
|
28
|
|
20
|
|
9
|
|
Africa
Regional Markets(ii)
|
12
|
|
(12)
|
|
15
|
|
(2)
|
|
|
|
|
|
|
Nigeria
|
39
|
|
39
|
|
57
|
|
35
|
|
|
Other beer:
|
South
Africa(ii)
|
13
|
|
8
|
|
11
|
|
(7)
|
|
|
|
|
|
|
|
|
|
|
|
|
Malta Guinness
|
38
|
|
35
|
|
19
|
|
Spirits
|
20
|
|
20
|
|
21
|
|
10
|
|
|
Senator
|
2
|
|
4
|
|
(7)
|
|
Beer(iii)
|
15
|
|
15
|
|
19
|
|
7
|
|
|
Tusker
|
8
|
|
4
|
|
(6)
|
|
Ready
to drink(ii)(iii)
|
30
|
|
7
|
|
31
|
|
(2)
|
|
|
Serengeti
|
6
|
|
7
|
|
(1)
|
|
(i)
For further details on exceptional operating items see Summary
Income Statement (c) Exceptional items and Notes, 3. Exceptional
items.
(ii)
Africa, Africa Regional Markets, South Africa and ready to drink
reported volume movement impacted by disposals. For further details
see Organic growth excluding Travel Retail and
Guinness.
(iii)
Flavoured malt beverages have been reclassified from ready to drink
to beer from 1 July 2020. This reflects the nature of these
products and how management reviews performance. Movements reported
in the table above are on a like for like basis.
(iv)
Spirits brands excluding ready to drink and non-alcoholic
variants.
(v) Organic equals reported volume
movement.
|
|
|
Africa contributed
|
|
Africa organic net sales grew
|
11% of
Diageo reported net sales in fiscal 21
|
|
20% in
fiscal 21
|
Market highlights
East Africa
Growth across all markets
Net sales grew 13%, lapping a 10% decline in fiscal 20. Kenya grew
11%, with strong spirits growth, particularly in mainstream gin,
and slower beer growth due to on-trade restrictions. Uganda grew
24% driven primarily by strong beer growth, benefiting from
production capacity expansion. Tanzania net sales grew 10%,
building on growth in fiscal 20.
Africa Regional Markets
Growth driven by strong Guinness performance
Net sales grew 15%, following a decline in fiscal 20 with good
growth in Ghana and Cameroon, partially offset by continued decline
in Ethiopia. Guinness grew 28%, benefiting from focussed strategic
marketing investment and improved supply capacity.
Nigeria
Strong broad based recovery
Net sales grew 57%, partially benefiting from lapping a soft
comparative. Strong growth in beer, mainstream spirits and
international premium spirits reflects momentum in the off-trade
and improved route to consumer across the business. Growth in beer
was primarily driven by Guinness and Malta Guinness which also
benefitted from partial recovery of the on-trade and
innovation.
South
Africa
Market impacted by Covid-19 related restrictions
Net sales grew 11%, following a disrupted fiscal 20, despite on-
and off-trade closures and periodic bans on sales and distribution
of alcohol. Growth was primarily driven by scotch, followed by
vodka and gin.
Marketing
Focussed investment in off-trade and new channels
Marketing spend grew 14%, behind net sales growth. Investment in
the on-trade was selectively scaled back and spending was focussed
on the off-trade, e-commerce and new route to consumer
programmes.
Latin America and Caribbean
●
|
Net sales increased 30%, lapping a significant decline in fiscal
20, driven by growth in all markets.
|
●
|
Growth reflects resilient consumer demand in the off-trade channel
and price increases in key markets.
|
●
|
Spirits grew 30% with strong growth across key categories,
particularly scotch.
|
●
|
Travel Retail Latin America and Caribbean declined 63% due to
continued international travel restrictions.
|
●
|
Operating margin improved by 674bps driven by net sales recovery,
positive price interventions and productivity
initiatives.
|
Key financials £ million:
|
|
2020
|
Exchange
|
Acquisitions
and
disposals
|
Organic movement
|
Other(i)
|
2021
|
Reported movement
%
|
Net sales
|
908
|
|
(137)
|
|
-
|
|
275
|
|
-
|
|
1,046
|
|
15
|
Marketing
|
155
|
|
(22)
|
|
-
|
|
28
|
|
-
|
|
161
|
|
4
|
Operating profit before exceptional items
|
248
|
|
(82)
|
|
-
|
|
153
|
|
(16)
|
|
303
|
|
22
|
Exceptional
operating items(ii)
|
(6)
|
|
|
|
|
|
-
|
|
|
Operating profit
|
242
|
|
|
|
|
|
303
|
|
25
|
Markets:
|
|
|
|
|
|
Global giants and local stars(iv):
|
|
Organic
volume
movement
|
Reported
volume
movement
|
Organic
net sales
movement
|
Reported
net sales
movement
|
|
|
Organicvolumemovement(v)
|
Organic
net sales
movement
|
Reported
net sales
movement
|
|
%
|
%
|
%
|
%
|
|
|
%
|
%
|
%
|
Latin America and Caribbean
|
|
|
|
|
|
Johnnie Walker
|
25
|
|
29
|
|
16
|
|
22
|
|
22
|
|
30
|
|
15
|
|
|
Buchanan's
|
18
|
|
23
|
|
11
|
|
|
|
|
|
|
|
Old Parr
|
14
|
|
16
|
|
4
|
|
PUB
|
24
|
|
24
|
|
50
|
|
20
|
|
|
Smirnoff
|
16
|
|
25
|
|
7
|
|
Mexico
|
10
|
|
10
|
|
24
|
|
11
|
|
|
Black & White
|
33
|
|
44
|
|
26
|
|
CCA
|
15
|
|
15
|
|
12
|
|
8
|
|
|
Tanqueray
|
27
|
|
34
|
|
11
|
|
Andean
|
27
|
|
27
|
|
33
|
|
19
|
|
|
Baileys
|
39
|
|
44
|
|
32
|
|
PEBAC
|
47
|
|
47
|
|
73
|
|
62
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spirits
|
22
|
|
22
|
|
30
|
|
15
|
|
|
|
|
|
|
Beer(iii)
|
11
|
|
11
|
|
17
|
|
16
|
|
|
|
|
|
|
Ready
to drink(iii)
|
24
|
|
24
|
|
38
|
|
17
|
|
|
|
|
|
|
(i)
For further details on fair value remeasurements see Summary Income
Statement (d) Fair value remeasurement.
(ii)
For further details on exceptional operating items see Summary
Income Statement (c) Exceptional items and Notes, 3. Exceptional
items
(iii)
Flavoured malt beverages have been reclassified from ready to drink
to beer from 1 July 2020. This reflects the nature of these
products and how management reviews performance. Movements reported
in the table above are on a like for like basis.
(iv)
Spirits brands excluding ready to drink and non-alcoholic
variants.
(v)
Organic equals reported volume movement.
|
|
|
Latin America and Caribbean contributed
|
|
Latin America and Caribbean organic net sales grew
|
8% of
Diageo reported net sales in fiscal 21
|
|
30% in
fiscal 21
|
Market highlights
PUB (Paraguay, Uruguay and Brazil)
Strong broad based growth in key categories
Net sales increased 50%, primarily driven by scotch, as well as
growth in gin, vodka and ready-to-drink. Scotch net sales increased
66%, with double-digit growth in Johnnie Walker and triple-digit
growth in White Horse. Brazil net sales grew 62%, reflecting a
recovery in consumption and pricing interventions, which more than
offset a decline in duty free sales.
Mexico
Market recovery supported by strong off-trade
execution
Net sales increased 24%, benefitting from lapping a reduction of
inventory levels by distributors in fiscal 20 and growth in the
off-trade channel in fiscal 21. Tequila grew 47% driven by Don
Julio, supported by limited editions and a strong activation plan,
resulting in share gains in the off-trade. Scotch sales grew 12%
driven by Buchanan's and Johnnie Walker.
CCA (Caribbean and Central America)
Growth in domestic consumption
Net sales increased 12%, lapping the decline in fiscal 20 due to
reduced levels of international tourism and on-trade restrictions.
Growth was driven by domestic consumption supported by "The Moment
is Now" campaign. Scotch net sales increased 13% driven by double
digit growth of Johnnie Walker, Buchanan's and Old
Parr.
Andean (Colombia and Venezuela)
Growth driven by strong scotch performance in Colombia
Net sales increased 33%, building on growth in fiscal 20, driven by
Colombia. Growth was primarily driven by scotch with net sales
increase of 25% driven by double-digit growth in Buchanan's and
triple-digit growth in Black & White.
PEBAC (Peru, Ecuador, Bolivia, Argentina and Chile)
Partial recovery following significant declines in fiscal
20
Net sales increased 73%, lapping a significant decline in fiscal 20
due to ongoing social and political instability across key markets
and the impact of Covid-19. Growth in fiscal 21 was supported by
strong execution through enhanced distribution partnerships. Scotch
delivered double-digit net sales growth, primarily driven by
Johnnie Walker.
Travel Retail Latin America and Caribbean
Persistent travel restrictions affect performance
Net sales decreased 63% due to continued international travel
restrictions.
Marketing
Investment redeployed to off-trade and e-commerce
Investment increased 18%, behind net sales, following a decline in
fiscal 20. On-trade marketing was redeployed to the off-trade and
e-commerce in response to at-home consumption trends.
Asia Pacific
●
|
Net sales grew 14%, following a significant decline in fiscal 20,
driven by Greater China, India and Australia, partially offset by a
continued significant decline in Travel Retail Asia and Middle
East.
|
●
|
Growth reflects strong recovery in China and off-trade momentum in
most markets.
|
●
|
Slower growth in North Asia and South East Asia reflects continuing
impact of Covid-19.
|
●
|
Spirits grew 12% driven mainly by Chinese white spirits, IMFL
whisky and scotch.
|
●
|
Operating margin grew 169bps driven primarily by positive market
mix, category mix and operating leverage driven by net sales
recovery.
|
Key financials £ million:
|
|
2020
|
Exchange
|
Reclassification(i)
|
Acquisitions
and
disposals
|
Organic movement
|
2021
|
Reported movement
%
|
Net sales
|
2,270
|
|
(75)
|
|
(14)
|
|
(1)
|
|
308
|
|
2,488
|
|
10
|
Marketing
|
365
|
|
(7)
|
|
-
|
|
-
|
|
60
|
|
418
|
|
15
|
Operating profit before exceptional items
|
501
|
|
(6)
|
|
-
|
|
-
|
|
113
|
|
608
|
|
21
|
Exceptional
operating items(ii)
|
(1,198)
|
|
|
|
|
|
-
|
|
|
Operating profit
|
(697)
|
|
|
|
|
|
608
|
|
187
|
Markets:
|
|
|
|
|
|
Global giants, local stars and reserve(iv):
|
|
Organic
volume
movement
|
Reported
volume
movement
|
Organic
net sales
movement
|
Reported
net sales
movement
|
|
|
Organicvolumemovement(v)
|
Organic
net sales
movement
|
Reported
net sales
movement
|
|
%
|
%
|
%
|
%
|
|
|
%
|
%
|
%
|
Asia Pacific
|
9
|
|
9
|
|
14
|
|
10
|
|
|
Johnnie Walker
|
4
|
|
3
|
|
2
|
|
|
|
|
|
|
|
McDowell's
|
10
|
|
10
|
|
1
|
|
India
|
9
|
|
9
|
|
13
|
|
4
|
|
|
Shui
Jing Fang(vi)
|
42
|
|
51
|
|
51
|
|
Greater China
|
24
|
|
24
|
|
38
|
|
37
|
|
|
Guinness
|
8
|
|
9
|
|
(8)
|
|
Australia
|
21
|
|
22
|
|
23
|
|
29
|
|
|
The Singleton
|
6
|
|
5
|
|
5
|
|
South East Asia
|
-
|
|
(1)
|
|
7
|
|
(3)
|
|
|
Smirnoff
|
-
|
|
(4)
|
|
(4)
|
|
North Asia
|
18
|
|
16
|
|
9
|
|
4
|
|
|
Windsor
|
(16)
|
|
(6)
|
|
(8)
|
|
Travel Retail Asia and Middle East
|
(57)
|
|
(57)
|
|
(63)
|
|
(63)
|
|
|
Bundaberg
|
6
|
|
4
|
|
9
|
|
|
|
|
|
|
|
|
|
|
|
Spirits
|
9
|
|
9
|
|
12
|
|
8
|
|
|
|
|
|
|
Beer(iii)
|
9
|
|
9
|
|
9
|
|
(7)
|
|
|
|
|
|
|
Ready
to drink(iii)
|
13
|
|
13
|
|
16
|
|
20
|
|
|
|
|
|
|
(i)
For fiscal 21, £14 million has been reclassified from cost of
good sold to excise duties.
(ii)
For further details on exceptional operating items see Summary
Income Statement (c) Exceptional items and Notes, 3. Exceptional
items.
(iii)
Flavoured malt beverages have been reclassified from ready to drink
to beer from 1 July 2020. This reflects the nature of these
products and how management reviews performance. Movements reported
in the table above are on a like for like basis.
(iv)
Spirits brands excluding ready to drink and non-alcoholic
variants.
(v)
Organic equals reported volume movement.
(vi)
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 fiscal 21
|
|
14% in
fiscal 21
|
Market highlights
India
Partial recovery in a challenging environment
Net sales grew 13%, lapping a significant decline in fiscal 20,
despite the continued economic slowdown and the impact of Covid-19.
Growth was driven by off-trade momentum, and the occurrence of the
Indian Premier League which was postponed from fiscal 20, partially
offset by the contraction of business in Andhra Pradesh and
restrictions in the on-trade channel. The Prestige and Above
segment grew 12%, with strong performance in scotch and growth of
the renovated McDowell's No.1 whisky. Net sales in the popular
brands segment declined 1%.
Greater China
Strong market recovery
Net sales increased 38%, lapping a decline in fiscal 20. Growth was
driven by Chinese white spirits and scotch which grew 53% and 21%,
respectively. Double-digit growth in scotch malts and Johnnie
Walker super deluxe was driven by focussed investment, innovation
and route to market expansion, including increased city coverage
and new distribution channels.
Australia
Strong growth across categories
Net sales increased 23%, building on mid-single digit growth in
fiscal 20, benefiting from a strong spirits category, including
spirits taking share of total beverage alcohol and off-trade
momentum. Growth was broad based across categories, with
particularly strong performance in ready to drink. Ready to drink
net sales grew 27% supported by the Smirnoff Spiked Seltzers and
Gordon's Pink Gin Premix innovations.
South East Asia
Soft growth due to Covid-19 impact
Net sales grew 7%, lapping significant decline in fiscal 20. Growth
was mainly driven by strong scotch performance in Vietnam, due to
Johnnie Walker super deluxe variants and scotch malts. Key Accounts
grew 11%, lapping double-digit decline in fiscal 20. However,
Covid-19 related restrictions continued to impact tourism in many
markets.
North Asia
Covid-19 continues to impact recovery
Net sales grew 9%, lapping double-digit decline in fiscal 20,
driven by momentum in the off trade. Japan net sales grew 8%
benefiting from focussed investment in Johnnie Walker and White
Horse. Korea grew net sales 10%, driven primarily by Johnnie
Walker, partially offset by continuing decline in
Windsor.
Travel Retail Asia and Middle East
Persistent travel restrictions continue to impact
performance
Net sales declined 63%.
Marketing
Increased investment behind growth drivers
Investment increased 16%, mainly in Greater China, across Chinese
white spirits and scotch. Australia and North Asia also invested
ahead of net sales. Marketing investment was reduced in the more
impacted markets of South East Asia and Travel Retail Asia and
Middle East.
Category and brand review
●
|
Spirits grew 18%, lapping a softer fiscal 20, with particularly
strong growth in scotch and tequila and broad-based growth across
other key categories.
|
●
|
Scotch grew 15%, and Johnnie Walker grew 12%, despite the
category's relatively high exposure to
Travel Retail.
|
●
|
Tequila grew 79% with Don Julio and Casamigos growing share within
the fast growing tequila category in US Spirits.
|
●
|
Beer grew 4%, driven by growth in flavoured malt beverages and
Malta Guinness.
|
●
|
Ready to drink grew 30%, with very strong growth in North America
and Australia driven by increased consumer demand for
convenient formats.
|
Key categories:
|
|
Organicvolumemovement(i)%
|
Organic
net sales
movement
%
|
Reported
net sales
movement
%
|
Spirits(ii)
|
11
|
|
18
|
|
11
|
|
Scotch
|
15
|
|
15
|
|
8
|
|
Vodka(iii)(iv)
|
7
|
|
7
|
|
1
|
|
Canadian whisky
|
8
|
|
12
|
|
4
|
|
Rum(iii)
|
-
|
|
7
|
|
1
|
|
Liqueurs
|
15
|
|
22
|
|
18
|
|
Indian-Made Foreign Liquor (IMFL) whisky
|
13
|
|
12
|
|
3
|
|
Tequila
|
70
|
|
79
|
|
67
|
|
Gin(iii)
|
14
|
|
14
|
|
12
|
|
US whiskey
|
3
|
|
7
|
|
1
|
|
Beer(v)
|
8
|
|
4
|
|
(4)
|
|
Ready
to drink(v)
|
24
|
|
30
|
|
21
|
|
(i)
Organic equals reported volume movement except for rum (1)%,
liqueurs 14%, tequila 69%, gin 15%, US whiskey 4%, beer 7% and
ready to drink 16%, which were impacted by acquisitions and
disposals.
(ii)
Spirits brands excluding ready to drink and non-alcoholic
variants.
(iii)
Vodka, rum, gin including IMFL brands.
(iv)
Vodka includes Ketel One Botanical.
(v)
Flavoured malt beverages have been reclassified from ready to drink
to beer from 1 July 2020. This reflects the nature of these
products and how management reviews performance. Movements
reported in the table above are on a like for like
basis.
Scotch
23% of Diageo's net sales and grew 15%
Growth in all regions partially offset by the impact of Covid-19 on
Travel Retail.
- Johnnie
Walker net sales increased 12% with growth in all
regions.
- Johnnie
Walker Reserve grew 23% mainly driven by US Spirits, Greater China,
Vietnam and South Korea.
- Johnnie
Walker Red Label grew 19% with strong growth in Brazil, PEBAC,
Turkey, Northern Europe and India driven by consumption
recovery
- Johnnie
Walker Black Label grew 6%, with growth in all regions except
Africa.
- Primary
scotch brands grew 27% driven by White Horse and Black & White
in Latin America and Caribbean and Bell's in Europe and
Turkey.
- Scotch
malts grew 11% driven by Asia Pacific and Europe and Turkey
partially offset by a decline in North America.
- Buchanan's
net sales grew 29% driven by strong growth in North America and
Latin America and Caribbean.
- Old
Parr net sales increased 16% driven by strong growth in
Brazil.
Vodka
10% of Diageo's net sales and grew 7%
Growth in all regions except Asia Pacific.
- Cîroc
grew 26% driven mainly by US Spirits on the back of refreshed
activations to engage with Cîroc's consumer
base.
- Smirnoff
net sales increased 5% driven by growth in Smirnoff flavours in
North America, Africa and Latin America and Caribbean partially
offset by declines in Europe and Turkey and Asia
Pacific.
- Ketel
One performance was flat with growth in North America offset by a
decline in Europe and Turkey.
Tequila
8% of Diageo's net sales and grew 79%
Growth was mainly driven by strong performance of Don Julio and
Casamigos within the fast growing tequila category in North America
which benefitted from its broad occasion appeal.
Canadian whisky
8% of Diageo's net sales and grew 12%
Growth of Crown Royal in North America was largely driven by
continued momentum on flavours with Crown Royal Regal Apple, Crown
Royal Peach and Crown Royal Vanilla all growing
strongly.
Rum
6% of Diageo's net sales and grew 7%
Growth was driven by Captain Morgan in North America, Great
Britain, Northern Europe and Southern Europe, Zacapa in North
America and Europe and Turkey, partially offset by a decline in
McDowell's No.1 in India.
Liqueurs
6% of Diageo's net sales and grew 22%
Growth was driven by Baileys, which had broad-based growth across
all regions. Performance was driven by Baileys Original, the
successful launches of Baileys Deliciously Light and Baileys Apple
Pie limited time offer and continued focus on Baileys' positioning
as a year-round indulgent treat.
IMFL whisky
5% of Diageo's net sales and grew 12%.
The growth was driven by McDowell's No.1, McDowell's No.1 Luxury
and Haywards Fine Whisky.
Gin
5% of Diageo's net sales and grew 14%
Growth across all regions with strong double-digit growth in Africa
and Latin America and Caribbean.
- Growth
in Africa was mainly driven by Gilbey's in Kenya and broad-based
growth of Gordon's across the region.
- Growth
in Latin America and Caribbean was mainly driven by growth of
Tanqueray and Gordon's in Brazil.
- Growth
in Europe was mainly driven by Gordon's and Tanqueray in Great
Britain and Tanqueray in Northern Europe.
US whiskey
2% of Diageo's net sales and grew 7%
Performance was driven by strong growth in Bulleit and George
Dickel in North America.
Beer
15% of Diageo's net sales and grew 4%
- Guinness
was overall flat with strong growth in Africa, particularly Nigeria
following partial recovery of the on-trade and Cameroon due to
improved supply capacity and improved recruitment, offset by
decline in Europe and Turkey where sales
decreased 19% due to the continuing impact of
Covid-19 on the on-trade, particularly in Ireland and Great
Britain.
- Beer
in Africa grew 19% driven by Guinness and Malta
Guinness.
- Smirnoff
flavoured malt beverages in Diageo Beer Company USA increased
17%.
Ready to drink
4% of Diageo's net sales and grew 30%
Growth was broad-based across all regions, particularly in the US
Spirits and Australia markets. US Spirits ready to drink
performance was driven by successful launches of Crown Royal
Cocktails and Ketel One Botanical Vodka Spritz and Australia ready
to drink performance was driven by Smirnoff, Bundaberg and Gordon's
ready to drink variants.
Global giants, local stars and reserve(i):
|
|
Organicvolumemovement(ii)%
|
Organic
net sales
movement
%
|
Reported
net sales
movement
%
|
Global giants
|
|
|
|
Johnnie
Walker
|
11
|
|
12
|
|
6
|
|
Smirnoff
|
6
|
|
5
|
|
(1)
|
|
Baileys
|
18
|
|
24
|
|
20
|
|
Captain
Morgan
|
10
|
|
9
|
|
4
|
|
Tanqueray
|
10
|
|
12
|
|
6
|
|
Guinness
|
7
|
|
-
|
|
(6)
|
|
Local stars
|
|
|
|
Crown
Royal
|
9
|
|
12
|
|
5
|
|
Yenì
Raki
|
2
|
|
(3)
|
|
(24)
|
|
Buchanan's
|
24
|
|
29
|
|
19
|
|
JƐB
|
3
|
|
3
|
|
(1)
|
|
Windsor
|
(16)
|
|
(6)
|
|
(8)
|
|
Old
Parr
|
14
|
|
16
|
|
5
|
|
Bundaberg
|
6
|
|
5
|
|
10
|
|
Black
& White
|
24
|
|
26
|
|
12
|
|
Ypióca
|
10
|
|
9
|
|
(15)
|
|
McDowell's
|
10
|
|
11
|
|
1
|
|
Shui
Jing Fang(iii)
|
42
|
|
51
|
|
51
|
|
Reserve
|
|
|
|
Scotch
malts
|
10
|
|
11
|
|
9
|
|
Cîroc
vodka
|
23
|
|
26
|
|
19
|
|
Ketel
One(iv)
|
6
|
|
-
|
|
(6)
|
|
Don
Julio
|
50
|
|
62
|
|
51
|
|
Bulleit
|
9
|
|
10
|
|
3
|
|
Casamigos
|
114
|
|
125
|
|
110
|
|
(i)
Spirits brands excluding ready to drink and non-alcoholic
variants.
(ii)
Organic equals reported volume movement.
(iii)
Growth figures represent total Chinese white spirits of which Shui
Jing Fang is the principal brand.
(iv)
Ketel One includes Ketel One vodka and Ketel One
Botanical.
Global
giants
37% of Diageo's net sales and grew by 9%
All brands grew net sales apart from Guinness which was flat due to
to restrictions on the on-trade channel, particularly in Great
Britain and Ireland, which was offset by growth in Guinness Foreign
Extra Stout and Guinness Extra Smooth in Africa and Guinness
Draught in Can in Europe and Turkey.
Local
stars
20% of Diageo's net sales and grew 17%
Largely driven by growth in net sales in Chinese white spirits in
Asia Pacific, Crown Royal in North America, Buchanan's in North
America and Latin America and Caribbean and McDowell's No.1 in
India.
Reserve
25% of Diageo's net sales and grew 36%
Largely driven by the strong net sales growth of Casamigos and Don
Julio in US Spirits, Chinese white spirits in Asia Pacific and
Johnnie Walker Reserve variants in all
regions.
Additional financial information
Year ended 30 June 2021
|
2020
|
|
Exchange
(a)
|
Acquisitions and disposals
(b)
|
Organic
movement(i)
|
Fair value remeasurement
(d)
|
Reclassification(ii)
|
2021
|
|
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
Sales
|
17,697
|
|
(1,317)
|
|
(105)
|
|
2,878
|
|
-
|
|
-
|
|
19,153
|
|
Excise duties
|
(5,945)
|
|
517
|
|
40
|
|
(1,018)
|
|
-
|
|
(14)
|
|
(6,420)
|
|
Net sales
|
11,752
|
|
(800)
|
|
(65)
|
|
1,860
|
|
-
|
|
(14)
|
|
12,733
|
|
Cost of sales
|
(4,654)
|
|
325
|
|
59
|
|
(773)
|
|
(9)
|
|
14
|
|
(5,038)
|
|
Gross profit
|
7,098
|
|
(475)
|
|
(6)
|
|
1,087
|
|
(9)
|
|
-
|
|
7,695
|
|
Marketing
|
(1,841)
|
|
105
|
|
(9)
|
|
(417)
|
|
(1)
|
|
-
|
|
(2,163)
|
|
Other operating items
|
(1,763)
|
|
64
|
|
(16)
|
|
(43)
|
|
(28)
|
|
-
|
|
(1,786)
|
|
Operating profit before exceptional items
|
3,494
|
|
(306)
|
|
(31)
|
|
627
|
|
(38)
|
|
-
|
|
3,746
|
|
Exceptional operating items (c)
|
(1,357)
|
|
|
|
|
|
|
(15)
|
|
Operating profit
|
2,137
|
|
|
|
|
|
|
3,731
|
|
Non-operating items (c)
|
(23)
|
|
|
|
|
|
|
14
|
|
Net finance charges
|
(353)
|
|
|
|
|
|
|
(373)
|
|
Share of after tax results of associates and joint
ventures
|
282
|
|
|
|
|
|
|
334
|
|
Profit before taxation
|
2,043
|
|
|
|
|
|
|
3,706
|
|
Taxation (e)
|
(589)
|
|
|
|
|
|
|
(907)
|
|
Profit for the year
|
1,454
|
|
|
|
|
|
|
2,799
|
|
(i)
For the definition of organic movement see
Explanatory notes.
(ii)
In the year ended 30 June 2021, £14 million has
been reclassified from cost of goods sold to excise
duties.
(a) Exchange
The impact of movements in exchange rates on reported figures for
net sales and operating profit is principally in respect of the
translation exchange impact of the strengthening of sterling
against the US dollar, the Brazilian real, the Indian rupee and the
Turkish lira, partially offset by the weakening of sterling against
the euro.
The effect of movements in exchange rates and other movements on
profit before exceptional items and taxation for the year ended 30
June 2021 is set out in the table below.
|
Gains/(losses)
|
|
£ million
|
Translation impact
|
(207)
|
Transaction impact
|
(99)
|
|
Operating profit before exceptional items
|
(306)
|
|
Net
finance charges - translation impact
|
15
|
|
Net
finance charges - transaction impact
|
(3)
|
|
Net finance charges
|
12
|
|
Associates - translation impact
|
4
|
|
Profit before exceptional items and taxation
|
(290)
|
|
|
Year
ended
30 June
2021
|
Year
ended
30 June
2020
|
Exchange rates
|
|
|
Translation
£1 =
|
$1.35
|
|
$1.26
|
|
Transaction
£1 =
|
$1.34
|
|
$1.35
|
|
Translation
£1 =
|
€1.13
|
|
€1.14
|
|
Transaction
£1 =
|
€1.14
|
|
€1.12
|
|
(b) Acquisitions and disposals
The acquisitions and disposals movement was primarily attributable
to the acquisition of Aviation Gin LLC ('Aviation Gin') and Davos
Brands LLC ('Davos Brands') in the year ended 30 June 2021 and to
the impact of prior year's disposals.
See Movement in net borrowings and equity; Notes, 11. Acquisition
of businesses and purchase of non-controlling interests and
Explanatory notes, Organic growth excluding Travel Retail and
Guinness for further details.
(c) Exceptional items
Exceptional operating items in the year ended 30 June 2021 were £15
million loss before tax (2020 -
£1,357 million).
In the year ended 30 June 2021, based on recent developments, an
additional provision of TRY 156 million
(£15 million) was recorded as an exceptional item in
respect of ongoing litigation in Turkey, bringing the provision's
balance to TRY 272 million (£23 million)
following a settlement of TRY 15 million (£1
million) during the year.
On 20 November 2020, the High Court of Justice of England and Wales
issued a ruling that requires schemes to equalise pension benefits
for men and women for the calculation of their guaranteed minimum
pension liability (GMP) on historic transfers out, which resulted
in an additional liability of £5 million. The
corresponding expense was recognised as an exceptional operating
item, consistent with the charge in relation to the initial GMP
ruling in the year ended 30 June 2019.
An exceptional charge of $6 million (£5 million) was
recognised as part of the 'Raising the Bar' programme, in addition
to the commitment of $100 million (£81 million) announced
in the year ended 30 June 2020. The additional charge represents
the re-investment of corporate tax benefit in the fund in certain
markets, where a corporate tax deduction is available.
In the year ended 30 June 2021, an inventory provision of
£7 million was released (2020 - a charge of
£30 million) in respect of inventories that had earlier
been expected to be returned and destroyed as a consequence of the
Covid-19 pandemic, resulting in an exceptional gain. Given the
original charge was classified as an exceptional item in the year
ended 30 June 2020, the change to the provision was also classified
as exceptional.
In the year ended 30 June 2021, an additional gain of
$4 million (£3 million) (2020 - £83 million) was
recognised in exceptional operating items for excess receipts in
respect of substitution drawback claims on prior year
accruals.
In the year ended 30 June 2020, an impairment charge of £1,345
million was recognised in exceptional operating items, comprising
of £655 million in respect of the India cash-generating
unit containing the India goodwill, £116 million in
respect of the USL popular brands category (Old Tavern brand
£78 million and Bagpiper brand £38 million) and
£1 million in respect of fixed assets in India;
£434 million in respect of the Windsor Premier brand;
£84 million in respect of the group's Nigerian tangible
fixed assets; and £55 million in respect of the group's
Ethiopian tangible fixed assets.
In line with the group's accounting policy, given the unusual
nature and magnitude of the below items, these were reported as
exceptional operating items in the year ended 30 June
2020:
(i) Diageo launched the 'Raising the Bar' programme, including a
commitment of $100 million (£81 million) over a period of
up to two years from 1 July 2020, to support pubs and bars to
recover following the Covid-19 pandemic. Diageo also provided other
forms of support to help the communities and the industry which
amounted to £8 million.
(ii) An exceptional charge of £30 million was recognised in
respect of obsolete inventories that had been or were expected to
be destroyed as a direct consequence of the Covid-19 pandemic. The
amount comprised of a £23 million inventory provision and
£7 million directly attributable to handling and destruction
costs.
(iii) An estimated benefit of $105 million (£83 million) for
substitution drawback claims that had been filed and were to be
filed with the US Government in relation to prior years was
recognised in exceptional operating items.
An assessment was issued by the Korea Tax Authority in the year
ended 30 June 2020 that resulted in the reversal of the prior
year's provision in the amount of £24 million. The
corresponding income was recognised as an exceptional operating
item, consistent with the charge in relation to the initial
provision in the year ended 30 June 2019.
Non-operating items in the
year ended 30 June 2021 were £14 million income before tax
(2020 - £23 million loss).
In the year ended 30 June 2021, ZAR 209 million
(£10 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 (2020 - loss
of £32 million).
Certain United Spirits Limited subsidiaries were sold in the year
ended 30 June 2021. The sale of businesses resulted in an
exceptional gain of £3 million.
In the year ended 30 June 2021, the group reversed $2 million
(£1 million) (2020 - £2 million) from
provisions in relation to the sale of a portfolio of 19 brands to
Sazerac on 20 December 2018.
In the year ended 30 June 2020, Diageo completed the acquisition of
Seedlip and Anna Seed 83 and acquired controlling interests in
certain Distill Ventures entities. As a result of these entities
becoming subsidiaries of the group a gain of £8 million arose,
being the difference between the book value of the associates prior
to the transaction and their fair value.
In the year ended 30 June 2020, the disposal of an associate, Equal
Parts, LLC resulted in an exceptional loss of £1
million.
For further details on exceptional items see Notes, (c) 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 a £9 million gain for the year ended 30 June 2020.
The adjustments to marketing and other operating expenses are the
elimination of fair value changes to contingent consideration
liabilities and earn out arrangements in respect of prior year
acquisitions of £36 million loss for the year ended 30 June
2021 and £7 million loss for the year ended 30 June
2020.
(e) Taxation
The reported tax rate for the year ended 30 June 2021 was 24.5%
compared with 28.8% for the year ended 30 June 2020.
On 24 May 2021, legislation was substantively enacted in the UK to
increase the corporate tax rate to 25% with effect from 1 April
2023. As a result of the change, an exceptional tax charge of
£46 million was recognised for the year ended 30 June
2021 in relation to the remeasurement of deferred tax assets and
liabilities. In addition, there was a one-off
charge of £48 million
to other comprehensive income and equity, mainly in respect of the
remeasurement of the deferred tax liabilities on the post
employment assets.
On 15 December 2020, legislation was substantively enacted in the
Netherlands to maintain the headline corporate tax rate at 25%,
reversing a previously enacted reduction in the corporate tax rate
to 21.7% in 2021. As a result of the change, an exceptional tax
charge of £42 million was recognised for the year ended 31
June 2021 in relation to the remeasurement of deferred tax
liabilities.
As disclosed in the 2020 Annual Report, Diageo launched the
'Raising the Bar' programme to support pubs and bars to welcome
customers back and recover following the Covid-19 pandemic
including a commitment of $100 million (£81 million) over a
period of up to two years from 1 July 2020. Due to uncertainty
about the precise nature of the spend, it could not be determined
whether the amounts were deductible for tax purposes in future
periods. As a result, no deferred tax asset was recognised in
respect of the provision for the year ended 30 June 2020. In 2021,
additional information regarding the nature of the spend was
available and this has been re-assessed and a £5 million
exceptional tax credit has been recognised, mainly in respect of
amounts spent in the United States, United Kingdom and Ireland for
the year ended 30 June 2021.
The reported tax charge for the year ended 30 June 2020 included an
exceptional tax credit of £154 million mainly comprising
exceptional tax credits on the impairment of the Windsor and USL
brands of £105 million and £25 million, respectively,
exceptional tax credits in respect of fixed assets impairments in
Nigeria and Ethiopia of £25 million and £10 million,
respectively, and a further £7 million exceptional tax credit
in respect of obsolete inventories offset by a £20 million
exceptional tax charge in respect of substitution drawback
claims.
The tax rate before exceptional items for the year ended 30 June
2021 was 22.2% compared with 21.7% for the year ended 30 June
2020.
We expect the tax rate before exceptional items for the year ending
30 June 2022 to be in the range of 22%-24%.
(f)
Dividend
The group aims to increase the dividend each year and the decision
in respect of the dividend is made with reference to 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 2021 dividend cover is 1.6 times. The
recommended final dividend for the year ended 30 June 2021, to be
put to the shareholders for approval at the Annual General Meeting
is 44.59 pence, an increase of 5% on the prior year final dividend.
This brings the full year dividend to 72.55 pence per share, an
increase of 4% on the prior year. We will keep future returns of
capital, including dividends, under review through year ending 30
June 2022 to ensure we allocate Diageo's capital in the best way to
maximize value for the business and our stakeholders.
Subject to approval by shareholders, the final dividend will be
paid to holders of ordinary shares and US ADRs on register as of
27 August 2021. The ex-dividend date both for the holders of
the ordinary shares and for US ADR holders is 26 August
2021.The final dividend, once approved by shareholders, will be
paid to shareholders on 7 October 2021 and payment to US ADR
holders will be made on 13 October 2021. A dividend
reinvestment plan is available to holders of ordinary shares in
respect of the final dividend and the plan notice date is
16 September 2021.
(g) Return of Capital
On 25 July 2019, the Board approved a return of capital programme
to return up to £4.5 billion to shareholders over the
three-year period from 1 July 2019 to 30 June 2022, utilising the
most appropriate mechanic of either share buybacks or special
dividends depending on market conditions. Under the first phase of
the programme, which ended on 31 January 2020, the company returned
£1.25 billion to shareholders via share buybacks. On 9 April
2020, due to uncertainties related to Covid-19 pandemic, Diageo
announced that it had not initiated the next phase of the
programme. On 12 May 2021, the Board approved recommencing the
return of capital programme. Due to the impact of Covid-19, the
original completion date for the programme has been extended by two
years to 30 June 2024. The second phase of the programme of up to
£1 billion to shareholders via share buybacks was also
initiated on 12 May 2021 and it is expected to be completed by the
end of the financial year ending 30 June 2022.
Between 12 May 2021 and 30 June 2021, the company purchased
3.2 million ordinary shares at a cost of £109 million
(including £1 million of transaction costs). All shares
purchased under the share buyback programmes were cancelled. A
financial liability of £91 million has been established
at 30 June 2021 representing the 2.6 million shares that are
expected to be purchased by 29 July 2021.
Movement in net borrowings and equity
Movement in net borrowings
|
2021
|
2020
|
|
£ million
|
£ million
|
Net borrowings at the beginning of the year
|
(13,246)
|
|
(11,277)
|
|
Free cash flow (a)
|
3,037
|
|
1,634
|
|
Acquisitions (b)
|
(488)
|
|
(130)
|
|
Sale of businesses and brands
|
14
|
|
11
|
|
Share buyback programme
|
(109)
|
|
(1,282)
|
|
Proceeds from issue of share capital
|
-
|
|
1
|
|
Net sale of own shares for share schemes (c)
|
49
|
|
54
|
|
Dividends paid to non-controlling interests
|
(77)
|
|
(111)
|
|
Net movements in bonds (d)
|
(216)
|
|
4,368
|
|
Purchase of shares of non-controlling interests (e)
|
(42)
|
|
(62)
|
|
Net movements in other borrowings (f)
|
(753)
|
|
(285)
|
|
Equity dividends paid
|
(1,646)
|
|
(1,646)
|
|
Net
(decrease)/increase in cash and cash equivalents
|
(231)
|
|
2,552
|
|
Net
decrease/(increase) in bonds and other borrowings
|
967
|
|
(4,089)
|
|
Exchange differences (g)
|
598
|
|
(95)
|
|
Other non-cash items (h)
|
(197)
|
|
(86)
|
|
Adoption of IFRS 16
|
-
|
|
(251)
|
|
Net
borrowings at the end of the year
|
(12,109)
|
|
(13,246)
|
|
(a) See Explanatory Notes, Free cash flow for the analysis of free
cash flow.
(b) On 30 September 2020, Diageo completed the acquisition of
Aviation Gin LLC and Davos Brands LLC to support Diageo's
participation in the super premium gin segment for a total
consideration of $337 million (£263 million) upfront in cash
and contingent consideration of up to $275 million (£214
million) linked to performance targets. Diageo also completed a
number of additional acquisitions in the year ended 30 June 2021
comprising: (i) on 26 February 2021, the acquisition of Chase
Distillery Limited, to further support Diageo's participation in
the premium-plus gin segment in the United Kingdom; (ii) on 8
March 2021, the acquisition of Far West Spirits LLC, owner of the
Lone River Ranch Water brand, to improve Diageo's participation in
the ready to drink category in the United States; and (iii) on 14
April 2021, the acquisition of Sons of Liberty Spirits Company, to
expand Diageo's spirits-based ready to drink portfolio with Loyal 9
Cocktails. The aggregate up-front cash consideration paid on
completion of these three transactions in the year ended 30 June
2021 was £95 million. In addition, two of these transactions
include provision for further contingent consideration of up to
£86 million in aggregate, in each case linked to performance
targets, and one of the transactions provides for a further £2
million of deferred consideration, of which £1 million has
been paid by 30 June 2021.
In the year ended 30 June 2020, Diageo acquired the remaining share
capital of Seedlip Limited and Anna Seed 83 Limited (the brand
owner of Aecorn) which it did not already own, and completed a
number of smaller acquisitions. In both financial years
acquisitions also include additional investments as part of the
Distill Ventures programme, as well as deferred and contingent
consideration paid in respect of previous
acquisitions.
(c) Net sale of own shares comprised receipts from employees on the
exercise of share options of £57 million (2020 - £56
million) less purchase of treasury shares for the future settlement
of obligations under the employee share option schemes of £8
million (2020 - £2 million).
(d) In the year ended 30 June 2021, the group issued bonds of
€700 million (£636 million - net of discount and fee)
and £395 million (including £5 million discount and fee)
and repaid bonds of $696 million (£551 million) and €775
million (£696 million).
In the year ended 30 June 2020, the group issued bonds of $4,100
million (£3,296 million), €1,750 million (£1,594
million) and £298 million (including £2 million discount
and fee) and repaid bonds of $1,000 million (£820
million).
(e) In the year ended 30 June 2021, East African Breweries Limited
(EABL), a subsidiary of Diageo, completed the purchase of 30% of
the share capital of Serengeti Breweries Limited for $55 million
(£42 million).
In the year ended 30 June 2020, Diageo acquired additional shares
in United Spirits Limited for INR 5,495 million (£60 million)
which took Diageo's percentage of shares owned in United Spirits
Limited from 54.78% to 55.94% (excluding 2.38% owned by the USL
Benefit Trust). During the year ended 30 June 2020, EABL, a
subsidiary of Diageo, completed the purchase of 4% of the share
capital of Serengeti Breweries Limited for $3 million (£2
million).
(f) In the year ended 30 June 2021, the net movements in other
borrowings principally arose from cash movement of foreign exchange
swaps and forwards. In the year ended 30 June 2020, the net
movements in other borrowings principally arose from foreign
exchange swaps and forwards, partially offset by the cash movement
on lease liabilities.
(g) The exchange differences arising on net borrowings of £598
million is primarily driven by favourable exchange movements on US
dollar and euro denominated borrowings, partially offset by an
unfavourable movement on cash and cash equivalents, foreign
exchange swaps and forwards.
In the year ended 30 June 2020 the £95 million exchange on net
borrowings was driven by unfavourable exchange movements on US
dollar and euro denominated borrowings and cash and cash
equivalents, partially offset by a favourable movement on foreign
exchange swaps and forwards.
(h) In the year ended 30 June 2021, other non-cash items are
principally in respect of fair value changes of cross currency
interest rate swaps and interest rate swaps partially offset by the
fair value changes of borrowings. In the year ended 30 June 2020,
other non-cash items are principally in respect of leases of
£206 million entered into in the year, partially offset by the
fair value changes of cross currency interest rate
swaps.
Movement in equity
|
2021
|
2020
|
|
£ million
|
£ million
|
Equity at the beginning of the year
|
8,440
|
|
10,156
|
|
Profit
for the year
|
2,799
|
|
1,454
|
|
Exchange adjustments (a)
|
(836)
|
|
(282)
|
|
Remeasurement of post employment plans net of taxation
|
(27)
|
|
3
|
|
Purchase of shares of non-controlling interests (b)
|
(42)
|
|
(62)
|
|
Associates' transactions with non-controlling
interests
|
(91)
|
|
-
|
|
Dividends to non-controlling interests
|
(72)
|
|
(117)
|
|
Equity dividends paid
|
(1,646)
|
|
(1,646)
|
|
Share buyback programme
|
(200)
|
|
(1,256)
|
|
Other reserve movements
|
106
|
|
190
|
|
Equity at the end of the year
|
8,431
|
|
8,440
|
|
(a) Exchange movement in the year ended 30 June 2021 primarily
arose from exchange losses driven by the Indian rupee, the US
dollar and the Turkish lira.
(b) In the year ended 30 June 2021, East African Breweries Limited
completed the purchase of 30% of the share capital of Serengeti
Breweries Limited for $55 million (£42
million).
In the year ended 30 June 2020, Diageo acquired additional shares
in United Spirits Limited for INR 5,495 million (£60 million)
and additional shares in Serengeti Breweries Limited for $3 million
(£2 million).
Post employment plans
The net surplus of the group's post employment benefit plans have
increased by £82 million from £362 million at 30 June
2020 to £444 million at 30 June 2021. The increase in net
surplus is attributable to the favourable discount rate change in
the United Kingdom, due to the increase in returns from 'AA' rated
corporate bonds used to calculate the discount rates on the
liabilities of the post employment plans (from 1.5% to 1.9%) that
was partially offset by the change in inflation rate assumptions in
the United Kingdom and Ireland (UK from 2.1% to 2.5%; Ireland from
1.2% to 1.6%). Following the
experience analysis carried out for the Diageo Pension Scheme in
the United Kingdom, demographic assumptions have been updated,
having a further adverse impact on the net
surplus.
The operating profit charge before exceptional items increased by
£40 million from £47 million for the year ended 30 June
2020 to £87 million for the year ended 30 June 2021. The
operating profit charge for the year ended 30 June 2020 includes
past service gain of £47 million in respect of the
Guinness Ireland Group Pension Scheme (GIGPS), following
communications to the deferred members in respect of changing their
expectations of a full pension prior to reaching the age of 65 and
to pensioners in respect of future pension increases, and
curtailment gains of £12 million mainly in respect of the
Diageo Pension Scheme and the GIGPS.
Total cash contributions by the group to all post employment plans
in the year ending 30 June 2022 are estimated to be approximately
£120 million.
Diageo condensed consolidated income statement
|
|
Year ended 30 June 2021
|
|
Year ended 30 June 2020
|
|
Notes
|
£ million
|
|
£ million
|
Sales
|
2
|
19,153
|
|
|
17,697
|
|
Excise duties
|
|
(6,420)
|
|
|
(5,945)
|
|
Net sales
|
2
|
12,733
|
|
|
11,752
|
|
Cost of sales
|
|
(5,038)
|
|
|
(4,654)
|
|
Gross profit
|
|
7,695
|
|
|
7,098
|
|
Marketing
|
|
(2,163)
|
|
|
(1,841)
|
|
Other operating items
|
|
(1,801)
|
|
|
(3,120)
|
|
Operating profit
|
2
|
3,731
|
|
|
2,137
|
|
Non-operating items
|
3
|
14
|
|
|
(23)
|
|
Finance income
|
4
|
278
|
|
|
366
|
|
Finance charges
|
4
|
(651)
|
|
|
(719)
|
|
Share of after tax results of associates and joint
ventures
|
|
334
|
|
|
282
|
|
Profit before taxation
|
|
3,706
|
|
|
2,043
|
|
Taxation
|
5
|
(907)
|
|
|
(589)
|
|
Profit for the year
|
|
2,799
|
|
|
1,454
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
Equity shareholders of the parent company
|
|
2,660
|
|
|
1,409
|
|
Non-controlling interests
|
|
139
|
|
|
45
|
|
|
|
2,799
|
|
|
1,454
|
|
|
|
|
|
|
Weighted average number of shares
|
|
million
|
|
million
|
Shares in issue excluding own shares
|
|
2,337
|
|
|
2,346
|
|
Dilutive potential ordinary shares
|
|
8
|
|
|
8
|
|
|
|
2,345
|
|
|
2,354
|
|
|
|
|
|
|
|
|
pence
|
|
pence
|
Basic earnings per share
|
|
113.8
|
|
|
60.1
|
|
|
|
|
|
|
Diluted earnings per share
|
|
113.4
|
|
|
59.9
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diageo condensed consolidated statement of comprehensive
income
|
Year
ended
30 June
2021
|
Year
ended
30 June
2020
|
|
£ million
|
£ million
|
Other comprehensive income
|
|
|
Items that will not be recycled subsequently to the income
statement
|
|
|
Net remeasurement of post employment plans
|
|
|
-
group
|
16
|
38
|
|
-
associates and joint ventures
|
3
|
|
(14)
|
|
Tax on post employment plans
|
(46)
|
|
(21)
|
|
|
(27)
|
|
3
|
|
Items that may be recycled subsequently to the income
statement
|
|
|
Exchange differences on translation of foreign
operations
|
|
|
-
group
|
(1,233)
|
|
(104)
|
|
-
associates and joint ventures
|
(240)
|
|
82
|
|
-
non-controlling interests
|
(173)
|
|
(37)
|
|
Net investment hedges
|
810
|
|
(227)
|
|
Exchange loss recycled to the income statement
|
|
|
-
on translation of foreign operations
|
-
|
|
4
|
|
Tax on exchange differences - group
|
(9)
|
|
4
|
|
Tax on exchange differences - non-controlling
interests
|
(1)
|
|
-
|
|
Effective portion of changes in fair value of cash flow
hedges
|
|
|
-
hedge of foreign currency debt of the group
|
(298)
|
|
221
|
|
-
transaction exposure hedging of the group
|
101
|
|
(43)
|
|
-
commodity price risk hedging of the group
|
41
|
|
(11)
|
|
-
hedges by associates and joint ventures
|
(1)
|
|
6
|
|
-
recycled to income statement - hedge of foreign currency debt of
the group
|
175
|
|
(75)
|
|
-
recycled to income statement - transaction exposure hedging of the
group
|
10
|
|
42
|
|
-
recycled to income statement - commodity price risk hedging of the
group
|
(2)
|
|
8
|
|
Tax on effective portion of changes in fair value of cash flow
hedges
|
(6)
|
|
(23)
|
|
Hyperinflation adjustment
|
(17)
|
|
(18)
|
|
Tax on hyperinflation adjustment
|
5
|
|
4
|
|
|
(838)
|
|
(167)
|
|
Other
comprehensive loss, net of tax, for the year
|
(865)
|
|
(164)
|
|
Profit
for the year
|
2,799
|
|
1,454
|
|
Total
comprehensive income for the year
|
1,934
|
|
1,290
|
|
|
|
|
Attributable to:
|
|
|
Equity shareholders of the parent company
|
1,969
|
|
1,282
|
|
Non-controlling interests
|
(35)
|
|
8
|
|
Total
comprehensive income for the year
|
1,934
|
|
1,290
|
|
Diageo condensed consolidated balance sheet
|
|
30 June 2021
|
30 June 2020
|
|
Notes
|
£ million
|
£ million
|
£ million
|
£ million
|
Non-current assets
|
|
|
|
|
|
Intangible assets
|
12
|
10,764
|
|
|
11,300
|
|
|
Property, plant and equipment
|
|
4,849
|
|
|
4,926
|
|
|
Biological assets
|
|
66
|
|
|
51
|
|
|
Investments in associates and joint ventures
|
|
3,308
|
|
|
3,557
|
|
|
Other investments
|
|
40
|
|
|
41
|
|
|
Other receivables
|
|
36
|
|
|
46
|
|
|
Other financial assets
|
|
327
|
|
|
686
|
|
|
Deferred tax assets
|
|
100
|
|
|
119
|
|
|
Post employment benefit assets
|
|
1,018
|
|
|
1,111
|
|
|
|
|
|
20,508
|
|
|
21,837
|
|
Current assets
|
|
|
|
|
|
Inventories
|
6
|
6,045
|
|
|
5,772
|
|
|
Trade and other receivables
|
|
2,385
|
|
|
2,111
|
|
|
Corporate tax receivables
|
5
|
145
|
|
|
190
|
|
|
Other financial assets
|
|
121
|
|
|
75
|
|
|
Cash and cash equivalents
|
7
|
2,749
|
|
|
3,323
|
|
|
|
|
|
11,445
|
|
|
11,471
|
|
Total assets
|
|
|
31,953
|
|
|
33,308
|
|
Current liabilities
|
|
|
|
|
|
Borrowings and bank overdrafts
|
7
|
(1,862)
|
|
|
(1,995)
|
|
|
Other financial liabilities
|
|
(257)
|
|
|
(389)
|
|
|
Share buyback liability
|
|
(91)
|
|
|
-
|
|
|
Trade and other payables
|
|
(4,648)
|
|
|
(3,683)
|
|
|
Corporate tax payables
|
5
|
(146)
|
|
|
(246)
|
|
|
Provisions
|
|
(138)
|
|
|
(183)
|
|
|
|
|
|
(7,142)
|
|
|
(6,496)
|
|
Non-current liabilities
|
|
|
|
|
|
Borrowings
|
7
|
(12,865)
|
|
|
(14,790)
|
|
|
Other financial liabilities
|
|
(384)
|
|
|
(393)
|
|
|
Other payables
|
|
(338)
|
|
|
(175)
|
|
|
Provisions
|
|
(274)
|
|
|
(293)
|
|
|
Deferred tax liabilities
|
|
(1,945)
|
|
|
(1,972)
|
|
|
Post employment benefit liabilities
|
|
(574)
|
|
|
(749)
|
|
|
|
|
|
(16,380)
|
|
|
(18,372)
|
|
Total liabilities
|
|
|
(23,522)
|
|
|
(24,868)
|
|
Net assets
|
|
|
8,431
|
|
|
8,440
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
Share capital
|
|
741
|
|
|
742
|
|
|
Share premium
|
|
1,351
|
|
|
1,351
|
|
|
Other reserves
|
|
1,621
|
|
|
2,272
|
|
|
Retained earnings
|
|
3,184
|
|
|
2,407
|
|
|
Equity attributable to equity shareholders of the parent
company
|
|
|
6,897
|
|
|
6,772
|
|
Non-controlling interests
|
|
|
1,534
|
|
|
1,668
|
|
Total equity
|
|
|
8,431
|
|
|
8,440
|
|
|
|
|
|
|
|
Diageo 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 2019
|
753
|
|
|
1,350
|
|
|
2,372
|
|
|
(2,026)
|
|
|
5,912
|
|
|
3,886
|
|
|
8,361
|
|
|
1,795
|
|
|
10,156
|
|
Profit for the year
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1,409
|
|
|
1,409
|
|
|
1,409
|
|
|
45
|
|
|
1,454
|
|
Other comprehensive loss
|
-
|
|
|
-
|
|
|
(116)
|
|
|
-
|
|
|
(11)
|
|
|
(11)
|
|
|
(127)
|
|
|
(37)
|
|
|
(164)
|
|
Total comprehensive (loss)/income
|
-
|
|
|
-
|
|
|
(116)
|
|
|
-
|
|
|
1,398
|
|
|
1,398
|
|
|
1,282
|
|
|
8
|
|
|
1,290
|
|
Employee share schemes
|
-
|
|
|
-
|
|
|
-
|
|
|
90
|
|
|
(36)
|
|
|
54
|
|
|
54
|
|
|
-
|
|
|
54
|
|
Share-based incentive plans
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2
|
|
|
2
|
|
|
2
|
|
|
-
|
|
|
2
|
|
Share-based incentive plans in respect of associates
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
4
|
|
|
4
|
|
|
4
|
|
|
-
|
|
|
4
|
|
Tax on share-based incentive plans
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1
|
|
|
1
|
|
|
1
|
|
|
-
|
|
|
1
|
|
Share based payments and purchase of treasury shares in respect of
subsidiaries
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1)
|
|
|
(1)
|
|
|
(1)
|
|
|
-
|
|
|
(1)
|
|
Shares issued
|
-
|
|
|
1
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
1
|
|
|
-
|
|
|
1
|
|
Transfers
|
-
|
|
|
-
|
|
|
5
|
|
|
-
|
|
|
(5)
|
|
|
(5)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
Purchase of non-controlling interests
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(39)
|
|
|
(39)
|
|
|
(39)
|
|
|
(23)
|
|
|
(62)
|
|
Non-controlling interest in respect of new subsidiary
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
5
|
|
|
5
|
|
Change in fair value of put option
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
9
|
|
|
9
|
|
|
9
|
|
|
-
|
|
|
9
|
|
Share buyback programme
|
(11)
|
|
|
-
|
|
|
11
|
|
|
-
|
|
|
(1,256)
|
|
|
(1,256)
|
|
|
(1,256)
|
|
|
-
|
|
|
(1,256)
|
|
Dividends paid
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,646)
|
|
|
(1,646)
|
|
|
(1,646)
|
|
|
(117)
|
|
|
(1,763)
|
|
At 30 June 2020
|
742
|
|
|
1,351
|
|
|
2,272
|
|
|
(1,936)
|
|
|
4,343
|
|
|
2,407
|
|
|
6,772
|
|
|
1,668
|
|
|
8,440
|
|
Profit for the year
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
2,660
|
|
|
2,660
|
|
|
2,660
|
|
|
139
|
|
|
2,799
|
|
Other comprehensive loss
|
-
|
|
|
-
|
|
|
(652)
|
|
|
-
|
|
|
(39)
|
|
|
(39)
|
|
|
(691)
|
|
|
(174)
|
|
|
(865)
|
|
Total comprehensive (loss)/income
|
-
|
|
|
-
|
|
|
(652)
|
|
|
-
|
|
|
2,621
|
|
|
2,621
|
|
|
1,969
|
|
|
(35)
|
|
|
1,934
|
|
Employee share schemes
|
-
|
|
|
-
|
|
|
-
|
|
|
59
|
|
|
(10)
|
|
|
49
|
|
|
49
|
|
|
-
|
|
|
49
|
|
Share-based incentive plans
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
49
|
|
|
49
|
|
|
49
|
|
|
-
|
|
|
49
|
|
Share-based incentive plans in respect of associates
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
3
|
|
|
3
|
|
|
3
|
|
|
-
|
|
|
3
|
|
Tax on share-based incentive plans
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
9
|
|
|
9
|
|
|
9
|
|
|
-
|
|
|
9
|
|
Purchase of non-controlling interests
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(15)
|
|
|
(15)
|
|
|
(15)
|
|
|
(27)
|
|
|
(42)
|
|
Associates' transactions with non-controlling
interests
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(91)
|
|
|
(91)
|
|
|
(91)
|
|
|
-
|
|
|
(91)
|
|
Change in fair value of put option
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(2)
|
|
|
(2)
|
|
|
(2)
|
|
|
-
|
|
|
(2)
|
|
Share buyback programme
|
(1)
|
|
|
-
|
|
|
1
|
|
|
-
|
|
|
(200)
|
|
|
(200)
|
|
|
(200)
|
|
|
-
|
|
|
(200)
|
|
Dividends declared
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(1,646)
|
|
|
(1,646)
|
|
|
(1,646)
|
|
|
(72)
|
|
|
(1,718)
|
|
At 30 June 2021
|
741
|
|
|
1,351
|
|
|
1,621
|
|
|
(1,877)
|
|
|
5,061
|
|
|
3,184
|
|
|
6,897
|
|
|
1,534
|
|
|
8,431
|
|
Diageo condensed consolidated statement of cash flows
|
Year
ended 30 June 2021
|
|
Year ended 30 June 2020
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
Profit for the year
|
2,799
|
|
|
|
|
1,454
|
|
|
|
Taxation
|
907
|
|
|
|
|
589
|
|
|
|
Share of after tax results of associates and joint
ventures
|
(334)
|
|
|
|
|
(282)
|
|
|
|
Net finance charges
|
373
|
|
|
|
|
353
|
|
|
|
Non-operating items
|
(14)
|
|
|
|
|
23
|
|
|
|
Operating profit
|
|
|
3,731
|
|
|
|
|
2,137
|
|
Increase in inventories
|
(443)
|
|
|
|
|
(366)
|
|
|
|
(Increase)/decrease in trade and other receivables
|
(446)
|
|
|
|
|
523
|
|
|
|
Increase/(decrease) in trade and other payables and
provisions
|
1,220
|
|
|
|
|
(485)
|
|
|
|
Net decrease/(increase) in working capital
|
|
|
331
|
|
|
|
|
(328)
|
|
Depreciation, amortisation and impairment
|
447
|
|
|
|
|
1,839
|
|
|
|
Dividends received
|
290
|
|
|
|
|
4
|
|
|
|
Post employment payments less amounts included in operating
profit
|
(30)
|
|
|
|
|
(109)
|
|
|
|
Other items
|
88
|
|
|
|
|
(14)
|
|
|
|
|
|
|
795
|
|
|
|
|
1,720
|
|
Cash generated from operations
|
|
|
4,857
|
|
|
|
|
3,529
|
|
Interest received
|
89
|
|
|
|
|
185
|
|
|
|
Interest paid
|
(440)
|
|
|
|
|
(493)
|
|
|
|
Taxation paid
|
(852)
|
|
|
|
|
(901)
|
|
|
|
|
|
|
(1,203)
|
|
|
|
|
(1,209)
|
|
Net cash inflow from operating activities
|
|
|
3,654
|
|
|
|
|
2,320
|
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
Disposal of property, plant and equipment and computer
software
|
13
|
|
|
|
|
14
|
|
|
|
Purchase of property, plant and equipment and computer
software
|
(626)
|
|
|
|
|
(700)
|
|
|
|
Movements in loans and other investments
|
(4)
|
|
|
|
|
-
|
|
|
|
Sale of businesses and brands
|
14
|
|
|
|
|
11
|
|
|
|
Acquisition of businesses
|
(488)
|
|
|
|
|
(130)
|
|
|
|
Net cash outflow from investing activities
|
|
|
(1,091)
|
|
|
|
|
(805)
|
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
Share buyback programme
|
(109)
|
|
|
|
|
(1,282)
|
|
|
|
Proceeds from issue of share capital
|
-
|
|
|
|
|
1
|
|
|
|
Net sale of own shares for share schemes
|
49
|
|
|
|
|
54
|
|
|
|
Dividends paid to non-controlling interests
|
(77)
|
|
|
|
|
(111)
|
|
|
|
Proceeds from bonds
|
1,031
|
|
|
|
|
5,188
|
|
|
|
Repayment of bonds
|
(1,247)
|
|
|
|
|
(820)
|
|
|
|
Purchase of shares of non-controlling interests
|
(42)
|
|
|
|
|
(62)
|
|
|
|
Net movements in other borrowings
|
(753)
|
|
|
|
|
(285)
|
|
|
|
Equity dividends paid
|
(1,646)
|
|
|
|
|
(1,646)
|
|
|
|
Net cash (outflow)/inflow from financing activities
|
|
|
(2,794)
|
|
|
|
|
1,037
|
|
|
|
|
|
|
|
|
|
Net (decrease)/increase in net cash and cash
equivalents
|
|
|
(231)
|
|
|
|
|
2,552
|
|
Exchange differences
|
|
|
(285)
|
|
|
|
|
(120)
|
|
Net cash and cash equivalents at beginning of the year
|
|
|
3,153
|
|
|
|
|
721
|
|
Net cash and cash equivalents at end of the year
|
|
|
2,637
|
|
|
|
|
3,153
|
|
|
|
|
|
|
|
|
|
Net cash and cash equivalents consist of:
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
2,749
|
|
|
|
|
3,323
|
|
Bank overdrafts
|
|
|
(112)
|
|
|
|
|
(170)
|
|
|
|
|
2,637
|
|
|
|
|
3,153
|
|
Notes
1. Basis of preparation
This condensed set of financial statements has been prepared in
accordance with international accounting standards in conformity
with the requirements of the Companies Act 2006 and International
Financial Reporting Standards adopted pursuant to Regulation (EC)
No 1606/2002 as it applies in the European Union and IFRS as issued
by the International Accounting Standards Board (IASB). IFRS as
adopted by the EU differs in certain respects from IFRS as issued
by the IASB. The differences have no impact on the group's
condensed consolidated financial statements for the years
presented. The condensed consolidated financial statements are
prepared on a going concern basis under the historical cost
convention, unless stated otherwise in the relevant accounting
policy.
The annual financial statements of the group are prepared in
accordance with IFRSs as issued by the IASB and as adopted by the
EU and in conformity with the requirements of the Companies Act
2006. As required by the Disclosure and Transparency Rules of the
Financial Conduct Authority, the condensed set of financial
statements have been prepared applying the accounting policies and
presentation that were applied in the preparation of the company's
published consolidated financial statements for the year ended 30
June 2020 except for changes on the adoption of new accounting
standards and amendments explained below. IFRS is subject to
ongoing review or possible amendment by interpretative guidance and
the issuance of new standards by the IASB. In preparing these
condensed 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 2020, with the exception of changes in estimates
disclosed in note 13 - Contingent liabilities and legal
proceedings.
Management has prepared cash flow forecasts which have also been
sensitised to reflect severe, but plausible downside scenarios
taking into consideration the group's principal risks. In our base
case scenario, we expect net sales momentum to continue into the
year ending 30 June 2022, however, we expect near-term volatility
to remain. The potential financial impact of a slower Covid-19
pandemic recovery has been modelled in the plausible downside
scenarios. Even with these negative sensitivities for each region
taken into account, the group's cash position is still considered
to remain strong, as we have protected our liquidity by launching
and pricing €700 million of fixed rate Euro and
£400 million of fixed rate Sterling denominated bonds
under Diageo's European Debt Issuance Programme. Mitigating
actions, should they be required, are all within management's
control and could include reductions in discretionary spending
including acquisitions and capital expenditure, as well as a
temporary suspension of the share buyback programme and dividend
payments in the next 12 months or drawdown on committed facilities.
Having considered the outcome of these assessments, the Directors
are comfortable that the Company is going concern for at least 12
months from the date of signing the company's consolidated
financial statements.
Weighted average exchange rates used in the translation of income
statements were US dollar - £1 = $1.35 (2020 - £1 =
$1.26) and euro - £1 = €1.13 (2020 - £1 =
€1.14). Exchange rates used to translate assets and
liabilities at the balance sheet date were US dollar - £1 =
$1.39 (30 June 2020 - £1 = $1.23) and euro - £1 =
€1.17 (30 June 2020 - £1 = €1.09). The group uses
foreign exchange transaction hedges to mitigate the effect of
exchange rate movements.
New accounting standards and interpretations
The following amendments to the accounting standards, issued by the
IASB or International Financial Reporting Interpretations Committee
(IFRIC) and endorsed by the EU, have been adopted by the group from
1 July 2020 with no impact on the group's consolidated results,
financial position or disclosures:
- Amendments
to References to the Conceptual Framework in IFRS
Standards
- Amendments
to IFRS 3 - Definition of a Business
- Amendments
to IAS 1 and IAS 8 - Definition of Material
- Amendments
to IFRS 16 - Covid-19 - Related Rent
Concessions
The following amendment issued by the IASB and endorsed by the EU,
has been adopted by the group:
Amendments to IFRS 9, IAS 39 and IFRS 7 - Interest rate benchmark
reform (phase 1). The amendment provides temporary relief from
applying specific hedge accounting requirements to hedging
relationships directly affected by interbank offered rate (IBOR)
reform. The reliefs have the effect that IBOR reform should not
generally cause hedge accounting to terminate. The expectations are
that the cash flows in relation to hedging relationships will not
be altered by the reform and the derivative instruments used in
hedge accounting will still provide a close approximation to the
extent of the managed risk exposures.
Amendments to IAS 19 - Plan Amendment, Curtailment or
Settlement. The
amendment requires the remeasurement of service cost and interest
charge for the rest of the period following plan amendments,
settlements and curtailments using actuarial assumptions prevailing
at the date of these events. The amendment is applicable to Diageo
from 1 July 2019 on a prospective basis and has resulted in an
additional service cost of £1 million in the year ended 30
June 2021 (2020 - £1 million).
The following standard and amendment, issued by the IASB has not
been endorsed by the EU and has not been adopted by the
group:
IFRS 17 - Insurance contracts (effective in 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.
Amendments to IFRS 9, IAS 39 and IFRS 7 - Interest rate benchmark
reform (phase 2). The amendment to IFRS 9 provides relief from
applying specific hedge accounting and financial instrument
derecognition requirements directly affected by interbank offered
rate (IBOR) reform. By applying the practical expedient, Diageo
will not be required to discontinue its hedging relationships as a
result of changes in reference rates due to the IBOR reform. The
amendment to IFRS 7 will require additional disclosure explaining
the nature and extent of risk related to the reform and the
progress of the transition.
There are a number of other amendments and clarifications to IFRS,
effective in future years, which are not expected to significantly
impact the group's consolidated results or financial
position.
The comparative figures for the financial year ended 30 June 2020
are not the company's statutory accounts for that financial year.
Those 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.
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 the production sites in the
United Kingdom, Ireland, Italy, Guatemala and Mexico, as well as
comprises the global procurement management functions.
Continuing operations also include the Corporate function.
Corporate revenues and 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. They also include rents receivable and payable
in respect of properties not used by the group in the manufacture,
sale or distribution of premium drinks.
Diageo uses shared services operations to deliver transaction
processing activities for markets and operational entities. These
centers are located in Hungary, Colombia, the Philippines and
India. The captive business service centers in Budapest and
Bangalore 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.
As part of the annual planning process a budgeted exchange rate is
set each year equal to the prior year's weighted average rate. This
rate is used for management reporting purposes and, in order to
ensure a consistent basis on which performance is measured through
the year, the prior period results are restated to the budget rate
as well. Segmental information for net sales and operating profit
before exceptional items are reported on a consistent basis with
our 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
separately the result of acquisitions and disposals completed in
the current and prior year 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
Year
ended
|
North America
|
Europe
and
Turkey
|
Africa
|
Latin America and Caribbean
|
Asia
Pacific
|
SC&P
|
Eliminate
inter-
segment
sales
|
Total
operating
segments
|
Corporate
and other
|
Total
|
30 June 2021
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
Sales
|
5,803
|
|
4,795
|
|
2,020
|
|
1,369
|
|
5,146
|
|
1,537
|
|
(1,537)
|
|
19,133
|
|
20
|
|
19,153
|
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
At
budgeted exchange rates(i)
|
5,527
|
|
2,579
|
|
1,541
|
|
1,176
|
|
2,561
|
|
1,627
|
|
(1,548)
|
|
13,463
|
|
20
|
|
13,483
|
|
Acquisitions and disposals
|
28
|
|
2
|
|
5
|
|
-
|
|
-
|
|
-
|
|
-
|
|
35
|
|
-
|
|
35
|
|
SC&P allocation
|
9
|
|
45
|
|
3
|
|
13
|
|
9
|
|
(79)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Retranslation to actual exchange rates
|
(355)
|
|
(68)
|
|
(137)
|
|
(143)
|
|
(82)
|
|
(11)
|
|
11
|
|
(785)
|
|
-
|
|
(785)
|
|
Net sales
|
5,209
|
|
2,558
|
|
1,412
|
|
1,046
|
|
2,488
|
|
1,537
|
|
(1,537)
|
|
12,713
|
|
20
|
|
12,733
|
|
Operating profit/(loss)
|
|
|
|
|
|
|
|
|
|
|
At
budgeted exchange rates(i)
|
2,469
|
|
728
|
|
228
|
|
422
|
|
628
|
|
(97)
|
|
-
|
|
4,378
|
|
(218)
|
|
4,160
|
|
Acquisitions and disposals
|
(18)
|
|
(3)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(21)
|
|
-
|
|
(21)
|
|
SC&P allocation
|
(30)
|
|
(32)
|
|
(3)
|
|
(27)
|
|
(5)
|
|
97
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Fair value remeasurement of contingent considerations, equity
option and earn out arrangements
|
(9)
|
|
(27)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(36)
|
|
-
|
|
(36)
|
|
Retranslation to actual exchange rates
|
(175)
|
|
(31)
|
|
(54)
|
|
(92)
|
|
(15)
|
|
-
|
|
-
|
|
(367)
|
|
10
|
|
(357)
|
|
Operating profit/(loss) before exceptional items
|
2,237
|
|
635
|
|
171
|
|
303
|
|
608
|
|
-
|
|
-
|
|
3,954
|
|
(208)
|
|
3,746
|
|
Exceptional items
|
-
|
|
(15)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(15)
|
|
-
|
|
(15)
|
|
Operating profit/(loss)
|
2,237
|
|
620
|
|
171
|
|
303
|
|
608
|
|
-
|
|
-
|
|
3,939
|
|
(208)
|
|
3,731
|
|
Non-operating items
|
|
|
|
|
|
|
|
|
|
14
|
|
Net finance charges
|
|
|
|
|
|
|
|
|
|
(373)
|
|
Share of after tax results of associates and joint
ventures
|
|
|
|
|
|
|
|
|
|
334
|
|
Profit before taxation
|
|
|
|
|
|
|
|
|
|
3,706
|
|
Year
ended
|
North America
|
Europe
and
Turkey
|
Africa
|
Latin America and Caribbean
|
Asia
Pacific
|
SC&P
|
Eliminate
inter-
segment
sales
|
Total
operating
segments
|
Corporate
and other
|
Total
|
30 June 2020
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
Sales
|
5,222
|
|
4,697
|
|
1,911
|
|
1,184
|
|
4,645
|
|
1,343
|
|
(1,343)
|
|
17,659
|
|
38
|
|
17,697
|
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
At
budgeted exchange rates(i)
|
4,445
|
|
2,501
|
|
1,300
|
|
944
|
|
2,253
|
|
1,439
|
|
(1,341)
|
|
11,541
|
|
38
|
|
11,579
|
|
Acquisitions and disposals
|
32
|
|
10
|
|
50
|
|
-
|
|
1
|
|
-
|
|
-
|
|
93
|
|
-
|
|
93
|
|
SC&P allocation
|
11
|
|
60
|
|
4
|
|
10
|
|
12
|
|
(98)
|
|
-
|
|
(1)
|
|
1
|
|
-
|
|
Retranslation to actual exchange rates
|
135
|
|
(4)
|
|
(8)
|
|
(46)
|
|
4
|
|
2
|
|
(2)
|
|
81
|
|
(1)
|
|
80
|
|
Net sales
|
4,623
|
|
2,567
|
|
1,346
|
|
908
|
|
2,270
|
|
1,343
|
|
(1,343)
|
|
11,714
|
|
38
|
|
11,752
|
|
Operating profit/(loss)
|
|
|
|
|
|
|
|
|
|
|
At
budgeted exchange rates(i)
|
2,007
|
|
730
|
|
116
|
|
254
|
|
498
|
|
45
|
|
-
|
|
3,650
|
|
(152)
|
|
3,498
|
|
Acquisitions and disposals
|
(1)
|
|
(4)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(5)
|
|
-
|
|
(5)
|
|
SC&P allocation
|
6
|
|
26
|
|
2
|
|
5
|
|
6
|
|
(45)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
Fair value remeasurement of contingent consideration
|
(10)
|
|
(4)
|
|
-
|
|
7
|
|
-
|
|
-
|
|
-
|
|
(7)
|
|
-
|
|
(7)
|
|
Fair value remeasurement of biological assets
|
-
|
|
-
|
|
-
|
|
9
|
|
-
|
|
-
|
|
-
|
|
9
|
|
-
|
|
9
|
|
Retranslation to actual exchange rates
|
32
|
|
9
|
|
(17)
|
|
(27)
|
|
(3)
|
|
-
|
|
-
|
|
(6)
|
|
5
|
|
(1)
|
|
Operating profit/(loss) before exceptional items
|
2,034
|
|
757
|
|
101
|
|
248
|
|
501
|
|
-
|
|
-
|
|
3,641
|
|
(147)
|
|
3,494
|
|
Exceptional items
|
54
|
|
(62)
|
|
(145)
|
|
(6)
|
|
(1,198)
|
|
-
|
|
-
|
|
(1,357)
|
|
-
|
|
(1,357)
|
|
Operating profit/(loss)
|
2,088
|
|
695
|
|
(44)
|
|
242
|
|
(697)
|
|
-
|
|
-
|
|
2,284
|
|
(147)
|
|
2,137
|
|
Non-operating items
|
|
|
|
|
|
|
|
|
|
(23)
|
|
Net finance charges
|
|
|
|
|
|
|
|
|
|
(353)
|
|
Share of after tax results of associates and joint
ventures
|
|
|
|
|
|
|
|
|
|
282
|
|
Profit before taxation
|
|
|
|
|
|
|
|
|
|
2,043
|
|
(i)
These items represent the IFRS 8 performance measures for the
geographical and SC&P segments.
(1)
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 other operating
segments, inter-segment sales are not material.
(2)
The group's net finance charges are managed centrally and are not
attributable to individual operating
segments.
(3) Approximately 40% of annual net sales
occurred in the last four months of calendar year
2020.
(b) Category and geographical analysis
|
Category analysis
|
Geographical analysis
|
Year ended
|
Spirits
£ million
|
Beer(ii)
£ million
|
Ready
to
drink(ii)
£
million
|
Other
£ million
|
Total
£ million
|
Great
Britain
£ million
|
United
States
£ million
|
Nether-
lands
£ million
|
India
£ million
|
Rest of
World
£ million
|
Total
£ million
|
30 June 2021
|
|
|
|
|
|
|
|
|
|
|
|
Sales(i)
|
15,634
|
2,562
|
741
|
216
|
19,153
|
1,822
|
5,441
|
70
|
3,011
|
8,809
|
19,153
|
Year ended
|
|
|
|
|
|
|
|
|
|
|
|
30 June 2020 (Restated)
|
|
|
|
|
|
|
|
|
|
|
|
Sales(i)
|
14,158
|
|
2,687
|
|
621
|
|
231
|
|
17,697
|
|
1,684
|
|
4,839
|
|
62
|
|
2,783
|
|
8,329
|
|
17,697
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i)
The geographical analysis of sales is based on the location of
third party sales.
(ii) Flavoured
malt beverages have been reclassified from ready to drink to beer
from 1 July 2020. This reporting is in line with the nature of
these products and how management reviews the performance. Before
the reclassification the beer sales would
have been £2,188
million in 2021 (2020 - £2,342 million), and the ready to
drink sales would have been £1,115 million in 2021 (2020 -
£966 million).
3. Exceptional items
Exceptional items are those that in management's judgement need to
be disclosed separately. See Explanatory notes, (c) Exceptional
items for the definition of exceptional items and the criteria used
to determine whether an exceptional item is accounted for as
operating or non-operating.
|
Year
ended
30 June
2021
|
Year
ended
30 June
2020
|
|
£ million
|
£ million
|
Exceptional operating items
|
|
|
Ongoing litigation in Turkey
|
(15)
|
|
-
|
|
Guaranteed minimum pension equalisation
|
(5)
|
|
-
|
|
Donations
|
(5)
|
|
(89)
|
|
Obsolete inventories
|
7
|
|
(30)
|
|
Substitution drawback
|
3
|
|
83
|
|
Brand, goodwill, tangible and other assets impairment
|
-
|
|
(1,345)
|
|
Indirect tax in Korea
|
-
|
|
24
|
|
|
(15)
|
|
(1,357)
|
|
Non-operating items
|
|
|
Sale of businesses and brands
|
|
|
United
National Breweries
|
10
|
|
(32)
|
|
USL
businesses
|
3
|
|
-
|
|
Portfolio
of 19 brands
|
1
|
|
2
|
|
Loss
on disposal of associate
|
-
|
|
(1)
|
|
Step acquisitions
|
-
|
|
8
|
|
|
14
|
|
(23)
|
|
|
|
|
Exceptional items before taxation
|
(1)
|
|
(1,380)
|
|
|
|
|
Items included in taxation
|
|
|
Tax on exceptional operating items
|
4
|
|
154
|
|
Exceptional taxation
|
(88)
|
|
-
|
|
|
(84)
|
|
154
|
|
|
|
|
Total exceptional items
|
(85)
|
|
(1,226)
|
|
|
|
|
Attributable to:
|
|
|
Equity shareholders of the parent company
|
(86)
|
|
(1,157)
|
|
Non-controlling interests
|
1
|
|
(69)
|
|
Total exceptional items
|
(85)
|
|
(1,226)
|
|
Operating exceptional items are charged to other operating
expenses.
For further details on exceptional items see Additional financial
information, (c) Exceptional items.
4. Finance income and charges
|
Year
ended
30 June
2021
|
|
Year
ended
30 June
2020
|
|
£ million
|
|
£ million
|
Interest income
|
119
|
|
|
192
|
|
Fair value gain on financial instruments
|
124
|
|
|
123
|
|
Total interest income
|
243
|
|
|
315
|
|
Interest charge on bank loans, bonds and overdrafts
|
(365)
|
|
|
(390)
|
|
Interest charge on leases
|
(16)
|
|
|
(15)
|
|
Fair value loss on financial instruments
|
(126)
|
|
|
(123)
|
|
Interest charge on other borrowings
|
(84)
|
|
|
(120)
|
|
Total interest charges
|
(591)
|
|
|
(648)
|
|
Net interest charges
|
(348)
|
|
|
(333)
|
|
|
|
|
|
Net finance income in respect of post employment plans in
surplus
|
18
|
|
|
26
|
|
Hyperinflation adjustment in respect of Venezuela (a)
|
2
|
|
|
6
|
|
Interest income in respect of direct and indirect tax
|
15
|
|
|
16
|
|
Other
finance income
|
-
|
|
|
3
|
|
Total other finance income
|
35
|
|
|
51
|
|
Hyperinflation adjustment and foreign exchange revaluation of
monetary items in respect of Lebanon (a)
|
(8)
|
|
|
-
|
|
Net finance charge in respect of post employment plans in
deficit
|
(13)
|
|
|
(17)
|
|
Unwinding of discounts
|
(20)
|
|
|
(24)
|
|
Interest charge in respect of direct and indirect tax
|
(11)
|
|
|
(22)
|
|
Change in financial liability (Level 3)
|
(7)
|
|
|
(6)
|
|
Guarantee
fees
|
(1)
|
|
|
(1)
|
|
Other finance charges
|
-
|
|
|
(1)
|
|
Total other finance charges
|
(60)
|
|
|
(71)
|
|
Net other finance charges
|
(25)
|
|
|
(20)
|
|
(a) Hyperinflation adjustment
Venezuela is a hyperinflationary economy where the government
maintains a regime of strict currency controls with multiple
foreign currency rate systems. Access to US dollars on these
exchange systems is very limited. The foreign currency denominated
transactions and balances of the group's Venezuelan operations are
translated into the local functional currency (Venezuelan bolivar)
at the rate they are expected to be settled, applying the most
appropriate official exchange rate (DICOM). For consolidation
purposes, the group converts its Venezuelan operations using
management's estimate of the exchange rate considering forecast
inflation and the most appropriate official exchange rate. The
exchange rate used to translate the results of the group's
Venezuelan operations was VES/£ 236,878,083 for the year ended
30 June 2021 (2020 - VES/£ 10,024,865). Movement in the price
index for the year ended 30 June 2021 was 1,991% (2020 - 2,464%).
The inflation rate used by the group is provided by an independent
valuer, because no reliable, official published rate is available
that is representative of the situation in 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 year ended 30 June 2021 and
30 June 2020 and with the amounts that would have resulted if the
official DICOM exchange rate had been applied:
|
Year ended 30 June 2021
|
|
Year ended 30 June 2020
|
|
At estimated exchange rate
|
At DICOM exchange rate
|
|
At estimated
exchange rate
|
At DICOM
exchange rate
|
|
236,878,083
VES/£
|
4,449,579
VES/£
|
|
10,024,865
VES/£
|
252,558
VES/£
|
|
£ million
|
£ million
|
|
£ million
|
£ million
|
Net sales
|
-
|
|
4
|
|
|
-
|
|
3
|
|
Operating (loss)/profit
|
(1)
|
|
11
|
|
|
-
|
|
10
|
|
Other finance income - hyperinflation adjustment
|
2
|
|
122
|
|
|
6
|
|
222
|
|
Net cash inflow from operating activities
|
-
|
|
9
|
|
|
-
|
|
6
|
|
Net assets
|
38
|
|
2,016
|
|
|
48
|
|
1,893
|
|
Lebanon became a hyperinflationary economy during the year ended 30
June 2021. Hyperinflationary accounting has been applied for the
group's Lebanese operations from 1 July 2020, with
hyperinflationary gains and foreign exchange losses associated with
monetary items being reported in finance charges. The impact of
applying hyperinflationary accounting was
immaterial.
5. Taxation
For the year ended 30 June 2021, the £907 million taxation
charge (2020 - £589 million) comprises a UK tax charge of
£168 million (2020 - £144 million) and a foreign tax
charge of £739 million (2020 - £445
million).
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. As at 30 June 2021 the ongoing
audits that are provided for individually are not expected to
result in a material tax liability. The current tax asset
of £145
million (30
June 2020 - £190
million) and tax liability
of £146
million (30
June 2020 - £246
million)
includes £129
million (30
June 2020 - £189
million) of provisions for tax
uncertainties with the reductions mainly driven by audit payments
and foreign exchange movements.
The tax rate before exceptional items for the year ended 30 June
2021 was 22.2% compared with 21.7% for the year ended 30 June
2020.
6. Inventories
|
30 June 2021
|
|
30 June 2020
|
|
£ million
|
|
£ million
|
Raw materials and consumables
|
348
|
|
|
363
|
|
Work in progress
|
60
|
|
|
48
|
|
Maturing inventories
|
4,668
|
|
|
4,562
|
|
Finished goods and goods for resale
|
969
|
|
|
799
|
|
|
6,045
|
|
|
5,772
|
|
7. Net borrowings
|
30 June 2021
|
|
30 June 2020
|
|
£ million
|
|
£ million
|
Borrowings due within one year and bank overdrafts
|
(1,862)
|
|
|
(1,995)
|
|
Borrowings due after one year
|
(12,865)
|
|
|
(14,790)
|
|
Fair value of foreign currency forwards and swaps
|
169
|
|
|
497
|
|
Fair value of interest rate hedging instruments
|
63
|
|
|
189
|
|
Lease liabilities
|
(363)
|
|
|
(470)
|
|
|
(14,858)
|
|
|
(16,569)
|
|
Cash and cash equivalents
|
2,749
|
|
|
3,323
|
|
|
(12,109)
|
|
|
(13,246)
|
|
8. Reconciliation of movement in net borrowings
|
Year
ended
30 June
2021
|
|
Year
ended
30 June
2020
|
|
£ million
|
|
£ million
|
Net
(decrease)/increase in cash and cash equivalents before
exchange
|
(231)
|
|
|
2,552
|
|
Net
decrease/(increase) in bonds and other borrowings(i)
|
967
|
|
|
(4,089)
|
|
Net
decrease/(increase) in net borrowings from cash flows
|
736
|
|
|
(1,537)
|
|
Exchange differences on net borrowings
|
598
|
|
|
(95)
|
|
Other
non-cash items(ii)
|
(197)
|
|
|
(86)
|
|
Adoption of IFRS 16
|
-
|
|
|
(251)
|
|
Net
borrowings at beginning of the year
|
(13,246)
|
|
|
(11,277)
|
|
Net
borrowings at end of the year
|
(12,109)
|
|
|
(13,246)
|
|
(i)
In the year ended 30 June 2021, net decrease in bonds and other
borrowings excludes £2 million cash outflow in respect of
derivatives designated in forward point hedges (2020 - £6
million).
(ii)
In the year ended 30 June 2021, other non-cash items are
principally in respect of fair value changes of cross currency
interest rate swaps and interest rate swaps, partially offset by
the fair value changes of borrowings. In the year ended 30
June
2020,
other non-cash items are principally in respect of leases of
£206 million entered into in the year, partially offset by the
fair value changes of cross currency interest rate
swaps.
In the year ended 30 June 2021, the group issued bonds of
€700 million (£636 million - net of discount and fee)
and £395 million (including £5 million discount
and fee) and repaid bonds of $696 million
(£551 million) and €775 million
(£696 million). In the year ended 30 June 2020, the group
issued bonds of $4,100 million (£3,296 million), €1,750
million (£1,594 million) and £298 million (including
£2 million discount and fee) and repaid bonds of $1,000
million (£820 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 Creations &
Products Inc, the owner of the Zacapa rum brand, to Diageo. The
liability is fair valued and as at 30 June 2021 an amount of
£149 million (30 June 2020 - £167 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 30 June 2021, 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 next 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 2023, the fair value of
the liability would increase by approximately
£4 million.
Included in other financial liabilities, the contingent
consideration on acquisition of businesses represents the present
value of payments up to £474 million linked to certain
performance targets which are expected to be paid over the next 10
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 year ended 30 June
2021.
The group's financial assets and liabilities measured at fair value
are categorised as follows:
|
30 June 2021
|
|
30 June 2020
|
|
£ million
|
|
£ million
|
Derivative assets
|
443
|
|
|
758
|
Derivative liabilities
|
(129)
|
|
|
(145)
|
|
Valuation techniques based on observable market input (Level
2)
|
314
|
|
|
613
|
|
Financial assets - other
|
138
|
|
|
116
|
|
Financial liabilities - other
|
(578)
|
|
|
(416)
|
|
Valuation techniques based on unobservable market input (Level
3)
|
(440)
|
|
|
(300)
|
|
In the years ended 30 June 2021 and 30 June 2020, the increase in
financial assets - other of £22 million (2020 - £30
million) is principally due to acquisitions.
The movements in level 3 instruments, measured on a recurring
basis, are as follows:
|
Zacapafinancialliability
|
|
Contingent
consideration recognised on acquisition of businesses(i)
|
|
Zacapafinancialliability
|
|
Contingent consideration recognised on acquisition of
businesses
|
|
Year
ended
30 June
2021
|
|
Year
ended
30 June
2021
|
|
Year
ended
30 June
2020
|
|
Year
ended
30 June
2020
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
At the beginning of the year
|
(167)
|
|
|
(249)
|
|
|
(174)
|
|
|
(227)
|
|
Net losses included in the income statement
|
(7)
|
|
|
(47)
|
|
|
(6)
|
|
|
(24)
|
|
Net gains/(losses) included in exchange in other comprehensive
income
|
21
|
|
|
31
|
|
|
(5)
|
|
|
(5)
|
|
Net (losses)/gains included in retained earnings
|
(2)
|
|
|
-
|
|
|
9
|
|
|
-
|
|
Acquisitions
|
-
|
|
|
(253)
|
|
|
-
|
|
|
(42)
|
|
Settlement of liabilities
|
6
|
|
|
89
|
|
|
9
|
|
|
49
|
|
At the end of the year
|
(149)
|
|
|
(429)
|
|
|
(167)
|
|
|
(249)
|
|
(i)
Included in the balance at 30 June 2021 is £80 million in
respect of the acquisition of Casamigos (30 June 2020 - £173
million), and £177 million in respect of the acquisition of
Aviation Gin and Davos Brands.
The carrying amount of the group's financial assets and liabilities
are generally the same as their fair value apart from borrowings.
At 30 June 2021 the fair value of gross borrowings (excluding lease
liabilities and the fair value of derivative instruments) was
£15,895 million and the carrying value was £14,727
million (30 June 2020 - £18,175 million and £16,785
million, respectively).
10. Dividends and other reserves
|
Year
ended
30 June
2021
|
|
Year
ended
30 June
2020
|
|
£ million
|
|
£ million
|
Amounts recognised as distributions to equity shareholders in the
year
|
|
|
|
Final
dividend for the year ended 30 June 2020 of
42.47 pence per share (2019 - 42.47 pence)
|
992
|
|
|
1,006
|
|
Interim
dividend for the year ended 30 June 2021 of
27.96 pence per share (2020 - 27.41 pence)
|
654
|
|
|
640
|
|
|
1,646
|
|
|
1,646
|
|
A final dividend of 44.59 pence per share was recommended by the
Board of Directors on 28 July 2021 for approval by
shareholders at the Annual General Meeting scheduled to be held on
30 September 2021 bringing the full year dividend to 72.55 pence
per share for the year ended 30 June 2021. As the approval will be
after the balance sheet date, the final dividend has not been
included as a liability.
Other reserves of £1,621 million at 30 June 2021 (2020 -
£2,272 million) include a capital redemption reserve of
£3,202 million (2020 - £3,201 million), a hedging reserve
of £113 million surplus (2020 - £93 million surplus) and
an exchange reserve of £1,694 million deficit (2020 -
£1,022 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 surplus £22 million
(2020 - £30 million surplus) in the hedging
reserve.
11. Acquisition of businesses and purchase of non-controlling
interests
Acquisition of businesses
Fair value of assets and liabilities acquired and cash
consideration paid in respect of acquisition of
subsidiaries in the year ended 30 June 2021 were as
follows:
|
Aviation Gin and Davos Brands
|
Other
|
Total
|
|
£ million
|
£ million
|
£ million
|
Brands
|
206
|
|
128
|
|
334
|
|
Property, plant and equipment
|
11
|
|
4
|
|
15
|
|
Inventories
|
7
|
|
5
|
|
12
|
|
Other working capital
|
-
|
|
(3)
|
|
(3)
|
|
Deferred tax
|
-
|
|
(15)
|
|
(15)
|
|
Borrowings
|
(6)
|
|
(2)
|
|
(8)
|
|
Cash
|
2
|
|
2
|
|
4
|
|
Fair value of assets and liabilities
|
220
|
|
119
|
|
339
|
|
Goodwill arising on acquisition
|
228
|
|
46
|
|
274
|
|
Consideration payable
|
448
|
|
165
|
|
613
|
|
Satisfied by:
|
|
|
|
Cash
consideration paid
|
(263)
|
|
(95)
|
|
(358)
|
|
Contingent
consideration payable
|
(185)
|
|
(68)
|
|
(253)
|
|
Deferred
consideration payable
|
-
|
|
(2)
|
|
(2)
|
|
|
(448)
|
|
(165)
|
|
(613)
|
|
Cash consideration paid in respect of the acquisition of businesses
and purchase of shares of non-controlling interests in the year
ended 30 June 2021 were as follows:
|
Consideration
|
|
£ million
|
Cash consideration paid for subsidiaries
|
(358)
|
|
Deferred consideration paid for subsidiaries
|
(1)
|
|
Cash consideration paid for Casamigos
|
(89)
|
|
Cash consideration paid in respect of other prior year
acquisitions
|
(6)
|
|
Capital injection in associates
|
(38)
|
|
Cash acquired
|
4
|
|
Net cash outflow on acquisition of businesses
|
(488)
|
|
Purchase of shares of non-controlling interests
|
(42)
|
|
Total net cash outflow
|
(530)
|
|
On 30 September 2020, Diageo completed the acquisition of Aviation
Gin LLC (Aviation Gin) and Davos Brands LLC (Davos Brands) to
support Diageo's participation in the super premium gin segment for
a total consideration of $337 million (£263 million)
upfront in cash and contingent consideration of up to
$275 million (£214 million) linked to performance
targets.
It is expected that the goodwill and brand will be deductible for
tax purposes. The goodwill arising on the acquisition of Aviation
Gin and Davos Brands represents expected revenue and cost synergies
and acquired workforce. Aviation Gin and Davos Brands contributed
$33 million (£26 million) to sales and $15 million
(£11 million) loss to the period, out of which $9 million
(£7 million) is related to acquisition transaction costs
in the year ended 30 June 2021.
Diageo also completed a number of additional acquisitions in the
year ended 30 June 2021, comprising: (i) on 26 February 2021, the
acquisition of Chase Distillery Limited, to further support
Diageo's participation in the premium-plus gin segment in the
United Kingdom; (ii) on 8 March 2021, the acquisition of Far West
Spirits LLC, owner of the Lone River Ranch Water brand, to improve
Diageo's participation in the ready to drink category in the United
States; and (iii) on 14 April 2021, the acquisition of Sons of
Liberty Spirits Company, to expand Diageo's spirits-based ready to
drink portfolio with Loyal 9 Cocktails. The aggregate up-front cash
consideration paid on completion of these three transactions in the
year ended 30 June 2021 was £95 million. In addition, two
of these transactions include provision for further contingent
consideration of up to £86 million in aggregate, in each case
linked to performance targets, and one of the transactions provides
for a further £2 million of deferred consideration, of
which £1 million has been paid by 30 June
2021.
Purchase of shares of non-controlling interests
On 21 October 2020 and on 6 November 2020, EABL completed the
acquisition of 13.3% and 16.7%, respectively of shares in Serengeti
Breweries Limited for a total consideration of $55 million
(£42 million) in cash and £16 million in the form of
shareholder loans outstanding to EABL and Diageo Holdings
Netherlands B.V. at the date of completion, increasing Diageo's
effective economic interest from 40.2% to 47.0%. Both transactions
are recognised within retained earnings.
12. Intangible assets - Sensitivity to change in key
assumptions
Impairment testing for the year ended 30 June 2021 has identified
the following cash-generating units as being sensitive to
reasonably possible changes in assumptions.
The table below shows the headroom at 30 June 2021 and the
impairment charge that would be required if the assumptions in the
calculation of their value in use were changed:
|
Carrying value of CGU
£ million
|
Headroom
£ million
|
1ppt
increase in discount rate
£
million
|
2ppt
decrease in annual growth rate in forecast period
2022-2029
£
million
|
Category growth scenario
£ million
|
India(i)
|
2,997
|
|
170
|
|
(116)
|
|
(114)
|
|
n/a
|
Antiquity
brand(i)
|
148
|
|
-
|
|
(20)
|
|
(17)
|
|
n/a
|
USL
Popular brands(i)
|
448
|
|
23
|
|
(28)
|
|
(35)
|
|
n/a
|
Windsor
Premier brand(ii)
|
152
|
|
45
|
|
-
|
|
n/a
|
(13)
|
|
(i)
Reasonably possible changes in key assumptions that would result in
an impairment of the India cash-generating unit, Antiquity and USL
Popular brands would be a 1ppt increase in discount rate or a 2ppt
decrease in the annual growth rate in the
forecast
period of 2022-2029.
(ii)
The Windsor Premier brand is disclosed as sensitive due to
challenging market conditions. The only change in key assumptions
considered reasonably possible that would result in an impairment
of the brand would be a scenario where volume
growth
rates are forecasted assuming permanent damage of local whisky
category with no recovery to F19 levels based on latest outlook of
IWSR reports, and the fact that the majority of sales are
on-trade.
13. Contingent liabilities and legal proceedings
(a) Guarantees and related matters
As of 30 June 2021, the group has no material unprovided guarantees
or indemnities in respect of liabilities of third
parties.
(b) Acquisition of USL shares from UBHL, winding-up petitions
against UBHL and other 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 21,767,749 shares (14.98%)
in United Spirits Limited (USL) for a total consideration of INR
31.3 billion (£349 million), including 10,141,437 shares
(6.98%) from UBHL. The SPA was signed on 9 November 2012 and was
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 30 June 2021, 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 sections
536 and 537 of 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 five winding-up
petitions that were pending against UBHL on 9 November 2012, being
the date of the SPA. Additional winding-up petitions have been
brought against UBHL since 9 November 2012, and the Leave Order did
not extend to them. 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 on 4 July 2013,
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 10,141,437 USL shares from UBHL at that
time.
Following closing of the UBHL Share Sale, appeals were filed by
various petitioners in respect of the Leave Order. On 20 December
2013, the division bench of the High Court set aside the Leave
Order (the December 2013 Order). Following the December 2013 Order,
Diageo filed special leave petitions (SLPs) in the Supreme Court of
India against the December 2013 Order.
On 10 February 2014, the Supreme Court of India issued an order
giving notice in respect of the SLPs and ordering that the status
quo be maintained with regard to the UBHL Share Sale pending a
hearing on the matter in the Supreme Court. Following a number of
adjournments, the next date for a substantive hearing of the SLPs
(in respect of which leave has since been granted and which have
been converted to civil appeals) is yet to be
fixed.
In separate proceedings, the High Court passed a winding-up order
against UBHL on 7 February 2017. On 4 March 2017, UBHL appealed
against this order before a division bench of the High Court. On 6
March 2020, the division bench of the High Court confirmed the
winding up order dated 7 February 2017, and dismissed the appeal
filed by UBHL. On 30 June 2020, UBHL filed a special leave petition
in the Supreme Court of India against the order of the division
bench of the High Court. On 26 October 2020, the Supreme Court of
India dismissed the petition filed by
UBHL.
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 acquired from UBHL (now represented by 50,707,185 USL shares
following a share split). 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 be
able to consolidate USL as a subsidiary 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 timeframe within which
they would be concluded.
Diageo also has the benefit of certain contractual undertakings and
commitments from the relevant sellers in relation to potential
challenges to its unencumbered title to the USL shares acquired on
4 July 2013, including relating to the winding-up petitions
described above and/or certain losses and costs that may be
incurred in the event of third party actions relating to the
acquisition of the USL shares.
(c) Continuing matters relating to the resignation of Dr Vijay
Mallya from USL and USL internal inquiries
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. As specified by
Diageo in its announcement at that time, these arrangements ended
its prior agreement with Dr Mallya regarding his position at USL,
therefore bringing to an end the uncertainty relating to the
governance of USL, and put in place a five-year global non-compete
(excluding the United Kingdom), non-interference, non-solicitation
and standstill arrangement with Dr Mallya. As part of those
arrangements, USL, Diageo and Dr Mallya agreed a mutual release in
relation to matters arising out of an inquiry into certain matters
referred to in USL's financial statements and the qualified
auditor's report for the year ended 31 March 2014 (the Initial
Inquiry) which had revealed, among other things, certain diversions
of USL funds. Dr Mallya also agreed not to pursue any claims
against Diageo, USL and their affiliates (including under the prior
agreement with Diageo). In evaluating entering into such
arrangements, Diageo considered the impact of the arrangements on
USL and all of USL's shareholders, and came to the view that the
arrangements were in the best interests of USL and its
shareholders.
Diageo's agreement with Dr Mallya (the February 2016 Agreement)
provided for a payment of $75 million (£53 million) to Dr
Mallya over a five-year period in consideration for the five-year
global non-compete, non-interference, non-solicitation and
standstill commitments referred to above, his resignation from USL
and the termination of his USL-related appointment and governance
rights, the relinquishing of rights and benefits attached to his
position at USL, and his agreement not to pursue claims against
Diageo and USL. The February 2016 Agreement also provided for the
release of Dr Mallya's personal obligations to indemnify (i) Diageo
Holdings Netherlands B.V. (DHN) in respect of its earlier liability
($141 million (£96 million)) under a backstop guarantee of
certain borrowings of Watson Limited (Watson) (a company affiliated
with Dr Mallya), and (ii) Diageo Finance plc in respect of its
earlier liability (£30 million) under a guarantee of certain
borrowings of United Breweries Overseas Limited, a subsidiary of
UBHL. $40 million (£28 million) of the $75 million (£53
million) amount was paid on signing of the February 2016 Agreement
with the balance being payable in equal instalments of $7 million
(£5 million) a year over five years, subject to and
conditional on Dr Mallya's compliance with certain terms of the
agreement.
While the five instalment payments of $7 million (£5 million)
would have become due on 25 February 2017, 25 February 2018, 25
February 2019, 25 February 2020 and 25 February 2021, respectively,
owing to various reasons (including breaches committed by Dr Mallya
and certain persons connected with him of several provisions of the
February 2016 Agreement and agreements of the same date between Dr
Mallya and USL), Diageo believes that it was not liable to pay such
amounts and did not do so. By notice to Dr Mallya and certain
persons connected with him on 24 February 2017, 3 November 2017, 23
February 2018, 22 August 2018, 22 February 2019, 24 February 2020
and 22 February 2021, Diageo and other group companies have
demanded from Dr Mallya the repayment of $40 million (£28
million) which was paid by Diageo on 25 February 2016, and also
sought compensation from him for various losses incurred by the
relevant members of the Diageo group on account of the breaches
committed by him and certain persons connected with him. 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
certain of the matters specified in those notices. At the same time
DHN also commenced claims in the English High Court against Dr
Mallya, his son Sidhartha Mallya, Watson (a company affiliated with
Dr Mallya) 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 (£105 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.
These additional claims are described in paragraph (d)
below.
Dr Mallya, Sidhartha Mallya and the relevant affiliated companies
filed a defence to such claims and the additional claims on 12
March 2018, and Dr Mallya also filed a counterclaim for payment of
the two $7 million (£5 million) instalment payments that had
then been withheld by Diageo as described above. Diageo and the
other relevant members of its group filed a reply to that defence
and a defence to the counterclaim on 5 September 2018.
Diageo continues to prosecute its claims and to defend the
counterclaim. As part of this, on 18 December 2018, 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. That application was made by DHN on the basis that the defence
filed by Dr Mallya and his co-defendants in relation to those
matters had no real prospect of success.
As described in paragraph (d) below, this application was
successful in relation to the predominant part of Watson and CASL's
liability to repay DHN and, since that application, Watson and
CASL's defence in relation to the remaining part of this liability
has also been struck out. Accordingly, Diageo and DHN have 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.
The remaining elements of the claims originally commenced on 16
November 2017 by Diageo and the relevant members of its group are
proceeding to a trial, which is scheduled to take place from 21
November 2021 through 30 November 2021.
As previously announced by USL, the Initial Inquiry identified
certain additional parties and matters indicating the possible
existence of other improper transactions. These transactions could
not be fully analysed during the Initial Inquiry and, accordingly,
USL, as previously announced, mandated that its Managing Director
and Chief Executive Officer conduct a further inquiry into the
transactions involving the additional parties and the additional
matters to determine whether they also suffered from improprieties
(the Additional Inquiry). USL announced the results of the
Additional Inquiry in a notice to the Indian Stock Exchange dated 9
July 2016. The mutual release in relation to the Initial Inquiry
agreed by Diageo and USL with Dr Mallya announced on 25 February
2016 does not extend to matters arising out of the Additional
Inquiry.
As stated in USL's previous announcement, the Additional Inquiry
revealed further instances of actual or potential fund diversions
from USL and its Indian and overseas subsidiaries to, in most
cases, Indian and overseas entities in which Dr Mallya appears to
have a material direct or indirect interest, as well as other
potentially improper transactions involving USL and its Indian and
overseas subsidiaries.
In connection with the matters identified by the Additional
Inquiry, USL has, pursuant to a detailed review of each case of
such fund diversion and after obtaining expert legal advice, where
appropriate, filed civil suits for recovery of funds from certain
parties, including Dr Mallya, before the relevant courts in
India.
The amounts identified in the Additional Inquiry have been
previously provided for or expensed in the financial statements of
USL or its subsidiaries for prior periods. 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 continuing matters relating to Dr Mallya and
affiliates
DHN issued a conditional backstop guarantee on 2 August 2013 to
Standard Chartered Bank (Standard Chartered) pursuant to a
guarantee commitment agreement (the Guarantee Agreement). The
guarantee was in respect of the liabilities of Watson, a company
affiliated with Dr Mallya, under a $135 million (£92 million)
facility from Standard Chartered (the Facility Agreement). The
Guarantee Agreement was entered into as part of the arrangements
put in place and announced at the closing of the USL transaction on
4 July 2013.
DHN's provision of the Guarantee Agreement enabled the refinancing
of certain existing borrowings of Watson from a third party bank
and facilitated the release by that bank of rights over certain USL
shares that were to be acquired by Diageo as part of the USL
transaction. The facility matured and entered into default in May
2015. In aggregate DHN paid Standard Chartered $141 million
(£101 million) under this guarantee, i.e. including payments
of default interest and various fees and
expenses.
Watson remains liable for all amounts paid by DHN under the
guarantee. Under the guarantee documentation with Standard
Chartered, DHN is entitled to the benefit of the underlying
security package for the loan, including: (a) certain shares in
United Breweries Limited (UBL) held solely by Dr Mallya and certain
other shares in UBL held by Dr Mallya jointly with his son
Sidhartha Mallya, and (b) the shareholding in
Watson.
Aspects of the security package are the subject of various
proceedings in India in which third parties are alleging and
asserting prior rights to certain assets comprised in the security
package or otherwise seeking to restrain enforcement against
certain assets by Standard Chartered and/or DHN. These proceedings
are ongoing and DHN will continue to vigorously pursue these
matters as part of its efforts for enforcement of the underlying
security and recovery of outstanding amounts. Diageo believes that
the existence of any prior rights or dispute in relation to the
security would be in breach of representations and warranties given
by Dr Mallya and others to Standard Chartered at the time the
security was granted and further believes that certain actions
taken by Dr Mallya in relation to the proceedings described above
also breached his obligations to Standard Chartered. In addition to
these third party proceedings, Dr Mallya is also subject to
proceedings in India under the Prevention of Money Laundering Act
and the Fugitive Economic Offenders Act in which the relevant
Indian authority, the Directorate of Enforcement, is seeking
confiscation of the UBL shares which were provided as security for
Watson's liabilities. DHN is participating in these proceedings in
order to protect its security interest in respect of the UBL
shares. Under the proceedings under the Prevention of Money
Laundering Act, the Special Court passed an order on 24 May 2021
directing, among other things, the release of certain assets of Dr
Mallya including the UBL shares in favour of third party banks. DHN
has subsequently filed a writ petition before the Bombay High Court
challenging this order of the Special Court insofar as it relates
to its security interest in respect of the UBL
shares.
Under the terms of the guarantee and as a matter of law, there are
arrangements to pass on to DHN the benefit of the security package
upon payment by DHN under the guarantee of all amounts owed to
Standard Chartered. Payment under the guarantee has now occurred as
described above. To the extent possible in the context of the
proceedings described above, DHN continues to work towards
enforcement of the security package, including, when appropriate,
in conjunction with Standard Chartered. DHN's ability to assume or
enforce security over some elements of the security package is also
subject to regulatory consent. It is not at this stage possible to
determine whether such consent would be forthcoming.
In addition to the Indian proceedings just described, certain of
the assets comprised in the security package may also be affected
by a worldwide freezing order of the English High Court granted on
24 November 2017 and continued on 8 December 2017 and 8 May 2018 in
respect of the assets of Dr Mallya.
The agreement with Dr Mallya referenced in paragraph (c) above does
not impact the security package. Watson remains liable for all
amounts paid pursuant to the guarantee and DHN has the benefit of a
counter-indemnity from Watson in respect of payments in connection
with the guarantee, as well as a claim against CASL as a co-surety
with DHN of Watson's obligations. The various security providers,
including Dr Mallya and Watson, acknowledged in the February 2016
Agreement referred to in paragraph (c) above that DHN is entitled
to the benefit of the security package underlying the Standard
Chartered facility and have also undertaken to take all necessary
actions in that regard. Further, Diageo believes that the existence
of any prior rights or disputes in relation to the security package
would be in breach of certain confirmations given to Diageo and DHN
pursuant to that agreement by Dr Mallya, Watson and certain
connected persons.
On 16 November 2017, DHN commenced various claims in the English
High Court for, in aggregate, in excess of $142 million (£105
million) (plus interest) in relation to these matters, including
the following: (i) a claim against Watson for $141 million
(£101 million) (plus interest) under Watson's
counter-indemnity to DHN in respect of payments made by DHN to
Standard Chartered under the guarantee referred to above; (ii) a
claim against Dr Mallya and Sidhartha Mallya under various
agreements creating or relating to the security package referred to
above for (a) the costs incurred to date in the various Indian
proceedings referred to above (plus interest), and (b) damages of
$141 million (£101 million), being DHN's loss as a result of
those Indian proceedings which currently prevent enforcement of the
security over shares in UBL (plus interest); and (iii) a claim
against CASL, as a co-surety with DHN of Watson's obligations under
the Facility Agreement, for 50% of the difference between the
amount claimed under (i) above and the amount (if any) that DHN is
in fact able to recover from Watson, Dr Mallya and/or Sidhartha
Mallya.
As noted in paragraph (c), Dr Mallya, Sidhartha Mallya and the
relevant affiliated companies filed a defence to these claims on 12
March 2018. Diageo and the other relevant members of its group
filed a reply to that defence on 5 September
2018.
DHN and Diageo continue to prosecute these claims. As part of that,
on 18 December 2018, Diageo and the other relevant members of its
group filed an application for strike out and/or summary judgment
in respect of certain aspects of the defence filed by Dr Mallya,
Sidhartha Mallya and the relevant affiliated companies, including
in respect of Watson and CASL's liability to repay
DHN.
This summary judgement and strike out application was heard by the
English High Court on 24 May 2019. The court decided in favour of
DHN that (i) Watson is liable to pay, and has no defence against
paying, $135 million (£92 million) plus interest of $11
million (£8 million) to DHN, and (ii) CASL is liable, as
co-surety, to pay, and has no defence against paying, 50% of any
such amount unpaid by Watson, i.e. up to $67.5 million (£49
million) plus interest of $5.5 million (£4 million) to DHN.
Watson and CASL were ordered to pay such sums, as well as certain
amounts in respect of DHN and Diageo's costs, to DHN by 21 June
2019. Such amounts were not paid on that date by either Watson or
CASL.
On 15 October 2020, as a result of applications made by DHN to
recover certain outstanding costs owed by Watson and CASL (being
approximately £260,000 plus interest, which remained unpaid),
Dr Mallya and Sidhartha Mallya were ordered to pay those amounts by
27 November 2020. As Dr Mallya and Sidhartha Mallya, in default of
the Court order, failed to make the required payments to DHN: (i)
Watson and CASL's defence to DHN's remaining claim for payment of
approximately $6 million (£4 million) (plus interest) has been
struck out, with further judgment in DHN's favour being entered
which will be pursued along with the original judgment as set out
above, and (ii) DHN is pursuing enforcement against Dr Mallya and
Sidhartha Mallya for the judgment debt of approximately
£260,000 plus interest.
(e) Other matters in relation to USL
Following USL's earlier updates concerning the Initial Inquiry as
well as in relation to the arrangements with Dr Mallya that were
the subject of the 25 February 2016 announcement, USL and Diageo
have received various notices from Indian regulatory authorities,
including the Ministry of Corporate Affairs, Enforcement
Directorate and Securities and Exchange Board of India
(SEBI).
Diageo and USL are co-operating fully with the authorities in
relation to these matters. Diageo and USL have also received
notices from SEBI requesting information in relation to, and
explanation of the reasons for, the arrangements with Dr Mallya
that were the subject of the 25 February 2016 announcement as well
as, in the case of USL, in relation to the Initial Inquiry and the
Additional Inquiry, and, in the case of Diageo, whether such
arrangements with Dr Mallya or the Watson backstop guarantee
arrangements referred to in paragraphs (c) and (d) above were part
of agreements previously made with Dr Mallya at the time of the
Original USL Transaction announced on 9 November 2012 and the open
offer made as part of the Original USL Transaction. Diageo and USL
have complied with such information requests and Diageo has
confirmed that, consistent with prior disclosures, the Watson
backstop guarantee arrangements and the matters described in the 25
February 2016 announcement were not the subject of any earlier
agreement with Dr Mallya. In respect of the Watson backstop
guarantee arrangements, SEBI issued a further 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 is clear 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 therefore
believes the decision in the SEBI notice to be misconceived and
wrong in law and 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 notice, Diageo believes SEBI's latest order to
be misconceived and wrong in law and has filed an appeal before SAT
against the order. This 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.
In relation to the matters described in the 25 February 2016
announcement, Diageo had also responded to a show cause notice
dated 12 May 2017 from SEBI arising out of the previous
correspondence in this regard and made its further submissions in
the matter, including at a personal hearing before a Whole Time
Member of SEBI. On 6 September 2018, SEBI issued an order holding
that Diageo had acquired sole control of USL following its earlier
open offers, and that no fresh open offer was triggered by
Diageo.
(f) 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 (£61
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 (£4 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 has since filed an appeal
against this order before a division bench of the High Court, which
on 30 July 2019 has 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 aforesaid amount of INR 459 million (£4
million) remains recoverable from IDBI.
(g) 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.
In April 2019, the European Commission issued its decision in a
state aid investigation into the Group Financing Exemption in the
UK controlled foreign company (CFC) rules. The European Commission
found that part of the Group Financing Exemption constitutes state
aid. The Group Financing Exemption was introduced in legislation by
the UK government in 2013. In common with other UK-based
international companies whose arrangements are in line with current
UK CFC legislation, Diageo could have been affected by the ultimate
outcome of this investigation. The UK government and other UK-based
international companies, including Diageo which calculated its
maximum potential liability to be approximately £277 million,
appealed to the General Court of the European Union against the
decision. In February 2021, HMRC completed its review of the
specific facts relating to Diageo and confirmed that Diageo was not
a beneficiary of state aid and that no assessment would be
issued.
The group operates in a large number of markets with complex tax
and legislative regimes that are open to subjective interpretation.
As assessing an accurate value of contingent liabilities in these
markets requires a high level of judgement, contingent liabilities
are disclosed on the basis of the current known possible exposure
from tax assessment values.
Diageo has reviewed its disclosures in relation to Brazil and
India, where Diageo has a large number of ongoing tax cases. While
not all of these cases are individually significant, the current
assessment of the aggregate possible exposures is up to
approximately £449 million for Brazil and up to approximately
£140 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. 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 2017 in relation to tax assessments where
the risk is considered to be remote or possible. These payments
have to be made in order to challenge the assessments and as such
have been recognised as a receivable on the consolidated balance
sheet. The total amount of protest payments recognised as a
receivable as at 30 June 2021 is £106 million (corporate tax
payments of £96 million and indirect tax payments of £10
million).
In the United States a lawsuit was filed on 15 April 2019 by the
National Association of Manufacturers (NAM) against the United
States Department of the Treasury (US Treasury) and the United
States Customs and Border Protection (CBP) on behalf of its
affected industry members, including Diageo, to invalidate
regulations published in February 2019 and to ensure that
substitution drawback is permitted in accordance with 19 USC §
1313(j)(2) as amended by the Trade Facilitation and Trade
Enforcement Act of 2015, which was enacted on 24 February 2016
(TFTEA). Substitution drawback permits the refund, including of
excise taxes, paid on imported merchandise when sufficiently
similar substitute merchandise is exported. The United States
Congress passed the TFTEA to, among other things, clarify and
broaden the standard for what constitutes substitute merchandise.
This change should entitle Diageo to obtain substitution drawback
in respect of certain eligible product categories. Despite this
change in the law, the US Treasury and CBP issued final regulations
in 2019 declaring that substitution drawback is not available for
imports when substituted with an export on which no tax was paid.
The Court of International Trade issued a judgement in favour of
NAM on 18 February 2020, denying the request by the US Treasury and
CBP for a stay of payment on 15 May 2020, and on 26 May 2020,
ordered the immediate processing of claims. Total payments of $129
million (£94 million) had been received as of 30 June 2021 in
respect of this matter, with approximately $33 million
(£26 million) of this amount received during the year
ended 30 June 2020 and another $96 million (£68 million)
received during the year ended 30 June 2021. Remaining eligible
outstanding claims of Diageo Americas Supply, Inc. are estimated at
$12 million (£8 million). However, the US Treasury and CBP has
filed an appeal with the US Federal Court of Appeals, which is now
fully briefed. Although Diageo believes that the NAM is more likely
than not to ultimately prevail, if they were to fail, the CBP could
be permitted to recover these payments.
(h) Information request
Diageo has received an inquiry from the US Securities and Exchange
Commission requesting information 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.
(i) Other
The group has extensive international operations and is a defendant
in a number of legal, customs and tax proceedings incidental to
these operations, the outcome of which cannot at present 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 pension plans.
In April 2020, the Directors became aware that certain purchases by
Diageo of its own shares and certain transactions related to
Diageo's employee share schemes between 10 May 2019 and 9 August
2019, amounting to approximately £320 million ('the
affected transactions'), were undertaken contrary to the applicable
provisions of the Companies Act 2006 as they were undertaken
following utilisation in full of Diageo plc's distributable
reserves as set out in its balance sheet as at 30 June 2018. At the
Annual General Meeting on 28 September 2020, a resolution was
passed to appropriate an equivalent amount of distributable profits
of the company to the payments made in respect of the affected
transactions and implement arrangements to put all potentially
affected parties, so far as possible, in the position in which they
were intended to be had the affected transactions been undertaken
in accordance with the applicable provisions of the Companies Act
2006. This resolution and the arrangements that it has implemented
constituted a related party transaction under IAS 24 and under the
Listing Rules, as the Directors benefitted from the waiver of any
claims that the company had or may have had against them as a
result of the affected transactions.
There have been no other transactions with these related parties
during the year ended 30 June 2021 on terms other than those that
prevail in arm's length transactions.
Additional information for shareholders
Explanatory notes
Comparisons are to the year ended 30 June 2020 (2020) unless
otherwise stated. Unless otherwise stated, percentage movements
given throughout this announcement 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
operating exceptional items and acquisitions and
disposals.
This announcement contains forward-looking statements that involve
risk and uncertainty. 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 beyond Diageo's control. Please refer to
'Cautionary statement concerning forward-looking statements' for
more details.
This announcement 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 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 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 in nine-litre
cases, divide by 10; 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 pounds sterling amounts on a
constant currency basis excluding the impact of exceptional items,
certain fair value remeasurement 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 absolute amount in the associated relevant row titled '2020
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
remeasurement 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
respective years' actual 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. It is believed that separate
disclosure of exceptional items and the classification between
operating and non-operating 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 impairment of intangible
assets and fixed assets, indirect tax settlements, property
disposals and changes in post employment plans.
Gains and losses on the 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 non-operating exceptional items below operating profit
in the consolidated income statement.
Exceptional current and deferred tax items, comprising material
unusual 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.
2019 to 2021 growth on constant basis
In order to provide the reader with a better understanding of how
our 2021 performance compares to a pre-Covid-19 environment we are
disclosing the 2019 to 2021 growth on a constant basis. This
measure is not used to incentivise management, however it has been
used in 2021 to understand performance. Management believes that it
is a useful measure to understand the trends of our business and
recovery towards our pre-Covid-19 performance. Management uses
volume, net sales, operating profit as these give the most insight
to understand the trends and recovery of the business. We continue
to present an organic movement reconciliation for sales and
marketing for 2020 to 2021 as in prior periods.
The 2019 adjusted base is an appropriate comparator for 2019 to
2021 growth calculation on a constant basis, as the rates used for
2020 constant currency calculations were not materially different
from those used for 2021 constant currency calculations, and there
were no material acquisition or disposal related adjustments or
accounting treatment changes in 2021 compared to 2020.
2019 to 2021 growth on a constant basis is calculated as adding up
the respective years' organic movement in the row titled 'Organic
movement' in the tables below, expressed as a percentage of the
absolute amount in the associated relevant row titled '2019
adjusted'. The most comparable GAAP financial measure is 2019 to
2021 reported movement % below, which is calculated by combining
the reported movement for 2019-2020 and 2020-2021, expressed as a
percentage of the 2019 reported amount.
Organic growth excluding Travel Retail and Guinness
The performance of the Travel Retail channel is dependent on the
level of international travel and the performance of Guinness is
highly dependent on the availability of the on-trade channel
(particularly in Europe and Turkey).
Due to ongoing travel restrictions and market variability of
on-trade recovery conditions brought about by the Covid-19
pandemic, we are experiencing slower recovery in Travel Retail and
Guinness performance. Therefore, in order to provide additional
insight on how these parts of our business and the performance of
the remainder of our business have been impacted in each of fiscal
20 and fiscal 21 by Covid-19, additional information has been
provided about these components and on the performance of the
business excluding Travel Retail and Guinness. Management uses this
information to monitor and assess business performance and believes
that having the additional information provides them with improved
insight to manage the business, particularly related to rate of
growth. Management also believes that such information will be
similarly useful to the readers of this document.
The measures noted are calculated by excluding the performance of
Travel Retail and Guinness from '2020 adjusted' and 'Organic
movement' respectively on memo lines, and 'Movement excluding
Travel Retail and Guinness' expressed as a percentage of the
absolute amount in the associated relevant row titled '2020
adjusted excluding Travel Retail and Guinness'.
In respect of Global Travel, the decline in this channel due to the
impact of Covid-19 travel restrictions will have also driven some
level of incremental sales of our products in certain domestic
markets, which would have a positive impact on their reported
results. It is not possible to quantify the impact of any such
incremental sales either at Diageo or an individual market
level.
Organic movement calculations for the year ended 30 June 2021 were
as follows:
|
North America
million
|
Europe and
Turkey
million
|
Africa
million
|
Latin America
and Caribbean
million
|
Asia
Pacific
million
|
Corporate
million
|
Total
million
|
Volume (equivalent units)
|
|
|
|
|
|
|
|
2019 reported
|
49.4
|
|
45.4
|
|
33.6
|
|
22.4
|
|
95.1
|
|
-
|
|
245.9
|
|
Disposals(vii)
|
(2.1)
|
|
(0.1)
|
|
(2.7)
|
|
-
|
|
-
|
|
-
|
|
(4.9)
|
|
2019 adjusted
|
47.3
|
|
45.3
|
|
30.9
|
|
22.4
|
|
95.1
|
|
-
|
|
241.0
|
|
memo:
2019 Travel Retail and Guinness
|
2.1
|
|
6.6
|
|
3.9
|
|
0.7
|
|
3.8
|
|
-
|
|
17.1
|
|
memo:
2019 adjusted excluding Travel Retail and Guinness
|
45.2
|
|
38.7
|
|
27.0
|
|
21.7
|
|
91.3
|
|
-
|
|
223.9
|
|
Organic movement
|
0.1
|
|
(5.2)
|
|
(4.0)
|
|
(3.4)
|
|
(14.5)
|
|
-
|
|
(27.0)
|
|
memo:
2020 Travel Retail and Guinness movement
|
(0.3)
|
|
(1.5)
|
|
(0.7)
|
|
(0.1)
|
|
(1.5)
|
|
-
|
|
(4.1)
|
|
memo:
2020 Movement excluding Travel Retail and Guinness
|
0.4
|
|
(3.7)
|
|
(3.3)
|
|
(3.3)
|
|
(13.0)
|
|
-
|
|
(22.9)
|
|
Acquisitions
and disposals(vii)
|
1.0
|
|
0.1
|
|
1.9
|
|
-
|
|
-
|
|
-
|
|
3.0
|
|
2020 reported
|
48.4
|
|
40.2
|
|
28.8
|
|
19.0
|
|
80.6
|
|
-
|
|
217.0
|
|
Organic movement %
|
-
|
|
(11)
|
|
(13)
|
|
(15)
|
|
(15)
|
|
-
|
|
(11)
|
|
memo:
Organic movement % excluding Travel Retail and
Guinness
|
1
|
|
(10)
|
|
(12)
|
|
(15)
|
|
(14)
|
|
-
|
|
(10)
|
|
|
|
|
|
|
|
|
|
Volume (equivalent units)
|
|
|
|
|
|
|
|
2020 reported
|
48.4
|
|
40.2
|
|
28.8
|
|
19.0
|
|
80.6
|
|
-
|
|
217.0
|
|
Disposals(viii)
|
(0.4)
|
|
(0.4)
|
|
(1.9)
|
|
-
|
|
-
|
|
-
|
|
(2.7)
|
|
2020 adjusted
|
48.0
|
|
39.8
|
|
26.9
|
|
19.0
|
|
80.6
|
|
-
|
|
214.3
|
|
memo:
2020 Travel Retail and Guinness
|
1.8
|
|
5.1
|
|
3.2
|
|
0.6
|
|
2.3
|
|
-
|
|
13.0
|
|
memo:
2020 adjusted excluding Travel Retail and Guinness
|
46.2
|
|
34.7
|
|
23.7
|
|
18.4
|
|
78.3
|
|
-
|
|
201.3
|
|
Organic movement
|
5.1
|
|
2.9
|
|
4.8
|
|
4.1
|
|
7.0
|
|
-
|
|
23.9
|
|
memo:
2021 Travel Retail and Guinness movement
|
(0.4)
|
|
(1.4)
|
|
0.9
|
|
(0.1)
|
|
(0.7)
|
|
-
|
|
(1.7)
|
|
memo:
2021 Movement excluding Travel Retail and Guinness
|
5.5
|
|
4.3
|
|
3.9
|
|
4.2
|
|
7.7
|
|
-
|
|
25.6
|
|
Acquisitions
and disposals(viii)
|
0.1
|
|
-
|
|
0.1
|
|
-
|
|
-
|
|
-
|
|
0.2
|
|
2021 reported
|
53.2
|
|
42.7
|
|
31.8
|
|
23.1
|
|
87.6
|
|
-
|
|
238.4
|
|
Organic movement %
|
11
|
|
7
|
|
18
|
|
22
|
|
9
|
|
-
|
|
11
|
|
memo:
Organic movement % excluding Travel Retail and
Guinness
|
12
|
|
12
|
|
16
|
|
23
|
|
10
|
|
-
|
|
13
|
|
|
|
|
|
|
|
|
|
2019 to 2021 reported growth %
|
8
|
|
(6)
|
|
(5)
|
|
3
|
|
(8)
|
|
-
|
|
(3)
|
|
2019 to 2021 growth on a constant basis %
|
11
|
|
(5)
|
|
3
|
|
3
|
|
(8)
|
|
-
|
|
(1)
|
|
|
North America
£ million
|
Europe and
Turkey
£ million
|
Africa
£ million
|
Latin America
and Caribbean
£ million
|
Asia
Pacific
£ million
|
Corporate
£ million
|
Total
£ million
|
Sales
|
|
|
|
|
|
|
|
2020 reported
|
5,222
|
|
4,697
|
|
1,911
|
|
1,184
|
|
4,645
|
|
38
|
|
17,697
|
|
Exchange
|
3
|
|
(32)
|
|
(22)
|
|
1
|
|
(5)
|
|
-
|
|
(55)
|
|
Disposals(viii)
|
(26)
|
|
(59)
|
|
(60)
|
|
-
|
|
(1)
|
|
-
|
|
(146)
|
|
2020 adjusted
|
5,199
|
|
4,606
|
|
1,829
|
|
1,185
|
|
4,639
|
|
38
|
|
17,496
|
|
memo:
2020 Travel Retail and Guinness
|
270
|
|
673
|
|
319
|
|
42
|
|
267
|
|
26
|
|
1,597
|
|
memo:
2020 adjusted excluding Travel Retail and Guinness
|
4,929
|
|
3,933
|
|
1,510
|
|
1,143
|
|
4,372
|
|
12
|
|
15,899
|
|
Organic movement
|
970
|
|
436
|
|
368
|
|
366
|
|
756
|
|
(18)
|
|
2,878
|
|
memo:
2021 Travel Retail and Guinness movement
|
(22)
|
|
(150)
|
|
88
|
|
(13)
|
|
(78)
|
|
(22)
|
|
(197)
|
|
memo:
2021 Movement excluding Travel Retail and Guinness
|
992
|
|
586
|
|
280
|
|
379
|
|
834
|
|
4
|
|
3,075
|
|
Acquisitions
and disposals(viii)
|
30
|
|
3
|
|
8
|
|
-
|
|
-
|
|
-
|
|
41
|
|
Exchange
|
(396)
|
|
(250)
|
|
(185)
|
|
(182)
|
|
(249)
|
|
-
|
|
(1,262)
|
|
2021 reported
|
5,803
|
|
4,795
|
|
2,020
|
|
1,369
|
|
5,146
|
|
20
|
|
19,153
|
|
Organic movement %
|
19
|
|
9
|
|
20
|
|
31
|
|
16
|
|
(47)
|
|
16
|
|
memo:
Organic movement % excluding Travel Retail and
Guinness
|
20
|
|
15
|
|
19
|
|
33
|
|
19
|
|
33
|
|
19
|
|
|
North America
£ million
|
Europe and
Turkey
£ million
|
Africa
£ million
|
Latin America
and Caribbean
£ million
|
Asia
Pacific
£ million
|
Corporate
£ million
|
Total
£ million
|
Net sales
|
|
|
|
|
|
|
|
2019 reported
|
4,460
|
2,939
|
1,597
|
1,130
|
2,688
|
53
|
12,867
|
Exchange(i)
|
(34)
|
(19)
|
(2)
|
4
|
1
|
2
|
(48)
|
Reclassification(iii)
|
-
|
-
|
-
|
(10)
|
-
|
-
|
(10)
|
Disposals(vii)
|
(75)
|
(1)
|
(91)
|
(1)
|
(1)
|
-
|
(169)
|
2019 adjusted
|
4,351
|
2,919
|
1,504
|
1,123
|
2,688
|
55
|
12,640
|
memo:
2019 Travel Retail and Guinness
|
283
|
622
|
296
|
52
|
386
|
42
|
1,681
|
memo:
2019 adjusted excluding Travel Retail and Guinness
|
4,068
|
2,297
|
1,208
|
1,071
|
2,302
|
13
|
10,959
|
Organic movement
|
105
|
(358)
|
(200)
|
(169)
|
(423)
|
(16)
|
(1,061)
|
memo:
2020 Travel Retail and Guinness movement
|
(33)
|
(150)
|
(50)
|
(11)
|
(135)
|
(16)
|
(395)
|
memo:
2020 Movement excluding Travel Retail and Guinness
|
138
|
(208)
|
(150)
|
(158)
|
(288)
|
-
|
(666)
|
Acquisitions and disposals(vii)
|
32
|
10
|
50
|
-
|
1
|
-
|
93
|
Exchange(i)
|
135
|
(4)
|
(8)
|
(46)
|
4
|
(1)
|
80
|
2020 reported
|
4,623
|
2,567
|
1,346
|
908
|
2,270
|
38
|
11,752
|
Organic movement %
|
2
|
(12)
|
(13)
|
(15)
|
(16)
|
(29)
|
(8)
|
memo:
Organic movement % excluding Travel Retail and
Guinness
|
3
|
(9)
|
(12)
|
(15)
|
(13)
|
-
|
(6)
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
|
|
|
|
|
2020 reported
|
4,623
|
2,567
|
1,346
|
908
|
2,270
|
38
|
11,752
|
Exchange(v)
|
2
|
(17)
|
(13)
|
6
|
7
|
-
|
(15)
|
Reclassification(vi)
|
-
|
-
|
-
|
-
|
(14)
|
-
|
(14)
|
Disposals(viii)
|
(18)
|
(34)
|
(47)
|
-
|
(1)
|
-
|
(100)
|
2020 adjusted
|
4,607
|
2,516
|
1,286
|
914
|
2,262
|
38
|
11,623
|
memo:
2020 Travel Retail and Guinness
|
258
|
471
|
245
|
42
|
241
|
26
|
1,283
|
memo:
2020 adjusted excluding Travel Retail and Guinness
|
4,349
|
2,045
|
1,041
|
872
|
2,021
|
12
|
10,340
|
Organic movement
|
929
|
108
|
258
|
275
|
308
|
(18)
|
1,860
|
memo:
2021 Travel Retail and Guinness movement
|
(23)
|
(119)
|
73
|
(13)
|
(83)
|
(22)
|
(187)
|
memo:
2021 Movement excluding Travel Retail and Guinness
|
952
|
227
|
185
|
288
|
391
|
4
|
2,047
|
Acquisitions
and disposals(viii)
|
28
|
2
|
5
|
-
|
-
|
-
|
35
|
Exchange(v)
|
(355)
|
(68)
|
(137)
|
(143)
|
(82)
|
-
|
(785)
|
2021 reported
|
5,209
|
2,558
|
1,412
|
1,046
|
2,488
|
20
|
12,733
|
Organic movement %
|
20
|
4
|
20
|
30
|
14
|
(47)
|
16
|
memo:
Organic movement % excluding Travel Retail and
Guinness
|
22
|
11
|
18
|
33
|
19
|
33
|
20
|
|
|
|
|
|
|
|
|
2019 to 2021 reported growth %
|
17
|
(13)
|
(12)
|
(7)
|
(7)
|
(62)
|
(1)
|
2019 to 2021 growth on constant basis %
|
24
|
(9)
|
4
|
9
|
(4)
|
(62)
|
6
|
|
|
North America
£ million
|
|
Europe and
Turkey
£ million
|
|
Africa
£ million
|
|
Latin America
and Caribbean
£ million
|
|
Asia
Pacific
£ million
|
|
Corporate
£ million
|
|
Total
£ million
|
Marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020 reported
|
|
727
|
|
428
|
|
160
|
|
155
|
|
365
|
|
6
|
|
1,841
|
Exchange
|
|
10
|
|
(5)
|
|
(3)
|
|
-
|
|
1
|
|
(3)
|
|
-
|
Disposals(viii)
|
|
-
|
|
(2)
|
|
(1)
|
|
-
|
|
-
|
|
-
|
|
(3)
|
2020 adjusted
|
|
737
|
|
421
|
|
156
|
|
155
|
|
366
|
|
3
|
|
1,838
|
memo:
2020 Travel Retail and Guinness
|
|
58
|
|
94
|
|
33
|
|
4
|
|
40
|
|
-
|
|
229
|
memo:
2020 adjusted excluding Travel Retail and Guinness
|
|
679
|
|
327
|
|
123
|
|
151
|
|
326
|
|
3
|
|
1,609
|
Organic movement
|
|
248
|
|
56
|
|
22
|
|
28
|
|
60
|
|
3
|
|
417
|
memo:
2021 Travel Retail and Guinness movement
|
|
11
|
|
(17)
|
|
9
|
|
(1)
|
|
(15)
|
|
-
|
|
(13)
|
memo:
2021 Movement excluding Travel Retail and Guinness
|
|
237
|
|
73
|
|
13
|
|
29
|
|
75
|
|
3
|
|
430
|
Acquisitions(viii)
|
|
12
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
12
|
Fair value remeasurement of contingent considerations, equity
option and earn out arrangements
|
|
1
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
1
|
Exchange
|
|
(62)
|
|
(4)
|
|
(10)
|
|
(22)
|
|
(8)
|
|
1
|
|
(105)
|
2021 reported
|
|
936
|
|
473
|
|
168
|
|
161
|
|
418
|
|
7
|
|
2,163
|
Organic movement %
|
|
34
|
|
13
|
|
14
|
|
18
|
|
16
|
|
100
|
|
23
|
memo:
Organic movement % excluding Travel Retail and
Guinness
|
|
35
|
|
22
|
|
11
|
|
19
|
|
23
|
|
100
|
|
27
|
|
|
North America
£ million
|
|
Europe and
Turkey
£ million
|
|
Africa
£ million
|
|
Latin America
and Caribbean
£ million
|
|
Asia
Pacific
£ million
|
|
Corporate
£ million
|
|
Total
£ million
|
Operating profit before exceptional items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 reported
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,116
|
|
Exchange(ii)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
|
Acquisition
and disposal(vii)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(29)
|
|
2019 adjusted
|
|
|
|
|
|
|
|
|
|
|
|
|
|
4,087
|
|
memo:
2019 Travel Retail and Guinness
|
|
|
|
|
|
|
|
|
|
|
|
|
|
759
|
|
memo:
2019 adjusted excluding Travel Retail and Guinness
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,328
|
|
Organic movement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(589)
|
|
memo:
2020 Travel Retail and Guinness movement
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(289)
|
|
memo:
2020 Movement excluding Travel Retail and Guinness
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(300)
|
|
Acquisitions
and disposals(vii)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(5)
|
|
Fair
value remeasurement of contingent considerations and equity
option(iv)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(7)
|
|
Fair value remeasurement of biological assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
9
|
|
Exchange(ii)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)
|
|
2020 reported
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,494
|
|
Organic movement %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(14)
|
|
memo:
Organic movement % excluding Travel Retail and
Guinness
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit before exceptional items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020 reported
|
|
2,034
|
|
|
757
|
|
|
101
|
|
|
248
|
|
|
501
|
|
|
(147)
|
|
|
3,494
|
|
Exchange(v)
|
|
44
|
|
|
(18)
|
|
|
11
|
|
|
10
|
|
|
9
|
|
|
(5)
|
|
|
51
|
|
Fair value remeasurement of contingent considerations and equity
option
|
|
10
|
|
|
4
|
|
|
-
|
|
|
(7)
|
|
|
-
|
|
|
-
|
|
|
7
|
|
Fair value remeasurement of biological assets
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(9)
|
|
|
-
|
|
|
-
|
|
|
(9)
|
|
Disposals(viii)
|
|
(1)
|
|
|
(9)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(10)
|
|
2020 adjusted
|
|
2,087
|
|
|
734
|
|
|
112
|
|
|
242
|
|
|
510
|
|
|
(152)
|
|
|
3,533
|
|
memo:
2020 Travel Retail and Guinness
|
|
80
|
|
|
185
|
|
|
56
|
|
|
24
|
|
|
113
|
|
|
20
|
|
|
478
|
|
memo:
2020 adjusted excluding Travel Retail and Guinness
|
|
2,007
|
|
|
549
|
|
|
56
|
|
|
218
|
|
|
397
|
|
|
(172)
|
|
|
3,055
|
|
Organic movement
|
|
352
|
|
|
(38)
|
|
|
113
|
|
|
153
|
|
|
113
|
|
|
(66)
|
|
|
627
|
|
memo:
2021 Travel Retail and Guinness movement
|
|
(27)
|
|
|
(76)
|
|
|
24
|
|
|
(8)
|
|
|
(47)
|
|
|
(13)
|
|
|
(147)
|
|
memo:
2021 Movement excluding Travel Retail and Guinness
|
|
379
|
|
|
38
|
|
|
89
|
|
|
161
|
|
|
160
|
|
|
(53)
|
|
|
774
|
|
Acquisitions(viii)
|
|
(18)
|
|
|
(3)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(21)
|
|
Fair value remeasurement of contingent considerations, equity
option and earn out arrangements
|
|
(9)
|
|
|
(27)
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
(36)
|
|
Exchange(v)
|
|
(175)
|
|
|
(31)
|
|
|
(54)
|
|
|
(92)
|
|
|
(15)
|
|
|
10
|
|
|
(357)
|
|
2021 reported
|
|
2,237
|
|
|
635
|
|
|
171
|
|
|
303
|
|
|
608
|
|
|
(208)
|
|
|
3,746
|
|
Organic movement %
|
|
17
|
|
|
(5)
|
|
|
101
|
|
|
63
|
|
|
22
|
|
|
(43)
|
|
|
18
|
|
memo:
Organic movement % excluding Travel Retail and
Guinness
|
|
19
|
|
|
7
|
|
|
159
|
|
|
74
|
|
|
40
|
|
|
(31)
|
|
|
25
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Organic operating margin %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2021
|
|
44.1
|
|
|
26.5
|
|
|
14.6
|
|
|
33.2
|
|
|
24.2
|
|
|
n/a
|
|
30.9
|
|
2020
|
|
45.3
|
|
|
29.2
|
|
|
8.7
|
|
|
26.5
|
|
|
22.5
|
|
|
n/a
|
|
30.4
|
|
Margin movement (bps)
|
|
(124)
|
|
|
(265)
|
|
|
586
|
|
|
674
|
|
|
169
|
|
|
n/a
|
|
46
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 to 2021 reported growth %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(9)
|
|
2019 to 2021 growth on constant basis %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
(1)
For the reconciliation of sales to net sales see Summary income
statement.
(2)
Percentages and margin movement are calculated on rounded
figures.
Notes:
Information in respect of the organic movement
calculations
(i)
The impact of movements in exchange rates on reported figures for
net sales is principally in respect of the translation exchange
impact of the weakening of sterling against the US dollar,
partially offset by strengthening of sterling against
the
Brazilian
real, the Australian dollar and the euro.
(ii) The impact of
movements in exchange rates on reported figures for operating
profit is principally in
respect of the transactional exchange impact of the weakening of
the Brazilian real, the Colombian peso and the Nigerian naira,
broadly offset by
translational exchange
impact of the strengthening of the US dollar against
sterling.
(iii)
For the year ended 30 June 2019, trade investment of
£10 million has been reclassified from marketing to net
sales.
(iv) Change in contingent
consideration re Casamigos was reported as part of acquisitions in
the year ended 30 June 2019.
(v) The impact of movements in exchange
rates on reported figures for net sales and operating profit are
principally in respect of the translation exchange impact of the
strengthening of sterling against the US dollar, the Brazilian
real, the Indian rupee
and the Turkish lira, partially offset by the weakening of sterling
against the euro.
(vi) In the year ended 30 June 2021, £14
million has been reclassified from cost of goods sold to excise
duties.
(vii) In the year ended 30 June 2020, the acquisitions
and disposals that affected volume, net sales and operating profit
were as follows:
|
Volume
equ. units million
|
Net sales
£ million
|
|
Operating
profit
£ million
|
Year ended 30 June 2019
|
|
|
|
|
Acquisition
|
|
|
|
|
Change
in contingent consideration re Casamigos
|
-
|
|
-
|
|
|
15
|
|
|
-
|
|
-
|
|
|
15
|
|
Disposals
|
|
|
|
|
Portfolio
of 19 brands
|
(2.2)
|
|
(79)
|
|
|
(42)
|
|
South
African ready to drink
|
(0.5)
|
|
(43)
|
|
|
-
|
|
South
African cider
|
-
|
|
(4)
|
|
|
(1)
|
|
UNB
|
(2.2)
|
|
(43)
|
|
|
(1)
|
|
|
(4.9)
|
|
(169)
|
|
|
(44)
|
|
|
|
|
|
|
Acquisitions and disposals
|
(4.9)
|
|
(169)
|
|
|
(29)
|
|
|
|
|
|
|
Year ended 30 June 2020
|
|
|
|
|
Acquisition
|
|
|
|
|
Seedlip
and Aecorn
|
0.1
|
|
12
|
|
|
(8)
|
|
|
0.1
|
|
12
|
|
|
(8)
|
|
Disposals
|
|
|
|
|
Supply
contracts in respect of the 19 brands sold to Sazerac
|
1.1
|
|
31
|
|
|
3
|
|
South
African ready to drink
|
0.3
|
|
19
|
|
|
-
|
|
UNB
|
1.5
|
|
31
|
|
|
-
|
|
|
2.9
|
|
81
|
|
|
3
|
|
|
|
|
|
|
Acquisitions and disposals
|
3.0
|
|
93
|
|
|
(5)
|
|
(viii) In the year ended 30 June 2021, the acquisitions and
disposals that affected volume, sales, net sales, marketing and
operating profit were as follows:
|
Volume
|
|
Sales
|
|
Net sales
|
|
Marketing
|
|
Operating
profit
|
|
equ. units million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
Year ended 30 June 2020
|
|
|
|
|
|
|
|
|
|
Disposals
|
|
|
|
|
|
|
|
|
|
UNB
|
(1.5)
|
|
|
(29)
|
|
|
(29)
|
|
|
(1)
|
|
|
-
|
|
Budweiser
distribution license termination
|
(0.3)
|
|
|
(57)
|
|
|
(32)
|
|
|
(2)
|
|
|
(9)
|
|
Supply
contracts in respect of the 19 brands sold to Sazerac
|
(0.6)
|
|
|
(29)
|
|
|
(21)
|
|
|
-
|
|
|
(1)
|
|
South
African ready to drink
|
(0.3)
|
|
|
(31)
|
|
|
(18)
|
|
|
-
|
|
|
-
|
|
|
(2.7)
|
|
|
(146)
|
|
|
(100)
|
|
|
(3)
|
|
|
(10)
|
|
|
|
|
|
|
|
|
|
|
|
Year ended 30 June 2021
|
|
|
|
|
|
|
|
|
|
Acquisitions
|
|
|
|
|
|
|
|
|
|
Aviation
Gin and Davos Brands
|
0.1
|
|
|
26
|
|
|
24
|
|
|
(9)
|
|
|
(14)
|
|
Chase
Distillery
|
-
|
|
|
3
|
|
|
2
|
|
|
-
|
|
|
(3)
|
|
Lone
River
|
-
|
|
|
3
|
|
|
3
|
|
|
(2)
|
|
|
(3)
|
|
Loyal
9 Cocktails
|
-
|
|
|
1
|
|
|
1
|
|
|
(1)
|
|
|
(1)
|
|
|
0.1
|
|
|
33
|
|
|
30
|
|
|
(12)
|
|
|
(21)
|
|
Disposal
|
|
|
|
|
|
|
|
|
|
South
African ready to drink
|
0.1
|
|
|
8
|
|
|
5
|
|
|
-
|
|
|
-
|
|
|
0.1
|
|
|
8
|
|
|
5
|
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
Acquisitions and disposals
|
0.2
|
|
|
41
|
|
|
35
|
|
|
(12)
|
|
|
(21)
|
|
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 year ended 30
June 2021 and 30 June 2020 are set out in the table
below:
|
2021
|
2020
|
|
£ million
|
£ million
|
Profit attributable to equity shareholders of the parent
company
|
2,660
|
|
1,409
|
|
Exceptional operating and non-operating items
|
1
|
|
1,380
|
|
Exceptional taxation charges/(benefits)
|
88
|
|
-
|
|
Tax in respect of exceptional operating and non-operating
items
|
(4)
|
|
(154)
|
|
Exceptional items attributable to non-controlling
interests
|
1
|
|
(69)
|
|
|
2,746
|
|
2,566
|
|
|
|
|
Weighted average number of shares
|
million
|
million
|
Shares in issue excluding own shares
|
2,337
|
|
2,346
|
|
Dilutive potential ordinary shares
|
8
|
|
8
|
|
|
2,345
|
|
2,354
|
|
|
|
|
|
pence
|
pence
|
Basic earnings per share before exceptional items
|
117.5
|
109.4
|
|
|
|
Diluted earnings per share before exceptional items
|
117.1
|
109.0
|
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 cost 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 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 year ended 30 June 2021 and
30 June 2020 are set out in the table below:
|
2021
|
2020
|
|
£ million
|
£ million
|
Net cash inflow from operating activities
|
3,654
|
|
2,320
|
|
Disposal of property, plant and equipment and computer
software
|
13
|
|
14
|
|
Purchase of property, plant and equipment and computer
software
|
(626)
|
|
(700)
|
|
Movements in loans and other investments
|
(4)
|
|
-
|
|
Free cash flow
|
3,037
|
|
1,634
|
|
Operating cash conversion
Operating cash conversion is calculated by dividing cash generated
from operations excluding cash inflows and outflows in respect of
exceptional items, dividends received from associates, maturing
inventories, provisions, other items and post employment payments
in excess of the amount charged to operating profit by operating
profit before depreciation, amortisation, impairment and
exceptional operating items.
The ratio is stated at the budgeted exchange rates for the
respective year in line with management reporting and is expressed
as a percentage.
Operating cash conversion for the year ended 30 June 2021 and 30
June 2020 were as follows:
|
2021
|
2020
|
|
£ million
|
£ million
|
Operating profit
|
3,731
|
2,137
|
Exceptional operating items
|
15
|
1,357
|
Fair value remeasurement
|
36
|
(2)
|
Depreciation
and amortisation(i)
|
447
|
494
|
Retranslation to budgeted exchange rates
|
375
|
(2)
|
|
4,604
|
3,984
|
|
|
|
Cash generated from operations
|
4,857
|
3,529
|
Net
exceptional cash received(ii)
|
(49)
|
(1)
|
Post
employment payments less amounts included in operating
profit(i)
|
35
|
109
|
Net
movement in maturing inventories(iii)
|
174
|
262
|
Provision
movement
|
60
|
(22)
|
Dividends received from associates
|
(290)
|
(4)
|
Other
items(i)
|
(88)
|
14
|
Retranslation to budgeted exchange rates
|
387
|
12
|
|
5,086
|
3,899
|
|
|
|
Operating
cash conversion
|
110.5
|
%
|
97.9
|
%
|
|
|
|
|
|
(i)
Excluding exceptional items.
(ii)
Exceptional cash received for substitution drawback was £60
million (2020 - £26 million), exceptional cash payments for
other donations was £1 million (2020 - £7 million), for
tax payments £10 million (2020 - £18
million).
(iii)
Excluding non-cash movements such as exchange and the impact of
acquisitions and disposals.
Return on average total invested capital
Return on average total 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
total invested capital reflects operating profit before exceptional
items attributable to the 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 year.
Average total invested capital is calculated using the average
derived from the consolidated balance sheets at the beginning,
middle and end of the year. Average capital employed comprises
average net assets attributable to equity shareholders of the
parent company for the year, excluding post employment benefit net
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 total invested capital for the year ended
30 June 2021 and 30 June 2020 are set out in the table
below:
|
2021
|
2020
|
|
£ million
|
£ million
|
Operating profit
|
3,731
|
2,137
|
Exceptional operating items
|
15
|
1,357
|
Profit before exceptional operating items attributable to
non-controlling interests
|
(138)
|
(114)
|
Share of after tax results of associates and joint
ventures
|
334
|
282
|
Tax at the tax rate before exceptional items of 22.2% (2020 -
21.7%)
|
(906)
|
(795)
|
|
3,036
|
2,867
|
|
|
|
Average net assets (excluding net post employment
assets/liabilities)
|
8,146
|
9,063
|
Average non-controlling interests
|
(1,587)
|
(1,723)
|
Average net borrowings
|
12,672
|
12,551
|
Average integration and restructuring costs (net of
tax)
|
1,639
|
1,639
|
Goodwill at 1 July 2004
|
1,562
|
1,562
|
Average total invested capital
|
22,432
|
23,092
|
|
|
|
Return on average total invested capital
|
13.5%
|
12.4%
|
Adjusted net borrowings to earnings before exceptional operating
items, interest, tax, depreciation, amortisation and impairment
(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.
Calculations for the ratio of adjusted net borrowings to adjusted
EBITDA at 30 June 2021 and 30 June 2020 are set out in the table
below:
|
2021
|
2020
|
|
£ million
|
£ million
|
Borrowings due within one year
|
1,862
|
|
1,995
|
|
Borrowings due after one year
|
12,865
|
|
14,790
|
|
Fair value of foreign currency derivatives and interest rate
hedging instruments
|
(232)
|
|
(686)
|
|
Lease liabilities
|
363
|
|
470
|
|
Less: Cash and cash equivalents
|
(2,749)
|
|
(3,323)
|
|
Net borrowings
|
12,109
|
|
13,246
|
|
Post employment benefit liabilities before tax
|
574
|
|
749
|
|
Adjusted net borrowings
|
12,683
|
|
13,995
|
|
|
|
|
Operating profit
|
3,731
|
|
2,137
|
|
Depreciation, amortisation and impairment (excluding exceptional
items)
|
447
|
|
494
|
|
Share of after tax results of associates and joint
ventures
|
334
|
|
282
|
|
Exceptional impairment
|
-
|
|
1,345
|
|
Non-operating items
|
14
|
|
(23)
|
|
EBITDA
|
4,526
|
|
4,235
|
|
Exceptional operating items (excluding impairment)
|
15
|
|
12
|
|
Non-operating items
|
(14)
|
|
23
|
|
Adjusted EBITDA
|
4,527
|
|
4,270
|
|
|
|
|
Adjusted net borrowings to adjusted EBITDA
|
2.8
|
|
3.3
|
|
Tax rate before exceptional items
Tax rate before exceptional items is calculated by dividing the
total tax charge on continuing operations 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
continuing operations before tax on exceptional
items.
The tax rates from operations before exceptional and after
exceptional items for the year ended 30 June 2021 and year ended 30
June 2020 are set out in the table below:
|
2021
|
2020
|
|
£ million
|
£ million
|
Tax before exceptional items (a)
|
823
|
|
743
|
|
Tax in respect of exceptional items
|
(4)
|
|
(154)
|
|
Exceptional tax charge
|
88
|
|
-
|
|
Taxation on profit (b)
|
907
|
|
589
|
|
|
|
|
Profit before taxation and exceptional items (c)
|
3,707
|
|
3,423
|
|
Non-operating items
|
14
|
|
(23)
|
|
Exceptional operating items
|
(15)
|
|
(1,357)
|
|
Profit before taxation (d)
|
3,706
|
|
2,043
|
|
|
|
|
Tax rate before exceptional items (a/c)
|
22.2
|
%
|
21.7
|
%
|
Tax rate after exceptional items (b/d)
|
24.5
|
%
|
28.8
|
%
|
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.
Price/mix is the number of percentage points by which the organic
movement in net sales differs to 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 made 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 premium
brands; Roe & Co; The Singleton, Cardhu, Talisker, Lagavulin
and other malt brands; Buchanan's Special Reserve, Buchanan's Red
Seal; Bulleit Bourbon, Bulleit Rye; Tanqueray No. TEN, Tanqueray
ready to drink, Tanqueray Malacca Gin; Cîroc, Ketel One vodka,
Ketel One Botanical; Don Julio, Casamigos, Zacapa, Bundaberg SDlx,
Shui Jing Fang, Jinzu gin, Haig Club whisky, Orphan Barrel whiskey
and DeLeón; Villa Ascenti, Copper Dog whisky, Belsazar and
Pierde Almas.
References to global giants include the following brand families:
Johnnie Walker, Smirnoff, Captain Morgan, Baileys, Tanqueray and
Guinness. Local stars spirits include Buchanan's, Bundaberg, Crown
Royal, JeB, McDowell's, Old Parr, Yenм Raki, Black &
White, Shui Jing Fang, Windsor and Ypiуca. Global giants and
local stars exclude ready to drink 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.
References to the disposal of a portfolio of 19 brands comprise the
following brands that were primarily sold in the United States:
Seagram's VO, Seagram's 83, Seagram's Five Star, Popov, Myers's,
Parrot Bay, Yukon Jack, Romana Sambuca, Scoresby, Goldschlager,
Relska, Stirrings, The Club, Booth's, Black Haus, Peligroso, Grind,
Piehole and John Begg.
References to the group include Diageo plc and its consolidated
subsidiaries.
Risk factors
Diageo's products are sold in over 180 countries worldwide, which
subjects Diageo to risks and uncertainties in multiple
jurisdictions across developed and developing markets. The group's
aim is to manage risk and control its business and financial
activities cost-effectively and in a manner that enables it to:
exploit profitable business opportunities in a disciplined way;
avoid or reduce risks that can cause loss, reputational damage or
business failure; manage and mitigate historic risks and exposures
of the group; support operational effectiveness; and enhance
resilience to external events. To achieve this, an ongoing process
has been established for identifying, evaluating and managing risks
faced by the group. A detailed description of the key risks and
uncertainties facing the group are described in the 'Strategic
report' section of Diageo's Annual Report for the year ended 30
June 2020 and under 'Risk Factors' in Diageo's Annual Report on
Form 20-F for the year ended 30 June 2020.
These key risks and uncertainties include: unfavourable economic,
political, social or other developments and risks in the countries
in which Diageo operates (including as a result of the Covid-19
pandemic), the potential impact of any global, regional or local
trade disputes (including but not limited to any such dispute
between the United States and the European Union and/or the United
Kingdom), and the wider repercussions of the United Kingdom's
recent departure from the European Union; the impact of the
Covid-19 pandemic, or any other global or regional public health
threats; the impact of climate change, or legal, regulatory or
market measures intended to address climate change, including on
the cost and supply of water; changes in consumer preferences and
tastes, including as a result of disruptive market forces, evolving
social trends or economic downturns, among other factors, which
could adversely affect consumer demand; changes in the domestic and
international tax environment resulting in unexpected tax
exposures; changes in the cost of production; litigation or similar
proceedings specifically directed at the beverage alcohol industry,
as well as other litigation or proceedings more generally; other
legal and regulatory developments impacting the production,
distribution and marketing of Diageo's products and its business
more generally; any failure of internal controls, including those
affecting compliance with accounting and/or disclosure
requirements; the consequences of any failure to comply with
anti-corruption, sanctions or similar laws and regulations;
cyber-attacks or any other disruptions to core business operations,
including manufacturing and supply, business service centres or
information systems; the impact of any contamination,
counterfeiting or other events on support for and sales of Diageo's
brands; any failure by Diageo to maintain its brand image and
corporate reputation; competitive pressures, which could reduce
Diageo's market share and margins; increased costs for, or
shortages of, talent, as well as labour strikes or disputes;
failures to derive the expected benefits from Diageo's business
strategies, acquisitions and/or any cost-saving and restructuring
programmes; fluctuations in exchange and/or interest rates;
movements in the value of Diageo's pension funds; any failure to
maintain or renegotiate distribution, supply, manufacturing and
licence agreements on favourable terms; and any inability by Diageo
to protect its intellectual property rights.
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 22 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.
Factors that could cause actual results and developments to differ
materially from those expressed or implied by forward-looking
statements include, but are not limited
to:
-
|
economic,
political, social or other developments in countries and markets in
which Diageo operates (including as a result of the Covid-19
pandemic), which may contribute to a reduction in demand for
Diageo's products, adverse impacts on Diageo's customer, supplier
and/or financial counterparties, or the imposition of import,
investment or currency restrictions (including the potential impact
of any global, regional or local trade wars or any tariffs, duties
or other restrictions or barriers imposed on the import or export
of goods between territories; including but not limited to, imports
into and exports from the United States and the European Union
and/or the United Kingdom, as well as the United Kingdom's recent
departure from the European Union);
|
-
|
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
effects of climate change, or legal, regulatory or market measures
intended to address climate change, on Diageo's business or
operations, including on the cost and supply of water;
|
-
|
changes in consumer preferences and tastes, including as a result
of disruptive market forces, changes
in demographics, evolving social trends (including any shifts in
consumer tastes towards at-home occasions, premiumisation,
small-batch craft alcohol, lower or no alcohol, or other
alternative products), changes in travel, holiday or leisure
activity patterns, weather conditions, health concerns, pandemics
and/or a downturn in economic conditions;
|
-
|
changes
in the domestic and international tax environment, including as a
result of the OECD Base Erosion and Profit Shifting Initiative and
EU anti-tax abuse measures, leading 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 or as a result of
inflation;
|
-
|
any
litigation or other similar proceedings (including with tax,
customs, competition, environmental, anti-corruption or other
regulatory authorities), including litigation directed at the
beverage alcohol industry generally or at Diageo in
particular;
|
-
|
legal
and regulatory developments, including changes in regulations
relating to production, distribution, importation, marketing,
advertising, sales, pricing, labelling, packaging, product
liability, antitrust, labour, compliance and control systems,
environmental issues and/or data
privacy;
|
-
|
the
consequences of any failure of internal controls, including those
affecting compliance with existing or new accounting and/or
disclosure requirements;
|
-
|
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 including
manufacturing and supply, business service centres and/or
information systems;
|
-
|
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
actions by increasingly consolidated competitors or increased
competition from regional and local companies, that could
negatively impact Diageo's market share, distribution network,
costs and/or pricing;
|
-
|
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 in relation to expansion in emerging markets,
acquisitions and/or disposals, cost savings and productivity
initiatives or inventory
forecasting;
|
-
|
fluctuations
in exchange rates and/or interest rates, which may impact the value
of transactions and assets denominated in other currencies,
increase Diageo's financing costs or otherwise adversely affect
Diageo's financial results;
|
-
|
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 2020 filed with the US Securities and Exchange
Commission (SEC). 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. The reader should, however, consult any
additional disclosures that Diageo may make in any documents which
it publishes and/or files with the SEC. All readers, wherever
located, should take note of these
disclosures.
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 2021.
The information in this document does not constitute an offer to
sell or an invitation to buy shares in Diageo plc or an invitation
or inducement to engage in any other investment
activities.
This document may include information about Diageo's target debt
rating. A security rating is not a recommendation to buy, sell or
hold securities and may be subject to revision or withdrawal at any
time by the assigning rating organisation. Each rating should be
evaluated independently of any other
rating.
Past performance cannot be relied upon as a guide to future
performance.
Statement of directors' responsibilities
The responsibility statement set out below has been prepared in
connection with (and will be set out in) the annual report and
accounts for the year ended 30 June 2021, which will be published
on 5 August 2021 (and which can be found thereafter at
www.diageo.com).
The Directors consider that the annual report and accounts, taken
as a whole, is fair, balanced and understandable and provides the
information necessary for shareholders to assess the group and
parent company's position and performance, business model and
strategy.
Each of the Directors of Diageo plc confirms that, to the best of
his or her knowledge:
- the
group financial statements contained in the annual report and
accounts for the year ended 30 June 2021, which have been prepared
in accordance with international accounting standards in conformity
with the requirements of the Companies Act
2006
and international financial reporting standards adopted pursuant to
Regulation (EC) No 1606/200 as it applies in the European Union,
give a true and fair view of the assets, liabilities, financial
position and profit of the group; and
- the
Directors' Report contained in the annual report and accounts for
the year ended 30 June 2021 includes a fair review of the
development and performance of the business and the position of the
group and parent company, together with a
description
of
the principal risks and uncertainties that they
face.
The Directors of Diageo plc are as follows: Javier Ferrán
(Chairman), 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, Valérie
Chapoulaud-Floquet, Sir John Manzoni, Lady Mendelsohn and Ireena
Vittal.
Webcast, presentation slides and transcript
At 07.15 (UK time) on Thursday 29 July 2021, Ivan Menezes, Chief
Executive and Lavanya Chandrashekar, Chief Financial Officer will
present Diageo's preliminary 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 and replay
Ivan Menezes and Lavanya Chandrashekar will be hosting a Q&A
conference call on Thursday 29 July 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)330 336 9105
|
From the UK (free call):
|
0800 358 6377
|
From the USA:
|
+1 323 794 2093
|
From the USA (free call):
|
866 548 4713
|
The conference call is for analysts and investors only. To join the
call please use the password already sent to you or email
suzanne.austin@diageo.com.
To hear a replay of the call, please use the telephone numbers
below:
From the UK:
|
+44 (0)20 7660 0134
|
From the UK (free call):
|
0808 101 1153
|
From the USA:
|
+1 719 457 0820
|
From the USA (free call):
|
888 203 1112
|
Investor enquiries to:
|
Durga Doraisamy
|
+44 (0) 7902 126906
|
|
Vinod Rao
|
+44 (0) 7834 805733
|
|
Lucinda Baker
|
+44 (0) 7974 375550
|
|
Belinda Brown
|
+44 (0) 7590 810246
|
|
|
investor.relations@diageo.com
|
|
|
|
Media enquiries to:
|
Jessica Rouleau
|
+44 (0) 7925 642 561
|
|
Dominic Redfearn
|
+44 (0) 7971 977 759
|
|
Francesca Olivieri
|
+44 (0) 7523 930 130
|
|
|
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:
29 July 2021
|
|
|
|
|
By:___/s/
James Edmunds
|
|
|
|
James Edmunds
|
|
Deputy Company Secretary
|
Diageo (NYSE:DEO)
Historical Stock Chart
From Aug 2024 to Sep 2024
Diageo (NYSE:DEO)
Historical Stock Chart
From Sep 2023 to Sep 2024