TIDMDGE
RNS Number : 2338N
Diageo PLC
28 January 2016
Interim results, six months ended 31 December 2015
28 January 2016
Momentum continues with stronger top line growth and
higher free cash flow
* 1.8% organic net sales growth, on 1.0% organic volume
growth
* 2.4% organic operating profit growth
* Adverse exchange and the impact of the disposal of
non core assets, reduced net sales by GBP400 million
and operating profit* by GBP156 million to GBP5,606
million and GBP1,717 million, respectively
* Free cash flow GBP0.8 billion up GBP140 million on
comparable period
* eps of 56.1 pence, up 7%. Pre-exceptional eps 51.3
pence, down 4%
* Interim dividend up 5% to 22.6 pence per share
*Before exceptional items
Ivan Menezes, Chief Executive, commenting on the first
half said:
"Diageo has become a stronger, more competitive business. We
have delivered volume growth, a stronger top line, improved the
performance of our key brands, driven cost productivity and
continued to generate strong cash flow. While trading conditions
remain challenging in some markets, Diageo's brands, capabilities
in marketing and innovation and our route to consumer have proved
resilient. I am confident that Diageo can deliver improved,
sustained performance.
For the full year we expect volume growth to drive stronger top
line performance, margin to slightly improve and strong cash
conversion to continue. This will set us up to deliver better
momentum in F17, with productivity gains supporting margin
expansion and investment in growth. We remain confident of
achieving our objective of mid-single digit top line growth and
100bps of organic operating margin improvement in the three years
ending fiscal 19."
Ends
Key financial information
For six months ended 31 December 2015
Summary financial information
First First Organic Reported
Half Half growth growth
F16 F15 % %
Reported Reported
------------------------------- --------- --------- --------- ------- --------
Volume EUm 130.3 134.1 1 (3)
=============================== ========== ========= ========= ======= ========
GBP
Net sales million 5,606 5,900 2 (5)
=============================== ========== ========= ========= ======= ========
GBP
Marketing spend million 822 896 (5) (8)
=============================== ========== ========= ========= ======= ========
Operating profit before GBP
exceptional items million 1,717 1,839 2 (7)
=============================== ========== ========= ========= ======= ========
GBP
Operating profit(i) million 1,613 1,668 (3)
=============================== ========== ========= ========= ======= ========
Share of associates and
joint ventures profit after GBP
tax million 136 113 20
=============================== ========== ========= ========= ======= ========
GBP
Exceptional items million 107 (73) -
=============================== ========== ========= ========= ======= ========
GBP
Net finance charges million 176 239 -
=============================== ========== ========= ========= ======= ========
Tax rate % 16.6 16.8 (1)
=============================== ========== ========= ========= ======= ========
Tax rate before exceptional
items % 19.0 18.3 4
=============================== ========== ========= ========= ======= ========
Profit attributable to GBP
parent company's shareholders million 1,406 1,311 7
=============================== ========== ========= ========= ======= ========
Basic earnings per share pence 56.1 52.3 7
=============================== ========== ========= ========= ======= ========
Earnings per share before
exceptional items pence 51.3 53.7 (4)
=============================== ========== ========= ========= ======= ========
Interim dividend per share pence 22.6 21.5 5
------------------------------- ---------- --------- --------- ------- --------
(i) Operating profit for the six months ended 31 December 2015
includes an exceptional operating charge of GBP104 million (2014 -
GBP171 million).
Exceptional items
First
Half
F16
Operating items before taxation GBP million
--------------------------------- -----------
Impairment of Ypióca brand
and goodwill (104)
==================================== ===========
Non-operating items before
taxation
--------------------------------- -----------
Sale of wines in the United
States and Percy Fox (123)
==================================== ===========
Sale of Jamaican, Singapore
and Malaysia brewing businesses 457
==================================== ===========
Provision for a receivable
related to a loan guarantee (92)
==================================== ===========
Other (31)
------------------------------------ -----------
Total non-operating items before
taxation 211
------------------------------------ -----------
Total exceptional items before
taxation 107
------------------------------------ -----------
Tax relief in respect of the exceptional operating item was
GBP10 million. Tax relief in respect of the exceptional
non-operating items was GBP12 million. For further details of
exceptional items see Notes 3 'Exceptional items'.
Net sales growth (GBP million)
Organic net sales growth of 1.8% driven by volume and mix
Adverse exchange and sale of non core assets reduced reported net sales
Net sales GBP million
----------------------------------------------------------- --------------
F15 H1 Reported 5,900
=========================================================== ==============
Exchange (282)
=========================================================== ==============
Disposals completed in F15 and H1 F16 (118)
=========================================================== ==============
Disposals announced in F16 and completed since
31 December 2015 (43)
=========================================================== ==============
Acquisitions 52
=========================================================== ==============
Volume 55
=========================================================== ==============
Price/mix 42
----------------------------------------------------------- --------------
F16 H1 Reported 5,606
----------------------------------------------------------- --------------
Reported net sales declined primarily as a result of the adverse
impact of exchange and the disposals of non core assets. Organic
net sales growth was 1.8% with volume growth and positive
price/mix.
Later timing of innovations and new processes for innovation
launches (the replenishment model) in the United States led to a
decline in net sales of Cîroc which reduced Diageo net sales growth
by approximately 1ppt and impacted performance of Diageo North
America by approximately 3pps and reserve brands by some 7pps.
Operating profit growth (GBP million)
Organic operating profit growth 2.4%
Adverse exchange and sale of non core assets reduced reported operating profit
Operating profit GBP million
---------------------------------------------------------------- ----------------
F15 H1 Reported 1,839
================================================================ ================
Exchange (125)
================================================================ ================
Disposals completed in F15 and H1 F16 (31)
================================================================ ================
(MORE TO FOLLOW) Dow Jones Newswires
January 28, 2016 02:00 ET (07:00 GMT)
Disposals announced in F16 and completed since
31 December 2015 (26)
================================================================ ================
Acquisitions 21
================================================================ ================
Organic Growth 39
---------------------------------------------------------------- ----------------
F16 H1 Reported 1,717
---------------------------------------------------------------- ----------------
Reported operating profit declined mainly as a result of adverse
exchange and the sale of non core assets. Organic operating profit
was up 2.4%.
Exchange
The exchange rate movement reflects the translation of prior
year reported results at current exchange rates.
Reported net sales and operating profit were impacted by adverse
exchange movements driven by the weakness of many currencies
against sterling, in particular the euro, the Venezuelan bolivar
and the Brazilian real partially offset by the strenghtening of the
US dollar.
Using current exchange rates (GBP1 = $1.45; GBP1 = EUR1.33), the
exchange rate movement for the year ending 30 June 2016 is
estimated to adversely impact net sales by approximately GBP260
million and operating profit by approximately GBP85 million. This
estimate excludes the impact of IAS 21 and IAS 39.
Acquisitions and disposals
Acquisitions made in the year ended 30 June 2015 increased net
sales in the first half by GBP52 million and operating profit by
GBP21 million, largely due to the acquisition of the remaining 50%
shareholdings in Don Julio and United National Breweries.
Disposals, primarily the sale of Bushmills and Gleneagles in the
year ended 30 June 2015 and the sale of wines in the United States
and Percy Fox in Great Britain and beer assets in Jamaica and Asia
in the year ending 30 June 2016 contributed net sales of GBP332
million and operating profit of GBP74 million in the six months
ended 31 December 2014 and net sales of GBP171 million and
operating profit of GBP17 million in the six months ended 31
December 2015.
For further details on the impact of acquisitions and disposals
see 'Explanatory Notes' section.
Organic growth by region
Volume Net sales Marketing Operating
spend profit*
---------- ------------- -------------- --------------
% EUm % GBP % GBP % GBP
million million million
------------------ --- ----- --- -------- ---- -------- --- ---------
North America (2) (0.4) (2) (31) (12) (36) (2) (19)
================== === ===== === ======== ==== ======== === =========
Europe, Russia
and Turkey 2 0.5 3 42 - - 5 20
================== === ===== === ======== ==== ======== === =========
Africa 7 0.9 3 19 (4) (3) - -
================== === ===== === ======== ==== ======== === =========
Latin America and
Caribbean 4 0.4 9 40 4 3 5 7
================== === ===== === ======== ==== ======== === =========
Asia Pacific - (0.1) 2 26 (2) (4) 18 36
================== === ===== === ======== ==== ======== === =========
Corporate - - 6 1 - - (8) (5)
------------------ --- ----- --- -------- ---- -------- --- ---------
Diageo 1 1.3 2 97 (5) (40) 2 39
------------------ --- ----- --- -------- ---- -------- --- ---------
* before exceptionals
Change in operating margin (%)
Organic margin improved by 16bps
Exchange reduced operating margin by 66bps
Operating margin ppt
-------------------------------------------- -------
F15 H1 Reported 31.17
============================================ =======
Exchange (0.66)
============================================ =======
Acquisitions and disposals (0.04)
============================================ =======
Gross margin (0.23)
============================================ =======
Marketing spend 1.04
============================================ =======
Overheads (1.07)
============================================ =======
Other income and expenses 0.42
-------------------------------------------- -------
F16 H1 Reported 30.63
-------------------------------------------- -------
Reported margin decreased by 54bps mainly due to adverse
exchange which reduced margin by 66bps. Organic operating margin
improved by 16bps. Gross margin decline was driven by negative
market mix. Marketing efficiencies, together with lower spend on
innovation launches in US Spirits, led to margin improvement.
Overheads increased primarily driven by a higher bonus accrual.
Margin improvement from other income includes the profit on the
sale by United Spirits Limited (USL) of its shareholding in United
Breweries Limited shares of GBP28 million in the period.
Earnings per share before exceptional items (pence)
Organic operating profit growth increased eps by 1.54 pence
eps adversely impacted by exchange and disposals
eps before exceptional items pence
------------------------------------- -------
F15 H1 Reported 53.7
===================================== =======
Exchange on operating profit (5.00)
===================================== =======
Acquisitions and disposals (1.39)
===================================== =======
Operating profit excluding exchange (1.54)
===================================== =======
Associates and joint ventures 0.91
===================================== =======
Finance charges 2.48
===================================== =======
Tax (0.16)
===================================== =======
Non-controlling interests (0.81)
------------------------------------- -------
F16 H1 Reported 51.3
------------------------------------- -------
Earnings per share decreased 2.4 pence largely driven by adverse
exchange. Disposals adversely impacted eps because of low interest
rates on the sale proceeds. Lower finance charges from lower debt,
reduced hyperinflation charge and higher associate income increased
eps. Operating profit growth in USL was the main driver of the
increase in non-controlling interests which reduced eps.
Movement in net finance charges
GBP million
--------------------------------------------- ----- -----------
First Half F15 239
============================================= ===== ===========
Net interest charge reduction (31)
============================================= ===== ===========
Reduction in other finance charges (32)
--------------------------------------------- ----- -----------
First Half F16 176
--------------------------------------------- ----- -----------
First First
Half Half
F16 F15
--------------------------------------------- ----- -----------
Average monthly net borrowings (GBP million) 9,671 10,698
============================================= ===== ===========
Effective interest rate (i) 3.4% 3.7%
--------------------------------------------- ----- -----------
(i) For the calculation of the effective interest rate, the net
interest charge excludes fair value adjustments to derivative
financial instruments and borrowings. Average monthly net
borrowings include the impact of interest rate swaps that are no
longer in a hedge relationship but excludes the market value
adjustment for cross currency interest rate swaps.
The decrease in average net borrowings arose from the disposals
proceeds and stronger cash flow offset by the increase in the
dividend payment. The effective interest rate decreased in the six
months ended 31 December 2015 largely driven by the reduction of
debt in USL together with the repayment of Diageo bonds with a
higher interest rate.
Free cash flow (GBP million)
Free cash flow up GBP140 million with lower interest and tax payments and higher operating
profit offset by exchange.
Free cash flow GBP
million
------------------------------------------------------------------------------------------- ---------
F15 H1 Reported 699
=========================================================================================== =========
Exchange(i) (125)
(MORE TO FOLLOW) Dow Jones Newswires
January 28, 2016 02:00 ET (07:00 GMT)
=========================================================================================== =========
Operating profit before exchange(ii) 123
=========================================================================================== =========
Working capital movement (45)
=========================================================================================== =========
Net capex movement 38
=========================================================================================== =========
Interest and tax 124
=========================================================================================== =========
Other items(iii) 25
------------------------------------------------------------------------------------------- ---------
F16 H1 Reported 839
------------------------------------------------------------------------------------------- ---------
(i) Exchange on operating profit before exceptional items.
(ii) Movement on operating profit before exchange and after
exceptional items adjusted for depreciation and amortisation, post
employment payments and non-cash items.
(iii) Other items include post employment payments, dividends
received from associates and joint ventures and movements in loans
and other investments.
Growth in free cash flow from operating profit before exchange
results from the organic operating profit improvement, and the
higher operating exceptional items in respect of restructuring in
the comparative period. In the first half the operating exceptional
item (impairment of Ypióca brand and goodwill) has no cash impact.
The negative working capital movement was mainly driven by a
reduction in provisions following the settlement of the Korean
customs dispute in the second half of last year.
Return on average invested capital (%)(i)
Adverse exchange movements reduced ROIC by 0.9pps.
Return on average invested capital(i) ppt
--------------------------------------------------- ------
F15 H1 Reported(ii) 14.6
=================================================== ======
Exchange (0.9)
=================================================== ======
Acquisitions and disposals (0.2)
=================================================== ======
Operating profit 0.4
=================================================== ======
Associates and joint ventures 0.1
=================================================== ======
Tax 0.1
=================================================== ======
Non-controlling interests (0.2)
--------------------------------------------------- ------
F16 H1 Reported 13.9
--------------------------------------------------- ------
(i) ROIC calculation excludes exceptional items.
(ii) The group revised the calculation of ROIC at 30 June 2015
by excluding the net assets and net profit attributable to
non-controlling interests. Prior to this adjustment, in the six
months ended 31 December 2014 the ROIC reported was 13.9%.
Adverse exchange reduced ROIC by 0.9pps. Increased operating
profit, higher income from associates and lower tax payments all
had a positive impact on ROIC. Increased profit in USL was the main
driver of higher non-controlling interests, which had a negative
impact on ROIC.
Notes to the business and financial review
Unless otherwise stated:
-- commentary 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
-- GTME refers to Global Travel Asia and Middle East
Diageo has disposed of the majority of its wine interests in the
United States and Great Britain and is expected to complete the
sale of its Argentinian wine interests in the second half of the
year. In the six months ended 31 December 2015 net sales of wine
were GBP189 million (2014 - GBP231 million) and operating profit
was GBP19 million (2014- GBP43 million). As the remaining wine
businesses are immaterial no organic figures for wine are disclosed
in the business and financial review for the six months ended 31
December 2015.
See 'Explanatory Notes' section for explanation of non-GAAP
measures.
BUSINESS REVIEW
Six months ended 31 December 2015
North America
Performance in North America was in line with expectations. In
US Spirits, later innovation launches in the half and the
implementation of the replenishment model for innovations reduced
the level of shipments against the first half last year, especially
for Cîroc, however most key brands delivered stronger performance
in the half. Action taken on Smirnoff and Captain Morgan led to net
sales growth. Crown Royal performed strongly as a result of the
continued success of Crown Royal Regal Apple. Performance in scotch
benefitted from mix, especially on Johnnie Walker. Bulleit and Don
Julio each continued to deliver double digit net sales growth. In
addition Diageo delivered improved performance in DGUSA as net
sales grew 2% and in Canada with net sales up 5%. The number and
timing of innovation launches, together with procurement benefits
resulted in marketing spend down 12%. Excluding these impacts,
marketing would have been broadly flat. However net sales and
negative mix impacted gross margin and operating margin declined
29bps. In the drive for stronger, sustained performance the new
management team in Diageo North America have made a number of
changes to refocus marketing activity, upweight on premise activity
and enhance distributor relationships.
Key financials GBP million:
First First
Half Acquisitions Half Reported
F15 and Organic F16 movement
Reported FX disposals movement Reported %
----------------------- ---------- --------- --------- ------------ --------- --------- ---------
Net sales 1,867 83 (52) (31) 1,867 -
----------------------------------- --------- --------- ------------ --------- --------- ---------
Marketing spend 304 10 (3) (36) 275 (10)
----------------------------------- --------- --------- ------------ --------- --------- ---------
Operating profit before
exceptional items 819 30 (21) (19) 809 (1)
----------------------------------- --------- --------- ------------ --------- --------- ---------
Exceptional items (11) -
----------------------------------- --------- --------- ------------ --------- --------- ---------
Operating profit 808 809 -
----------------------------------- --------- --------- ------------ --------- --------- ---------
Markets:
Organic Reported Organic Reported
volume volume net sales net sales
movement movement movement movement
% % % %
----------------------- ---------- --------- --------- ------------
North America (2) (3) (2) -
----------------------- ---------- --------- --------- ------------
US Spirits
and Wines (2) (4) (3) -
----------------------- ---------- --------- --------- ------------
DGUSA - - 2 7
----------------------- ---------- --------- --------- ------------
Canada 4 3 5 (7)
----------------------- ---------- --------- --------- ------------
Spirits (2) (2) (3) 1
----------------------- ---------- --------- --------- ------------
Beer (1) (1) (1) 2
----------------------- ---------- --------- --------- ------------
Ready to
drink 3 (3) 6 5
----------------------- ---------- --------- --------- ------------
Global giants and local stars(i)
:
Organic Organic Reported
volume net sales net sales
movement movement movement
% % %
----------------------- ---------- --------- ---------
Crown Royal 8 8 13
----------------------- ---------- --------- ---------
Smirnoff 2 4 7
----------------------- ---------- --------- ---------
Captain Morgan 3 1 5
----------------------- ---------- --------- ---------
(MORE TO FOLLOW) Dow Jones Newswires
January 28, 2016 02:00 ET (07:00 GMT)
Johnnie Walker (6) - 5
----------------------- ---------- --------- ---------
Ketel One
vodka (1) (2) 4
----------------------- ---------- --------- ---------
Cîroc (42) (43) (40)
----------------------- ---------- --------- ---------
Baileys 2 4 7
----------------------- ---------- --------- ---------
Guinness 1 - 3
----------------------- ---------- --------- ---------
Tanqueray 1 2 7
----------------------- ---------- --------- ---------
Don Julio 25 28 35
----------------------- ---------- --------- ---------
Bulleit 24 27 34
----------------------- ---------- --------- ---------
Buchanan's 4 9 15
----------------------- ---------- --------- ---------
(i) Spirits brands excluding ready to drink.
-- Volume in US Spirits declined 2% with shipments down nearly
500k cases in the half. This was mainly driven by the reduction in
the volume of Cîroc against the prior period when 750k cases were
shipped for the launch of Cîroc Pineapple. In comparison, in this
half for the launch of the new Cîroc flavour, Cîroc Apple, which
occurred later in the half, 250k cases were shipped.
-- Net sales declined 3% as the decline in volume in Cîroc led
to negative mix which was only partially offset by the higher net
sales growth of Diageo's North American whiskey brands. Smirnoff
has returned to growth although it continues to underperform the
vodka category growth. Smirnoff has increased the activation behind
electronic dance music (EDM) in the half and has further amplified
this through social media and retail programming. Captain Morgan
has also improved and the brand has outperformed the declining rum
category, driven by the launch of Cannon Blast and the growth of
Captain Morgan Original Spiced Rum (OSR) as on premise programming
was stepped up using the activation army to revitalise recruitment.
Strong growth of Johnnie Walker super deluxe variants drove
positive mix with volume decline of Johnnie Walker Red and Black
Label. The growth of North American whiskey is driven by flavours
which is broadening reach to mass appeal and in the shot occasion,
and growth in unflavoured driven by authenticity, craftsmanship and
premiumisation. Crown Royal has variants for each of these growth
drivers and therefore depletions grew double digit and net sales
grew 8% despite lapping the high level of shipments associated with
the launch of Crown Royal Regal Apple in the first half last year.
In contrast depletions of Cîroc declined in the half. With 80% of
sales from flavour variants, growth of the Cîroc brand is more
reliant on a pipeline of high impact flavours and therefore lapping
the very successful innovation of Cîroc Pineapple last year did
impact performance. With the move to a replenishment model for
innovations and with the launch of the new Cîroc Apple innovation
later in the year, shipments of Cîroc were lower which together
with weaker depletions led to a 43% decline in net sales. Cîroc
marketing spend was refocused to drive broader reach though digital
and high profile PR events and increased sampling. For Buchanan's,
premiumisation and positioning within the Hispanic consumer base
continues to be the core strategy for growth, despite slower growth
in the half as a result of price increases to support the new
packaging and brand positioning. Don Julio and Bulleit continued to
build their positions in their respective categories with another
period of industry leading growth, both growing above 25% in the
half.
-- The marketing organisation in US Spirits was refocused in the
half on Release brands(ii) , North American whiskey, reserve brands
and scotch to create a more efficient structure. Marketing spend
benefitted from the achievement of further marketing spend
efficiencies and a reduction in the level of spend on innovations
against the prior period, reflecting the later timing of innovation
launches.
-- DGUSA delivered net sales growth through mix with strong
growth of Smirnoff ready to drink driven by new marketing
programmes and flavours. Beer was down as the launch of Guinness
Nitro IPA was offset by the decline in Guinness Keg, Smithwicks and
Harp.
-- In Canada strong growth across the portfolio drove volume growth and mix.
(ii) Release brands include Smirnoff, Captain Morgan and
Cîroc.
Europe, Russia and Turkey
The region's performance reflected continued momentum in Europe,
growth in Turkey and net sales growth in Russia against the prior
period although the trading environment there remains challenging.
In Europe net sales were up 2% and Diageo gained share, with
continued growth in Great Britain and improved performance in
Continental Europe and France. Reserve brands in Europe delivered
another strong performance with net sales up 18%. In both Great
Britain and Ireland Guinness momentum continued with innovations
from 'The Brewers Project'. Baileys was back to growth as a result
of increased in-outlet activation and consumer sampling. Continued
investment in our route to consumer led to a 10% increase in
outlets covered and coverage is expected to increase further in the
second half. In Russia price increases to offset devaluation led to
a volume decline of 12% however net sales grew 20% driven by
positive brand mix and Diageo gained share in rum although scotch
share declined. In Turkey net sales were up 9% with premiumisation
in the raki category and double digit growth of Johnnie Walker and
Smirnoff. Total operating margin for the region improved 46bps
largely driven by procurement savings in marketing spend.
Key financials GBP million:
First First
Half Acquisitions Half Reported
F15 and Organic F16 movement
Reported FX disposals movement Reported %
----------------------- ---------- --------- -------- ------------ --------- --------- ---------
Net sales 1,459 (114) (26) 42 1,361 (7)
----------------------------------- --------- -------- ------------ --------- --------- ---------
Marketing spend 225 (3) (4) - 218 (3)
----------------------------------- --------- -------- ------------ --------- --------- ---------
Operating profit before
exceptional items 480 (36) (14) 20 450 (6)
----------------------------------- --------- -------- ------------ --------- --------- ---------
Exceptional items (4) -
----------------------------------- --------- -------- ------------ --------- --------- ---------
Operating profit 476 450 (5)
----------------------------------- --------- -------- ------------ --------- --------- ---------
Markets:
Organic Reported Organic Reported
volume volume net net
sales sales
movement movement movement movement
% % % %
----------------------- ---------- --------- -------- ------------
Europe, Russia
and
Turkey 2 1 3 (7)
----------------------- ---------- --------- -------- ------------
Europe 3 1 2 (5)
----------------------- ---------- --------- -------- ------------
Russia (12) (15) 20 (28)
----------------------- ---------- --------- -------- ------------
Turkey 3 3 9 (11)
----------------------- ---------- --------- -------- ------------
Spirits 2 1 5 (7)
----------------------- ---------- --------- -------- ------------
Beer 2 2 1 (5)
----------------------- ---------- --------- -------- ------------
Ready to
drink (2) (2) (5) (7)
----------------------- ---------- --------- -------- ------------
Global giants and local stars(i)
:
Organic Organic Reported
volume net net
sales sales
movement movement movement
% % %
----------------------- ---------- --------- --------
Guinness 5 4 (1)
----------------------- ---------- --------- --------
Johnnie Walker 2 6 (4)
----------------------- ---------- --------- --------
Smirnoff (2) (5) (8)
----------------------- ---------- --------- --------
Baileys 6 7 -
----------------------- ---------- --------- --------
Yenì
Raki 5 5 (15)
----------------------- ---------- --------- --------
Captain Morgan 13 11 2
(MORE TO FOLLOW) Dow Jones Newswires
January 28, 2016 02:00 ET (07:00 GMT)
----------------------- ---------- --------- --------
J B (4) (5) (13)
----------------------- ---------- --------- --------
(i) Spirits brands excluding ready to drink.
-- In Europe net sales were up 2%:
-- In Great Britain net sales were up 3%, with spirits and beer
in growth. Baileys was back in growth with net sales up 14% driven
by increased in-outlet activation and consumer sampling. Captain
Morgan net sales were up 2% with growth driven by the launch of
Captain Morgan White. Smirnoff volume was up 1%, however net sales
were down driven by higher volume sold on promotion during the
holidays as part of a strategy to drive our broader vodka portfolio
in certain channels. Ready to drink net sales were down 6% due to
increased competition in the frozen pouch segment. Beer net sales
were up 3% with Guinness net sales up 4% driven by strong Rugby
World Cup activation and continued success of 'The Brewers Project'
launches. Reserve brands net sales were up 31% driven by Cîroc,
scotch malts and Tanqueray No. TEN.
-- In Ireland Guinness performance accelerated with net sales up
5%, supported by the continued growth of F15 innovations launched
through 'The Brewers Project' - Hop House 13 Lager, Dublin and West
Indies Porter. Net sales of agency lager brands declined 6% and net
sales in spirits were down 6% driven by channel restructuring.
-- In France net sales increased 4% driven by reserve brands up
8%, growth in Johnnie Walker Double Black and Johnnie Walker Red
Label, and the strong performance of Captain Morgan which almost
doubled net sales.
-- In Continental Europe net sales were up 2%:
-- Net sales in Iberia were flat. Activation against a broader
brand portfolio drove growth in Baileys, Johnnie Walker and
Gordon's in a vibrant gin category which offset a decline in J
B.
-- Net sales in Germany, Austria and Switzerland grew 8% driven
by double digit growth in Johnnie Walker, reserve brands, Baileys
and Tanqueray.
-- Benelux net sales were up 5% driven by growth in reserve
brands, Smirnoff, Tanqueray and Gordon's Gin.
-- Growth in scotch and gin and double digit growth of reserve
brands were the main drivers behind the 4% net sales growth in
Italy.
-- In Greece, net sales were up 3% driven by route to consumer
investment and increased activation.
-- Net Sales in Poland were up 1% and net sales declined in the
Eastern Europe Partner Markets.
-- Performance in Russia continued to be impacted by the events
in the region. In Russia price increases were implemented to offset
devaluation, which impacted volume, down 12% but net sales grew 20%
in part driven by growth of reserve brands where volume grew 24%.
While Diageo's share of scotch declined as a result of these price
increases, Captain Morgan continued to achieve strong share gains
behind the launch of Captain Morgan White.
-- In Turkey net sales grew 9%. Raki net sales were up 5% with
Yenì Raki and the super premium variant Tekirda Raki premiumising
the category. Net sales of Johnnie Walker, Smirnoff, Gordon's and
Tanqueray all grew double digit.
-- Marketing investment was held flat through procurement
savings on marketing spend. Excluding procurement savings marketing
spend increased 3%. The increased investment was focused on the
biggest growth opportunities such as reserve brands, gin, beer and
innovation.
Africa
Net sales grew 3% in Africa, with strong growth of beer as net
sales grew 15%, offset by a significant decline in Orijin following
its strong distribution growth in the prior year, and the decline
of scotch in South Africa and Angola given the economic conditions.
The beer performance was led by the roll back of excise duty
increase on Senator in Kenya, growth in Guinness and Malta Guinness
in Nigeria, and good performance in the growing value beer segment
with Satzenbrau in Nigeria, and Balozi and Allsopps in Kenya.
Weaker demand for scotch was offset by the strong growth of vodka
and rum in both East Africa and South Africa. In Ghana, the
successful launch of Orijin Bitters and ready to drink formats
drove net sales growth. Reserve brands have grown net sales 65%
driven by the strong performance of Johnnie Walker Blue in Nigeria
and Africa Regional Markets.
Key financials GBP million:
First First
Half Acquisitions Half Reported
F15 and Organic F16 movement
Reported FX disposals movement Reported %
----------------------- ---------- --------- --------- ------------ --------- --------- ---------
Net sales 746 (76) 27 19 716 (4)
----------------------------------- --------- --------- ------------ --------- --------- ---------
Marketing spend 85 (9) 1 (3) 74 (13)
----------------------------------- --------- --------- ------------ --------- --------- ---------
Operating profit before
exceptional items 175 (38) 1 - 138 (21)
----------------------------------- --------- --------- ------------ --------- --------- ---------
Exceptional items (1) -
----------------------------------- --------- --------- ------------ --------- --------- ---------
Operating profit 174 138 (21)
----------------------------------- --------- --------- ------------ --------- --------- ---------
Markets:
Organic Reported Organic Reported
volume volume net sales net sales
movement movement movement movement
% % % %
----------------------- ---------- --------- --------- ------------
Africa 7 17 3 (4)
----------------------- ---------- --------- --------- ------------
Nigeria (8) (8) (9) (18)
----------------------- ---------- --------- --------- ------------
East Africa 21 21 13 -
----------------------- ---------- --------- --------- ------------
Africa Regional
Markets 12 63 6 17
----------------------- ---------- --------- --------- ------------
South Africa (5) (4) 2 (12)
----------------------- ---------- --------- --------- ------------
Spirits (3) (3) - (12)
----------------------- ---------- --------- --------- ------------
Beer 23 45 15 10
----------------------- ---------- --------- --------- ------------
Ready to
drink (35) (28) (44) (43)
----------------------- ---------- --------- --------- ------------
Global giants and local stars(i)
:
Organic Organic Reported
volume net sales net sales
movement movement movement
% % %
----------------------- ---------- --------- ---------
Guinness 14 15 4
----------------------- ---------- --------- ---------
Malta 24 27 17
----------------------- ---------- --------- ---------
Tusker (13) (14) (26)
----------------------- ---------- --------- ---------
Senator 145 144 111
----------------------- ---------- --------- ---------
Harp (8) (8) (17)
----------------------- ---------- --------- ---------
Johnnie Walker (17) (4) (13)
----------------------- ---------- --------- ---------
Smirnoff 2 8 (7)
----------------------- ---------- --------- ---------
(i) Spirits brands excluding ready to drink.
-- In Nigeria, net sales declined 9% driven by the comparison
against the strong distribution growth on Orijin, which lapped its
successful introduction last year when it defined a new category in
Nigeria. The brand also saw rate of sale fall as competitors
entered the category. A number of interventions to bring new news
to the brand and the category have been made, including innovation
and packaging changes at appropriate price points. Beer delivered a
very strong performance with both volume and net sales up 28%. This
is driven by strong double digit shipment growth for Guinness and
Malta Guinness, reflecting momentum against a weak prior period,
and high single digit growth in underlying depletions benefitting
from new marketing, distribution changes and in part as consumers
switch back from Orijin. Satzenbrau performed strongly with half
year net sales growth of 54% as the brand builds its position in
the growing value beer segment.
(MORE TO FOLLOW) Dow Jones Newswires
January 28, 2016 02:00 ET (07:00 GMT)
-- In East Africa net sales were up 13% largely driven by the
strong growth of beer and mainstream spirits. In Kenya Senator keg
volume more than doubled following a duty reduction early in the
year. Mainstream spirits net sales were up 17%, largely driven by
the strong performance of Kenya Cane and Kane Extra. Guinness,
Smirnoff Ice Double Black and Guarana, and reserve brands all grew
both volume and net sales by double digits.
-- In Africa Regional Markets net sales grew 6% reflecting
strong growth in Ghana, Cameroon and Ethiopia. In Ghana net sales
were up 27% largely driven by the launch of Orijin Bitters and
ready to drink variants, and good performance in beer with net
sales up 5%. In Cameroon, net sales growth of 4% was driven by a
good performance from Guinness, despite short term supply
constraints, and Johnnie Walker which grew 30% as it continued to
benefit from an improved route to consumer. In Ethiopia, strong net
sales growth of Malta of 63% was partly offset by a small decline
in beer, in an increasingly aggressive sector as brewing capacity
expands in the market. We have relaunched our Meta beer brand in
November. Reported net sales increased GBP26 million in the half
following the acquisition of the remaining 50% of United National
Breweries in South Africa in May 2015. Net sales in Angola declined
52% reflecting economic and currency issues leading to reduced
stock levels. Reserve brands continue to perform well driven by
Johnnie Walker Blue Label.
-- In a challenging economic environment net sales in South
Africa were up 2%. Net sales of spirits were flat as a 9% growth in
vodka was offset by scotch net sales down 6%. Smirnoff 1818
continued its strong performance with net sales growth of 3%, and
is now the biggest spirits brand in South Africa. Net sales of
Johnnie Walker increased 5%, with Johnnie Walker Black depletions
of 12%, as marketing focused on the brand's quality credentials.
Overall scotch net sales performance reflects weaker performance of
Johnnie Walker Red, J B and Bell's as the economic issues led to
lower stock levels in the retail trade. Net sales in rum were up
14% as a result of consumer events to drive awareness. Reserve
brands' net sales were up 19% as it benefited from launches of
Bulleit, Ketel One, Cîroc Pineapple and Cardhu.
-- Marketing investment in Africa decreased 4% driven by Nigeria
and East Africa. In Nigeria, investment was down 16% as activity on
beer started slowly in the half, reflecting economic uncertainty.
In East Africa, investment declined 1% reflecting the growth in the
value sector and some re-phasing of marketing to the second half.
Investment increased 5% in African Regional Markets reflecting a
continued focus on core brands, alongside renovating the Meta brand
in Ethiopia and the launch of Orijin in Ghana. Investment behind
scotch increased 14% notably behind Johnnie Walker in South Africa
and Africa Regional Markets. Ready to drink investment increased
driven by Smirnoff Ice Double Black & Guarana in South
Africa.
Latin America and Caribbean
In LAC volume and net sales growth of 4% and 9% respectively
reflect strong performances across the domestic markets. Despite
difficult market conditions, Brazil net sales were up 12%
reflecting price increases and positive shipment phasing ahead of a
December duty increase. Perfomance in both Mexico and Colombia was
strong with net sales up 20% and 24% respectively, driven by scotch
and the introduction of Baileys flavours. Net sales growth in the
export channels reflects the comparison against last year when
stocks held by customers in the channel were reduced. There has
also been a significant decline in depletions in the export
channels given the continued currency weakness. Following a number
of years of currency devaluation which has impacted demand, net
sales in Venezuela were only GBP4 million. Scotch net sales across
LAC grew 9% reflecting strong Johnnie Walker Red Label performances
in Mexico and Brazil, and Buchanan's in Mexico and Colombia, driven
by invigourated marketing campaigns, some price increases and
growth in reserve scotch brands. Vodka net sales were up 22% driven
by growth in Mexico and in Brazil as a result of the pre-duty buy
in.
Key financials GBP million:
First First
Half Acquisitions Half Reported
F15 and Organic F16 movement
Reported FX disposals movement Reported %
----------------- -------- --------- --------- ------------ --------- --------- ---------
Net sales 619 (139) 2 40 522 (16)
--------------------------- --------- --------- ------------ --------- --------- ---------
Marketing spend 110 (21) 4 3 96 (13)
--------------------------- --------- --------- ------------ --------- --------- ---------
Operating profit before
exceptional items 207 (63) 3 7 154 (26)
--------------------------- --------- --------- ------------ --------- --------- ---------
Exceptional items (4) (104)
--------------------------- --------- --------- ------------ --------- --------- ---------
Operating profit 203 50 (75)
--------------------------- --------- --------- ------------ --------- --------- ---------
Markets:
Organic Reported Organic Reported
volume volume net sales net sales
movement movement movement movement
% % % %
----------------- -------- --------- --------- ------------
Latin America
and
Caribbean 4 5 9 (16)
----------------- -------- --------- --------- ------------
PUB 1 1 9 (21)
----------------- -------- --------- --------- ------------
Colombia 5 6 24 (11)
----------------- -------- --------- --------- ------------
Mexico 26 41 20 20
----------------- -------- --------- --------- ------------
West LAC 5 (2) 4 (7)
----------------- -------- --------- --------- ------------
Venezuela 7 6 39 (94)
----------------- -------- --------- --------- ------------
Spirits 5 7 9 (13)
----------------- -------- --------- --------- ------------
Beer 11 (28) 7 (41)
----------------- -------- --------- --------- ------------
Ready to
drink (9) (9) 3 (33)
----------------- -------- --------- --------- ------------
Global giants and local stars(i)
:
Organic Organic Reported
volume net sales net sales
movement movement movement
% % %
---------------- -------- --------- ---------
Johnnie Walker 7 11 (7)
---------------- -------- --------- ---------
Buchanan's (10) 5 (27)
---------------- -------- --------- ---------
Smirnoff 14 21 (14)
---------------- -------- --------- ---------
Old Parr (11) - (24)
---------------- -------- --------- ---------
Baileys (1) 5 (10)
---------------- -------- --------- ---------
Ypióca (6) 4 (28)
---------------- -------- --------- ---------
Black & White 49 72 25
---------------- -------- --------- ---------
(i) Spirits brands excluding ready to drink.
-- Net sales in Paraguay, Uruguay and Brazil (PUB) increased 9%
largely driven by Brazil where, despite challenging market
conditions, net sales were up 12% reflecting price increases
following a currency devaluation and positive shipment phasing
ahead of a significant excise duty increase in December 2015.
Scotch net sales in Brazil were up 17% with strong performance of
Johnnie Walker Red Label, Black and White, and White Horse with
Diageo holding share despite price increases, reflecting a
consistent and targeted investment behind these brands. Vodka net
sales were up 15% driven by Smirnoff and Cîroc as a result of the
pre-duty buy in. Despite the decline in the cachaça market, Ypióca
net sales were up 4% as on-trade activations focused on increasing
coverage in its core region. An impairment charge in respect of the
Ypióca brand and its goodwill has been made reflecting the
challenging economic environment and a significant adverse change
in local tax regulation which will lower its future profitability.
Net sales in the duty free zones of Paraguay and Uruguay declined
15% reflecting currency devaluation. Reserve brands' net sales in
PUB increased 14% driven by Cîroc and a focus on customer
experience through on trade marketing activity.
(MORE TO FOLLOW) Dow Jones Newswires
January 28, 2016 02:00 ET (07:00 GMT)
-- Net sales in Colombia were up 24%, with 18pps of positive
price/mix. Scotch delivered strong double digit net sales growth in
each segment. Johnnie Walker continues to grow with volume up 13%,
and net sales up 40% driven by price increases. Old Parr grew net
sales 21% and share benefited from the launch of Old Parr Tribute.
Buchanan's delivered 37% net sales growth and made share gains
primarily due to increases in Buchanan's Deluxe and Special
Reserve. Innovation through flavours, plus strong focus behind
brilliant execution during peak selling seasons contributed to a 7%
increase in Baileys net sales, and increased share in a growing
category. As the business looks to widen its portfolio, gin and
vodka categories posted net sales growth above 40% and 50%
respectively, albeit from a small base, driven by innovation and
reserve brands.
-- Mexico net sales were up 20% largely driven by scotch where
net sales increased 18%, reflecting strong brand momentum and
improved execution of marketing campaigns and commercial platforms.
A full revamp of the Buchanan's trademark through the launch of a
new bottle and the successful 'Good vs Great' campaign contributed
to 18% net sales growth. Johnnie Walker net sales grew 17%
benefitting from greater visibility with the Keep Walking - 'Walk
With Joy' ('Walk With Joy') campaign and digital activations. Black
and White net sales grew 87% reflecting strong focus on trade
activations. A robust turnaround plan has been implemented for
Smirnoff having regained distribution of the brand, focused on
brand availability through trade activations. The acquisition of
Don Julio drove reported net sales growth. Don Julio is the fastest
growing tequila brand in the country nearly doubling category
growth.
-- In West LAC net sales increased 4%. Net sales growth in the
export channels reflects the comparison against last year, when
stock held by customers in the channel were reduced, and a
significant decline in depletions given the continued currency
weakness. Domestic markets' net sales increased 3% driven by Peru,
Chile, and Central America and Caribbean. In Peru net sales were up
22% reflecting some pricing actions, with strong contributions from
Old Parr and across the Johnnie Walker portfolio on the back of the
'Walk With Joy' campaign and Johnnie Ginger activations in the
first half. In Chile, net sales improved 11% driven by strong
scotch volume and net sales growth of 18% and 15% respectively
benefiting from trade activations. Central America and Caribbean
net sales grew 2% driven by Smirnoff ready to drink up 14%
reflecting the launch of Smirnoff Ice Double Black and Guarana in
Central America in the half. In Argentina, changes in the channel
mix reduced net sales by 4% in the half. Diageo has now agreed to
sell its Argentina wine business and move to a full distribution
sales model, which is expected to complete in the second half. In
addition, the beer business in Jamaica was sold in October 2015 as
part of a focus on spirits.
-- Following the change in consolidation exchange rate to
recognise local inflation, net sales for Venezuela in the half were
GBP4 million.
-- An increase in marketing investment of 4% supported the
expansion of brand portfolios in the region, but spend was reduced
in Brazil in line with the weaker economic environment. In Mexico,
investment growth of 16% was driven by spend on Smirnoff as we
continue to invest having regained distribution, and on ready to
drink behind the launch of Smirnoff Ice Double Black & Guarana.
Elsewhere, Smirnoff ready to drink investment also increased behind
the new Green Apple flavour in Colombia. Scotch spend increased 2%
and was focused on Johnnie Walker Black in Brazil, Mexico and West
LAC supported by the 'Walk With Joy' campaign, and Buchanan's in
Mexico and Colombia with the relaunch of the new image.
Asia Pacific
The overall performance in Asia Pacific improved, with net sales
up 2% as Australia, South East Asia, Greater China and India all
grew. The performance of Shui Jing Fang drove growth in Greater
China and the successful renovation of Royal Challenge drove top
line growth in India. There was some weakness in Korea, driven by a
shift towards lower ABV spirits, and in Global Travel Asia and
Middle East, given geopolitical developments. The reserve portfolio
continued to deliver a strong performance, up 15%, with growth
coming from Master Distiller's No.8 brand in Greater China and the
reintroduction of Johnnie Walker Green Label in Australia.
Marketing spend was down 2% as a result of reduced spend on Johnnie
Walker Black Label and Blue Label in China. Operating margin
improved strongly as margin in India increased significantly driven
by both underlying improvement in operating margin and the sale by
USL of United Breweries Limited shares.
Key financials GBP million:
First First
Half Acquisitions Half Reported
F15 and Organic F16 movement
Reported FX disposals movement Reported %
----------------------- ---------- --------- --------- ------------ --------- --------- ---------
Net sales 1,166 (34) (35) 26 1,123 (4)
----------------------------------- --------- --------- ------------ --------- --------- ---------
Marketing spend 168 (6) (1) (4) 157 (7)
----------------------------------- --------- --------- ------------ --------- --------- ---------
Operating profit before
exceptional items 214 (15) (1) 36 234 9
----------------------------------- --------- --------- ------------ --------- --------- ---------
Exceptional items (147) -
----------------------------------- --------- --------- ------------ --------- --------- ---------
Operating profit 67 234 249
----------------------------------- --------- --------- ------------ --------- --------- ---------
Markets:
Organic Reported Organic Reported
volume volume net sales net sales
movement movement movement movement
% % % %
----------------------- ---------- --------- --------- ------------
Asia Pacific - (10) 2 (4)
----------------------- ---------- --------- --------- ------------
South East
Asia (2) (2) 6 2
----------------------- ---------- --------- --------- ------------
Greater China - - 4 6
----------------------- ---------- --------- --------- ------------
India - (12) 6 (3)
----------------------- ---------- --------- --------- ------------
Global Travel
Asia &
Middle East (6) (6) (12) (12)
----------------------- ---------- --------- --------- ------------
Australia 2 2 2 (11)
----------------------- ---------- --------- --------- ------------
North Asia 10 10 (2) (6)
----------------------- ---------- --------- --------- ------------
Spirits - (10) 2 (2)
----------------------- ---------- --------- --------- ------------
Beer 2 2 (1) (8)
----------------------- ---------- --------- --------- ------------
Ready to
drink (8) (8) (9) (18)
----------------------- ---------- --------- --------- ------------
Global giants and local stars(i)
:
Organic Organic Reported
volume net sales net sales
movement movement movement
% % %
----------------------- ---------- --------- ---------
Johnnie Walker (4) (5) (7)
----------------------- ---------- --------- ---------
McDowell's 2 3 (2)
----------------------- ---------- --------- ---------
Windsor - (7) (10)
----------------------- ---------- --------- ---------
Smirnoff (3) (3) (7)
----------------------- ---------- --------- ---------
Guinness 2 (1) (8)
----------------------- ---------- --------- ---------
Bundaberg (5) (4) (17)
----------------------- ---------- --------- ---------
Shui Jing
Fang 155 69 73
----------------------- ---------- --------- ---------
(i) Spirits brands excluding ready to drink.
(MORE TO FOLLOW) Dow Jones Newswires
January 28, 2016 02:00 ET (07:00 GMT)
-- In South East Asia net sales were up 6%. This growth was
driven by increased net sales in the wholesale channels which
lapped the inventory reduction of Johnnie Walker Black Label and
Johnnie Walker Red Label in F15. This inventory reduction has
continued in the first half, however while shipments are below
depletions, shipments are up on last year. Other countries in the
market were weaker. In Indonesia, increased regulation banning off
trade sales had a material impact resulting in a net sales
reduction of 16%. In Thailand, net sales were down 6% due to the
weak scotch market. However, Johnnie Walker grew share by 1ppt. In
addition, the successful launch of Smirnoff Midnight 100 in the
first quarter contributed to share gains of 40bps in Smirnoff ready
to drink. In Vietnam net sales declined by 29% with Johnnie Walker
particularly impacted.
-- In Greater China net sales increased 4%. The performance in
Shui Jing Fang continued to improve with net sales up 81%, driven
by the continuing strong performance of the Master Distiller's No.8
which competes in the premium baijiu segment. In China net sales of
international spirits were down 40%, largely due to scotch, which
was down 42% as the effects of the government's anti-extravagance
measures on the traditional on trade persist and competition
increases in the modern on trade channel. In Taiwan, net sales were
up 9% driven by the continued success of The Singleton which gained
share consolidating its number one scotch position.
-- In India, net sales were up 6% for the half. Shipments of
Johnnie Walker were down as a result of delays in registration in
some states and stock levels of Smirnoff were reduced. IMFL brands,
especially prestige and above, performed strongly in Q2 offsetting
some weakness in the first quarter. The renovation of the Royal
Challenge brand drove net sales growth of 57% and the brand gained
share in the category. This offset a temporary pricing related
challenge in Karnataka on our lead brand of Haywards which declined
32% and impacted the reported India results by 2pps. In addition,
Scotch performed strongly with double digit net sales growth from
revamped brand campaigns and category management across the
consolidated portfolio. Share gains were achieved in Premium White
Spirits driven by Smirnoff despite a softening category. Overall
India's gross profit margin improved 3pps due to improved
product/price mix and stronger collaboration with third party
suppliers and productivity initiatives that delivered a reduction
in cost of sales.
-- Global Travel Asia and Middle East net sales declined by 12%
as geopolitical developments led to softness in the domestic and
travel retail business in the Middle East. In Global Travel Asia
net sales declined 4% impacted by softness in China and South East
Asia.
-- Australia performed well in tough market conditions and net
sales grew 2%. Growth in spirits and beer more than offset the
continued decline in the ready to drink segment. Smirnoff, Captain
Morgan and Baileys performed strongly and all gained share.
However, the overall Bundaberg brand net sales were down 2% driven
by spirits as ready to drink was flat year on year. Johnnie Walker
was down low single digit driven by Johnnie Walker Red Label
partially offset by the re-introduction of Johnnie Walker Green
Label.
-- North Asia net sales were down 2%. In Japan, net sales grew
9%, largely driven by strong growth in scotch which offset the
decline in ready to drink, a category that is becoming more
competitive due to new entrants in craft beer and wine based ready
to drink. In Korea net sales were down 6%. Decline in the whisky
category and a shift towards lower ABV spirits was partially offset
by continued growth in beer as Diageo broadened its participation.
In response to the shift towards lower ABV spirits Korea launched W
Ice by Windsor in March 2015 and K Rare by Windsor in November 2015
and initial results show the brands are being well received both by
customers and consumers.
-- Marketing spend decreased 2% with a significant reduction in
Johnnie Walker investment predominantly in China with a planned
move away from in-outlet promotion. In North Asia, while marketing
spend reduced overall in response to the contraction of the whisky
market, Korea increased its investment in Guinness to broaden the
portfolio. The spend in South East Asia has increased by 12% with
the execution of the Johnnie Walker 'Walk With Joy' marketing
campaign and the launch of Smirnoff ready to drink Midnight 100 in
Thailand being the key focus. In India marketing spend was down as
marketing spend is focused on key brand renovations.
Corporate
Key financials GBP million:
First First
Half Acquisitions Half Reported
F15 and Organic F16 movement
Reported FX disposals movement Reported %
------------------------- --------- --- ------------ --------- --------- ---------
Net sales 43 (2) (25) 1 17 (60)
------------------------- --------- --- ------------ --------- --------- ---------
Marketing spend 4 - (2) - 2 (50)
------------------------- --------- --- ------------ --------- --------- ---------
Operating profit before
exceptional items (56) (3) (4) (5) (68) (21)
------------------------- --------- --- ------------ --------- --------- ---------
Exceptional items (7) -
------------------------- --------- --- ------------ --------- --------- ---------
Operating profit (63) (68) (8)
------------------------- --------- --- ------------ --------- --------- ---------
Reported corporate net sales in the six months ended 31 December
2015 were GBP17 million, down 60% from the previous year largely
due to the sale of the Gleneagles Hotel. Operating charges in the
period were GBP68 million, as cost savings in global functions were
more than offset by the release of provisions which benefited the
comparative. There were no exceptional charges in respect of
restructuring costs in the half
CATEGORY AND BRAND REVIEW
For six months ended 31 December 2015
Key categories:
Organic Reported
Organic Reported net net
volume volume sales sales
movement movement movement movement
% % % %
------------------------ -------- ------------------------- -------- --------
Spirits(i) - (5) 1 (4)
------------------------ -------- ------------------------- -------- --------
Scotch (2) (2) 1 (8)
------------------------ -------- ------------------------- -------- --------
North American whiskey 7 7 10 15
------------------------ -------- ------------------------- -------- --------
IMFL (4) (8) 2 (1)
------------------------ -------- ------------------------- -------- --------
Vodka (1) (1) (8) (9)
------------------------ -------- ------------------------- -------- --------
Rum 7 7 4 -
------------------------ -------- ------------------------- -------- --------
Tequila 7 87 6 45
------------------------ -------- ------------------------- -------- --------
Liqueurs 6 6 7 2
------------------------ -------- ------------------------- -------- --------
Gin 2 2 6 3
------------------------ -------- ------------------------- -------- --------
Beer 15 26 7 1
------------------------ -------- ------------------------- -------- --------
Ready to drink (14) (14) (13) (20)
------------------------ -------- ------------------------- -------- --------
(i) Spirits brands excluding ready to drink.
-- Scotch represents 25% of Diageo net sales and net sales were up 1%. A good performance in Latin America and
Caribbean, with net sales up 9%, was largely driven by Johnnie Walker and Buchanan's, supported by successful
marketing campaigns such as Buchanan's 'Good vs Great' campaign and Johnnie Walker's 'Walk With Joy' campaign.
Good overall performances by Black & White and White Horse were offset by net sales decline in J B and Bell's.
Windsor net sales declined double digit in Korea due to the decline of the whisky category and a market shift
towards lower ABV spirits.
-- North American whiskey represents 8% of Diageo's net sales and grew 10%. Performance was driven by the success of
Crown Royal Regal Apple and the strong growth of Bulleit which continued to gain share in the category in the
United States.
-- Vodka represents 12% of Diageo's net sales and declined 8%. The decline was largely driven by Cîroc in the
United States. Smirnoff, the largest brand in the category, performed well with net sales up 1% in developed
markets and 4% in emerging markets.
(MORE TO FOLLOW) Dow Jones Newswires
January 28, 2016 02:00 ET (07:00 GMT)
-- Beer represents 17% of Diageo's net sales and grew 7% largely driven by a strong performance in Africa where beer
net sales were up 15%. Key contributors were East Africa and Nigeria. In East Africa there was strong growth of
Senator, which more than doubled volume following the duty remission early in the fiscal year. In Nigeria,
Guinness benefited from trade activations, and a price and quality focus. While Malta continued its distribution
drive in to the growing off trade sector. Guinness also gained share and increased net sales in Great Britain by
4% and Ireland by 5%, its two biggest markets.
-- Ready to drink represents 5% of Diageo's net sales with net sales down 13%. This was largely driven by a decline
of Orijin in Nigeria as it lapped last year's national roll out and faced increased competition in this category.
The decline was partially offset by a good performance in Smirnoff Ice Flavours in the United States driven by
new marketing programmes and flavours and the launch of Orijin in Ghana. In Thailand, Smirnoff Midnight 100 was
successfully launched in the ready to drink segment in the first quarter and contributed to share gains of 40bps
in Smirnoff ready to drink.
Global giants, local stars and reserve (i):
Organic Organic Reported
volume net sales net sales
movement movement movement
% % %
------------------ -------- --------- ---------
Global giants
------------------ -------- --------- ---------
Johnnie Walker (1) 1 (5)
------------------ -------- --------- ---------
Smirnoff 2 2 (1)
------------------ -------- --------- ---------
Baileys 4 6 2
------------------ -------- --------- ---------
Captain Morgan 5 3 3
------------------ -------- --------- ---------
Tanqueray 8 8 9
------------------ -------- --------- ---------
Guinness 8 9 2
------------------ -------- --------- ---------
Local stars
------------------ -------- --------- ---------
Crown Royal 7 8 13
------------------ -------- --------- ---------
Yenì Raki 5 5 (14)
------------------ -------- --------- ---------
Buchanan's (5) 7 (13)
------------------ -------- --------- ---------
J B (6) (9) (16)
------------------ -------- --------- ---------
Windsor 1 (7) (10)
------------------ -------- --------- ---------
Old Parr (10) - (22)
------------------ -------- --------- ---------
Bundaberg (5) (4) (17)
------------------ -------- --------- ---------
Bell's (2) (3) (15)
------------------ -------- --------- ---------
White Horse (6) 10 (18)
------------------ -------- --------- ---------
Ypióca (6) 4 (28)
------------------ -------- --------- ---------
Cacique 53 9 (56)
------------------ -------- --------- ---------
Shui Jing Fang 154 68 72
------------------ -------- --------- ---------
Reserve
------------------ -------- --------- ---------
Scotch malts 8 10 5
------------------ -------- --------- ---------
Cîroc (36) (37) (34)
------------------ -------- --------- ---------
Ketel One vodka - (1) 4
------------------ -------- --------- ---------
Don Julio 24 27 75
------------------ -------- --------- ---------
Bulleit 27 29 36
------------------ -------- --------- ---------
(i) Spirits brands excluding ready to drink.
-- Global giants represent 45% of Diageo net sales and grew 4%.
-- Johnnie Walker net sales were up 1% as reserve brands performed well with net sales up 13%, tempered by
inventory reductions of Johnnie Walker Red Label in Asia Pacific. Johnnie Walker Black Label net sales were also
down 3%, largely driven by the continued effects of the government's anti extravagance measures in Greater China
and geopolitical developments which led to softness in the Middle East domestic and travel retail business.
-- Smirnoff net sales grew 2%, returning to growth in the United States, its biggest market, where Smirnoff net
sales were up 4% driven by Smirnoff Red and the launch of Smirnoff Peppermint. In Europe net sales were down 7%
due to decline in Great Britain with higher volume sold on promotion in the holiday season as part of a strategy
to drive our broader vodka portfolio in certain channels and a decline in Continental Europe as we restructured
trade terms with certain customers to create a more profitable and sustainable business.
-- Baileys net sales increased by 6% mainly driven by growth in Great Britain and the United States. In Great
Britain Baileys net sales were up 14% supported by increased media, sampling and in-outlet visibility and
promotions during the holiday season. In the United States the growth was driven by the launch of Baileys
Espresso Crème.
-- Captain Morgan net sales were up 3% with growth in Europe, Russia and the United States. In Europe there was
double digit net sales growth in Iberia, Poland, Nordics, Italy, Southern Europe and France. In the United States,
which accounts for nearly two thirds of Captain Morgan net sales, net sales were up 2% with the launch of Captain
Morgan Cannon Blast. In Russia, Captain Morgan continued a strong performance behind the Captain Morgan White
launch.
-- Tanqueray net sales were up 8% with all regions delivering net sales growth as Europe, Latin America and
Caribbean and Asia Pacific all achieved double digit net sales growth. In its biggest market, the United States,
net sales were up 1%, driven by Tanqueray No. TEN as the super-premium category continued to expand. Tanqueray
No. TEN was supported with variant-specific communication to drive awareness and trial to drive distribution in
top-end bars and restaurants nationally.
-- Guinness net sales increased 9%. In Nigeria net sales grew 28% as it continued to benefit from the distribution
drive launched last year to capture the growing off trade category. In Kenya net sales increased 11% supported by
the 'Get Booked 2' and 'Made of Black' marketing campaigns. Guinness also gained share and increased net sales in
Great Britain by 4% and Ireland by 5%.
-- Local stars represent 16% of Diageo net sales. Despite tough economic conditions in many of the markets for local
stars overall performance was good with net sales up 5%. Net sales growth of 8% in Crown Royal in the United
States and high double digit growth in Shui Jing Fang driven by the continuous strong performance of Master
Distiller's No.8 accounted for over 90% of the net sales growth. Elsewhere strong performances in Buchanan's
across North America and LAC and Raki in Turkey offset the decline in J B in Continental Europe and Windsor in
Korea.
-- Reserve brands' net sales decline of 2% was largely driven by lower volume of Cîroc as the United States
business moved to a replenishment model on innovations and the launch of Cîroc Apple occurred later in this
half than the launch of Cîroc Pineapple last year. Overall scotch reserve brand net sales are up 9% with
double digit growth of Johnnie Walker more than offsetting a decline in Haig Club as it laps the launch last
year. Bulleit, the fastest growing unflavoured North American whiskey, delivered double digit growth and both
Bulleit Bourbon and Bulleit Rye led growth in their respective segments through increased distribution, consumer
experience marketing, and the engagement of key trade influencers.
ADDITIONAL FINANCIAL INFORMATION
For the six months ended 31 December 2015
INCOME STATEMENT
Acquisitions
31 December Exchange and disposals Organic 31 December
2014 (a) (b) movement(ii) 2015
GBP million GBP million GBP million GBP million GBP million
---------------------------- ----------- ----------- -------------- ------------- -----------
Sales 8,724 (463) (161) 167 8,267
============================ =========== =========== ============== ============= ===========
Excise duties (2,824) 181 52 (70) (2,661)
---------------------------- ----------- ----------- -------------- ------------- -----------
Net sales 5,900 (282) (109) 97 5,606
============================ =========== =========== ============== ============= ===========
Cost of sales(i) (2,418) 106 71 (51) (2,292)
---------------------------- ----------- ----------- -------------- ------------- -----------
Gross profit 3,482 (176) (38) 46 3,314
============================ =========== =========== ============== ============= ===========
Marketing (896) 29 5 40 (822)
(MORE TO FOLLOW) Dow Jones Newswires
January 28, 2016 02:00 ET (07:00 GMT)
============================ =========== =========== ============== ============= ===========
Other operating expenses(i) (747) 22 (3) (47) (775)
---------------------------- ----------- ----------- -------------- ------------- -----------
Operating profit before
exceptional items 1,839 (125) (36) 39 1,717
============================ =========== =========== ============== ============= ===========
Exceptional operating
items (c) (171) (104)
---------------------------- ----------- -----------
Operating profit 1,668 1,613
============================ =========== ===========
Non-operating items
(c) 98 211
============================ =========== ===========
Net finance charges (239) (176)
============================ =========== ===========
Share of after tax results
of associates and joint
ventures 113 136
---------------------------- ----------- -----------
Profit before taxation 1,640 1,784
============================ =========== ===========
Taxation (276) (296)
---------------------------- ----------- -----------
Profit for the period 1,364 1,488
---------------------------- ----------- -----------
(i) Before exceptional
operating items.
(ii) For the definition
of organic movement
see 'Explanatory Notes'
section.
(a) Exchange
The impact of movements in exchange rates on reported figures is
principally in respect of the Venezuelan bolivar, the euro and the
Brazilian real partially offset by the US dollar.
Venezuela is a hyper-inflationary economy where the government
maintains a regime of strict currency controls with multiple
foreign currency rate systems. Access to US dollar 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 (VEF) at the rate
they are expected to be settled, applying the most appropriate
official exchange rate. For consolidation purposes, the group
converts its Venezuelan operations using management's estimate of
the rate that capital and dividend repatriations are expected to be
realised. The consolidation rate and the accounting treatment are
monitored and reviewed depending on the economic and regulatory
developments in the country.
The effect of movements in exchange rates and other movements on
profit before exceptional items and taxation for the six months
ended 31 December 2015 is set out in the table below.
Gains/ (losses)
GBP million
------------------------------------ ----------- ---------------
Translation impact (62)
------------------------------------ ----------- ---------------
Transaction impact (63)
------------------------------------ ----------- ---------------
Operating profit before exceptional items (125)
------------------------------------------------- ---------------
Net finance charges - translation
impact (3)
------------------------------------ ----------- ---------------
Mark to market impact of IAS 39 on interest
expense (5)
------------------------------------------------- ---------------
Impact of IAS 21 and IAS 39 on net other
finance charges (2)
------------------------------------------------- ---------------
Interest and other finance charges (10)
------------------------------------ ----------- ---------------
Associates - translation impact (11)
------------------------------------ ----------- ---------------
Profit before exceptional items and taxation (146)
------------------------------------------------- ---------------
Six months Six months
ended ended
31 December 31 December
2015 2014
------------------------------------ ----------- ---------------
Exchange rates
------------------------------------ ----------- ---------------
Translation GBP1 = $1.52 $1.61
------------------------------------ ----------- ---------------
Transaction GBP1 = $1.57 $1.58
------------------------------------ ----------- ---------------
Translation GBP1 = EUR1.39 EUR1.26
------------------------------------ ----------- ---------------
Transaction GBP1 = EUR1.33 EUR1.24
------------------------------------ ----------- ---------------
(b) Acquisitions and disposals
The impact of acquisitions and disposals on the reported figures
was primarily attributable to the disposals of The Old Bushmills
Distillery Company Limited on 27 February 2015, Gleneagles Hotels
Limited on 30 June 2015, Desnoes & Geddes Limited (D&G) on
7 October 2015, the wine businesses in the United States and the UK
Percy Fox wine business on 1 January 2016, partly offset by the
acquisition of the 50% equity interest in Don Julio in Mexico that
Diageo did not already own on 27 February 2015.
(c) Exceptional items
Exceptional operating charges in the six months ended 31
December 2015 included an impairment charge in respect of the
Ypióca brand and goodwill allocated to the Paraguay, Uruguay and
Brazil (PUB) cash-generating unit of GBP62 million and GBP42
million, respectively. Forecast cash flow assumptions have been
reduced principally due to a challenging economic environment in
Brazil and significant adverse changes in local tax regulation. A
pre-tax discount rate of 17% (2014 - 14%) and 19% (2014 - 18%) have
been used to calculate the net present value of the future cash
flows expected to be generated by Ypióca and PUB, respectively.
In the six months ended 31 December 2014 exceptional operating
charges included GBP145 million in respect of a settlement
agreement of disputes with the Korean customs authorities and GBP26
million in respect of restructuring programmes.
Non-operating items in the six months ended 31 December 2015
included an exceptional gain of GBP457 million in respect of the
sale of Diageo's 57.87% shareholding in D&G (Jamaican Red
Stripe business) and a 49.99% stake in GAPL Pte Limited (Singapore
and Malaysian beer business) to Heineken, which completed on 7
October 2015. The gain is net of a GBP13 million cumulative
exchange loss, in respect of prior years, recycled from other
comprehensive income and transaction costs of GBP8 million. As part
of the transaction, Diageo agreed to purchase an additional 20%
shareholding in Guinness Ghana Breweries Limited (GGBL) from
Heineken which increased Diageo's shareholding in GGBL to
72.42%.
On 1 December 2015, Diageo disposed of its 42.25% equity
interests in DHN Drinks, 25% equity stake in Sedibeng Breweries
Limited and its 15.01% equity stake in Namibia Breweries Limited
(South African associate interests). The net cash consideration
received was GBP120 million, which includes GBP31 million in
respect of loans made to DHN Drinks and Sedibeng Breweries Limited.
An exceptional non-operating loss of GBP28 million, net of a GBP30
million cumulative exchange loss, in respect of prior years,
recycled from other comprehensive income, was accounted for in the
income statement.
On 1 January 2016, Diageo completed the sale of the majority of
its wine interests in the United States and its UK based Percy Fox
businesses to Treasury Wine Estates. As at 31 December 2015 the
assets and liabilities of the US wine business and Percy Fox were
transferred to assets and liabilities held for sale on the
consolidated balance sheet. Together with the sale of the group's
other wine interests in the United States the transactions resulted
in an exceptional loss of GBP123 million in the period including an
estimated provision for the settlement of a guarantee given in
respect of the lease payments due to the lessor of the vineyards.
In the full year it is expected that the sale of the businesses
will result in an exceptional loss before taxation on disposal of
approximately GBP135 million. A cumulative exchange gain of GBP12
million, in respect of prior years, to be recycled from other
comprehensive income and other costs of approximately GBP24 million
will be accounted for in the second half of the year.
On 30 September 2015, the group completed the disposal of its
shareholding in Central Glass Industries Limited (CGI), a Kenyan
glass bottle manufacturer, resulting in an exceptional gain of
GBP14 million, net of GBP1 million transaction costs. GBP7 million
of the gain is attributable to non-controlling interests.
(MORE TO FOLLOW) Dow Jones Newswires
January 28, 2016 02:00 ET (07:00 GMT)
On 5 November 2015, Diageo agreed the sale of its interests in
Argentina to Grupo Peñaflor. The transaction will be completed in
the second half of the year. Net balances were transferred to
assets and liabilities held for sale on the consolidated balance
sheet and resulted in an exceptional loss of GBP17 million in the
six months ended 31 December 2015. It is expected that for the full
year the transaction will result in an exceptional loss on disposal
of approximately GBP45 million. The cumulative exchange loss, in
respect of prior years, of approximately GBP20 million to be
recycled from other comprehensive income and other directly
attributable costs of some GBP8 million will be accounted for in
the second half of the year.
In May 2015, a loan of $135 million (GBP92 million) provided by
Standard Chartered Bank (SCB) to Watson Limited guaranteed by
Diageo Holdings Netherlands B.V became due. The date from which the
guarantee can be called was extended to 29 January 2016 and $135
million was deposited during the period into an escrow account with
SCB. Given the risks in relation to the enforcement and
recoverability of associated security and counter-indemnities,
Diageo believes that the outstanding amounts may not be fully
recoverable. Therefore the $135 million deposited with SCB has been
provided for (see note 13(a)).
In the six months ended 31 December 2014 a gain of GBP103
million arose on the increase of the group's investment in United
Spirits Limited (USL) from 25.02% to 54.78% (excluding the 2.38%
interest owned by USL Benefit Trust) and the group incurred GBP5
million transaction costs in respect of the sale of the group's
shareholding in Bushmills.
Cash payments in the six months ended 31 December 2015 for
exceptional restructuring and for the deposit into the escrow
account with SCB in respect of the Watson guarantee (reported in
'movements in loans and other investments' in the consolidated
statement of cash flows) were GBP33 million (2014 - GBP62 million)
and GBP92 million (2014 - GBPnil), respectively. Cash expenditure
on exceptional restructuring in the second half of the year is
expected to be approximately GBP30 million.
(d) Dividend
An interim dividend of 22.6 pence per share will be paid to
holders of ordinary shares and ADRs on the register as of 26
February 2016. The ex-dividend date is 25 February 2016. This
represents an increase of 5% on last year's interim dividend. The
interim dividend will be paid to shareholders on 7 April 2016.
Payment to US ADR holders will be made on 12 April 2016. A dividend
reinvestment plan is available to holders of ordinary shares in
respect of the interim dividend and the plan notice date is 15
March 2016.
MOVEMENT IN NET BORROWINGS AND EQUITY
Movement in net borrowings
2015 2014
GBP GBP
million million
------------------------------------------------ -------- --------
Net borrowings at 30 June (9,527) (8,850)
------------------------------------------------ -------- --------
Free cash flow (a) 839 699
------------------------------------------------ -------- --------
Acquisition and sale of businesses (b) 643 (664)
------------------------------------------------ -------- --------
Net purchase of own shares for share schemes
(c) (20) (7)
------------------------------------------------ -------- --------
Dividends paid to non-controlling interests (56) (34)
------------------------------------------------ -------- --------
Purchase of shares of non-controlling interests
(d) (21) -
------------------------------------------------ -------- --------
Net movements in bonds (e) (489) (371)
------------------------------------------------ -------- --------
Net movements in other borrowings (f) 94 1,316
------------------------------------------------ -------- --------
Equity dividends paid (876) (801)
------------------------------------------------ -------- --------
Net increase in cash and cash equivalents 114 138
------------------------------------------------ -------- --------
Net decrease/(increase) in bonds and other
borrowings 395 (945)
------------------------------------------------ -------- --------
Exchange differences (g) (259) (143)
------------------------------------------------ -------- --------
Borrowings on acquisition of businesses - (849)
------------------------------------------------ -------- --------
Borrowings disposed through sale of businesses 7 -
------------------------------------------------ -------- --------
Other non-cash items 42 (19)
------------------------------------------------ -------- --------
Net borrowings at 31 December (9,228) (10,668)
------------------------------------------------ -------- --------
(a) See 'Key financial information' section for the analysis of
free cash flow.
(b) Acquisitions and sale of businesses include the disposal of
the group's shareholdings in D&G and GAPL on 7 October 2015 for
a net cash consideration, including disposal costs, of $752 million
(GBP490 million), the disposal of the group's equity stake in its
South African associate interests on 1 December 2015 for a cash
consideration of ZAR 2,517 million (GBP119 million), net of
disposal costs and the proceeds from the sale of CGI, a Kenyan
glass manufacturer, for KES 3,931 million (GBP25 million).
In the six months ended 31 December 2014 cash payments primarily
comprised GBP1,118 million in respect of the acquisition of
additional 26% investment in USL partially offset by GBP395 million
in respect of sale of the Whyte and Mackay Group.
(c) Net purchase of own shares comprised purchase of treasury
shares for the future settlement of obligations under the employee
share option schemes of GBP39 million (2014 - GBP39 million) less
receipts from employees on the exercise of share options of GBP19
million (2014 - GBP32 million).
(d) In the six months ended 31 December 2015 Diageo purchased an
additional 20% shareholding in Guinness Ghana Breweries Limited for
GBP21 million.
(e) In the six months ended 31 December 2015, the group repaid
bonds of $750 million (GBP489 million). In the comparable period,
the group repaid bonds of EUR1,000 million (GBP792 million) and
issued bonds of EUR1,000 million (GBP791 million), and a bond of
GBP370 million acquired on the purchase of USL was repaid using the
proceeds from the sale of the Whyte and Mackay Group.
(f) Net movements in other borrowings are primarily in respect
of the net drawdown of short term commercial paper which is used to
finance day-to-day operations.
(g) Exchange differences primarily arose on the US dollar and
euro denominated borrowings partially offset by the favourable
change on foreign exchange swaps and forwards.
Movement in equity
2015 2014
GBP GBP
million million
------------------------------------------- -------- --------
Equity at 30 June 9,256 7,590
------------------------------------------- -------- --------
Profit for the period 1,488 1,364
------------------------------------------- -------- --------
Exchange adjustments (a) 81 266
------------------------------------------- -------- --------
Net remeasurement of post employment plans (240) (341)
------------------------------------------- -------- --------
Exchange recycled to the income statement
(b) 43 79
------------------------------------------- -------- --------
Fair value movements on available-for-sale
investments (20) 11
------------------------------------------- -------- --------
Non-controlling interests acquired (b) (21) 594
------------------------------------------- -------- --------
Disposal of non-controlling interest (24) -
------------------------------------------- -------- --------
Dividends to non-controlling interests (56) (34)
------------------------------------------- -------- --------
Dividends paid (876) (801)
------------------------------------------- -------- --------
Other reserve movements 46 (32)
------------------------------------------- -------- --------
Equity at 31 December 9,677 8,696
------------------------------------------- -------- --------
(a) Movement in the six months ended 31 December 2015 primarily
arose from exchange gains in respect of the US dollar, euro and
Indian rupee partially offset by the exchange loss on Brazilian
real denominated net investments.
(b) In the six months ended 31 December 2015 exchange losses of
GBP43 million were recycled to the income statement in respect of
disposals.
In the six months ended 31 December 2014 following the change in
accounting for United Spirits Limited from an associate to a
subsidiary, an exchange loss of GBP79 million was recycled to the
income statement and a 43.9% non-controlling interest of GBP594
million was recognised.
Post employment plans
(MORE TO FOLLOW) Dow Jones Newswires
January 28, 2016 02:00 ET (07:00 GMT)
The deficit in respect of post employment plans before taxation
increased by GBP239 million from GBP259 million at 30 June 2015 to
GBP498 million at 31 December 2015. The increase primarily arose
due to a decrease in the market value of assets owned by the plans
partially offset by a reduction in long term inflation rates (UK
RPI from 3.2% to 3.1%, UK CPI from 2.2% to 2.1% and Ireland CPI
from 1.6% to 1.5%) used to calculate the liabilities in the plans.
Total cash contributions by the group to all post employment plans
in the year ending 30 June 2016 are estimated to be approximately
GBP180 million.
DIAGEO CONDENSED CONSOLIDATED INCOME STATEMENT
Six months
Six months ended ended
31 December 2015 31 December
2014
Notes GBP million GBP million
Sales 2 8,267 8,724
Excise duties (2,661) (2,824)
-------------------------- -----------------------------------------
Net sales 2 5,606 5,900
Cost of sales (2,292) (2,428)
-------------------------- -----------------------------------------
Gross profit 3,314 3,472
Marketing (822) (896)
Other operating expenses (879) (908)
-------------------------- -----------------------------------------
Operating profit 2 1,613 1,668
Non-operating items 3 211 98
Finance income 4 110 159
Finance charges 4 (286) (398)
Share of after tax results of
associates and joint ventures 136 113
-------------------------- -----------------------------------------
Profit before taxation 1,784 1,640
Taxation 5 (296) (276)
-------------------------- -----------------------------------------
Profit for the period 1,488 1,364
========================== =========================================
Attributable to:
Equity shareholders of the parent
company 1,406 1,311
Non-controlling interests 82 53
-------------------------- -----------------------------------------
1,488 1,364
========================== =========================================
Weighted average number of shares million million
Shares in issue excluding own shares 2,507 2,506
Dilutive potential ordinary shares 11 7
-------------------------- -----------------------------------------
2,518 2,513
========================== =========================================
pence pence
Basic earnings per share 56.1 52.3
========================== =========================================
Diluted earnings per share 55.8 52.2
========================== =========================================
DIAGEO CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
Six months Six months
ended ended
31 December 31 December
2015 2014
GBP million GBP million
Other comprehensive income
Items that will not be recycled subsequently
to the income
statement
Net remeasurement of post employment
plans
- group (240) (337)
- associates and joint ventures - (4)
Tax on post employment plans 55 53
-------------------------- --------------------------------
(185) (288)
Items that may be recycled subsequently
to the income
statement
Exchange differences on translation
of foreign operations
- group 118 384
- associates and joint ventures 80 (51)
- non-controlling interests 63 83
Exchange losses recycled to the income
statement 43 79
Net investment hedges (180) (150)
Tax on exchange differences 4 5
Effective portion of changes in fair
value of cash flow hedges
(MORE TO FOLLOW) Dow Jones Newswires
January 28, 2016 02:00 ET (07:00 GMT)
- gains/(losses) taken to other comprehensive
income - group 45 (34)
- gains/(losses) taken to other comprehensive
income - associates
and joint ventures 1 (2)
- recycled to income statement (50) (96)
Tax on effective portion of changes
in fair value of cash flow hedges (5) 15
Fair value movements on available-for-sale
investments
- gains taken to other comprehensive
income - group 4 6
- gains taken to other comprehensive
income - non-controlling
interests 4 5
- recycled to income statement -
group (15) -
- recycled to income statement -
non-controlling interests (13) -
Tax on available-for-sale fair value
movements 5 -
Hyperinflation adjustment (2) 29
Tax on hyperinflation adjustment 1 (1)
-------------------------- --------------------------------
103 272
-------------------------- --------------------------------
Other comprehensive loss, net of tax,
for the period (82) (16)
Profit for the period 1,488 1,364
-------------------------- --------------------------------
Total comprehensive income for the
period 1,406 1,348
========================== ================================
Attributable to:
Equity shareholders of the parent
company 1,270 1,207
Non-controlling interests 136 141
-------------------------- --------------------------------
Total comprehensive income for the
period 1,406 1,348
========================== ================================
DIAGEO CONDENSED CONSOLIDATED BALANCE SHEET
31 December 30 June 2015 31 December
2015 2014
GBP GBP GBP GBP GBP GBP
Notes million million million million million million
Non-current assets
Intangible assets 11,333 11,231 11,379
Property, plant and
equipment 3,624 3,690 3,754
Biological assets 9 65 66
Investments in associates
and joint ventures 2,314 2,076 2,491
Other investments 29 109 161
Other receivables 49 46 52
Other financial assets 9 259 292 279
Deferred tax assets 167 189 291
Post employment benefit
assets 224 436 137
-------- --------------- -------------
18,008 18,134 18,610
Current assets
Inventories 6 4,387 4,574 4,597
Trade and other
receivables 3,077 2,435 3,462
Assets held for sale 12 563 143 325
Other financial assets 9 221 46 114
Cash and cash equivalents 7 541 472 802
-------- --------------- -------------
8,789 7,670 9,300
-------- -------- --------
Total assets 26,797 25,804 27,910
-------- -------- --------
Current liabilities
Borrowings and bank
overdrafts 7 (1,935) (1,921) (2,845)
Other financial
liabilities 9 (111) (156) (156)
Trade and other payables (3,194) (2,943) (3,297)
Liabilities held for
sale 12 (175) (3) (45)
Corporate tax payable (294) (162) (284)
Provisions (91) (105) (188)
-------- --------------- -------------
(5,800) (5,290) (6,815)
Non-current liabilities
Borrowings 7 (7,930) (7,917) (8,518)
Other financial
liabilities 9 (439) (443) (475)
Other payables (58) (69) (83)
Provisions (248) (238) (251)
Deferred tax liabilities (1,923) (1,896) (2,147)
Post employment benefit
liabilities (722) (695) (925)
-------- --------------- -------------
(11,320) (11,258) (12,399)
-------- -------- --------
Total liabilities (17,120) (16,548) (19,214)
-------- -------- --------
Net assets 9,677 9,256 8,696
======== ======== ========
Equity
Share capital 797 797 797
Share premium 1,346 1,346 1,345
Other reserves 2,050 1,994 2,393
Retained earnings 3,946 3,634 2,693
(MORE TO FOLLOW) Dow Jones Newswires
January 28, 2016 02:00 ET (07:00 GMT)
-------- --------------- -------------
Equity attributable
to equity
shareholders of the
parent company 8,139 7,771 7,228
Non-controlling interests 1,538 1,485 1,468
-------- -------- --------
Total equity 9,677 9,256 8,696
======== ======== ========
DIAGEO CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY
Retained earnings/(deficit)
------------------------------------
Equity
attributable
Other to parent Non-
Share Share Other Own retained company controlling Total
capital premium reserves shares earnings Total shareholders interests equity
GBP GBP GBP GBP GBP GBP GBP GBP GBP
million million million million million million million million million
At 30 June 2014 797 1,345 2,243 (2,280) 4,718 2,438 6,823 767 7,590
Total
comprehensive
income - - 150 - 1,057 1,057 1,207 141 1,348
Employee share
schemes - - - 39 (44) (5) (5) - (5)
Share-based
incentive plans - - - - 18 18 18 - 18
Share-based
incentive plans
in respect
of associates - - - - 1 1 1 - 1
Tax on
share-based
incentive
plans - - - - (6) (6) (6) - (6)
Acquisitions - - - - - - - 594 594
Change in fair
value of put
options - - - - (9) (9) (9) - (9)
Dividends paid - - - - (801) (801) (801) (34) (835)
------- ------- -------- -------- --------------- --------- ---------------- --------------- -------------------------------------
At 31 December
2014 797 1,345 2,393 (2,241) 4,934 2,693 7,228 1,468 8,696
======= ======= ======== ======== =============== ========= ================ =============== =====================================
At 30 June 2015 797 1,346 1,994 (2,228) 5,862 3,634 7,771 1,485 9,256
Total
comprehensive
income - - 56 - 1,214 1,214 1,270 136 1,406
Employee share
schemes - - - 10 (28) (18) (18) - (18)
Share-based
incentive plans - - - - 13 13 13 - 13
Share-based
incentive plans
in respect
of associates - - - - 1 1 1 - 1
Tax on
share-based
incentive
plans - - - - (3) (3) (3) - (3)
Disposal of
non-controlling
interests - - - - - - - (24) (24)
Change in fair
value of put
options - - - - (1) (1) (1) - (1)
Purchase of
non-controlling
interests - - - - (18) (18) (18) (3) (21)
Dividends paid - - - - (876) (876) (876) (56) (932)
At 31 December
2015 797 1,346 2,050 (2,218) 6,164 3,946 8,139 1,538 9,677
------- ------- -------- -------- --------------- --------- ---------------- --------------- -------------------------------------
DIAGEO CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
Six months Six months
ended ended
31 December 31 December
2015 2014
GBP GBP GBP GBP
million million million million
Cash flows from operating activities
Profit for the period 1,488 1,364
Taxation 296 276
Share of after tax results of associates
and joint ventures (136) (113)
Net finance charges 176 239
Non-operating items (211) (98)
-------- ---------------
Operating profit 1,613 1,668
Increase in inventories (78) (175)
Increase in trade and other receivables (698) (668)
Increase in trade and other payables
and provisions 254 366
-------- ---------------
Net increase in working capital (522) (477)
Depreciation, amortisation and
impairment 281 190
Dividends received 3 10
Post employment payments less amounts
included in operating profit (32) (32)
Other items (8) 20
-------- ---------------
244 188
------- ----------------------------------
Cash generated from operations 1,335 1,379
(MORE TO FOLLOW) Dow Jones Newswires
January 28, 2016 02:00 ET (07:00 GMT)
Interest received 81 88
Interest paid (235) (312)
Taxation paid (144) (198)
-------- ---------------
(298) (422)
------- ----------------------------------
Net cash from operating activities 1,037 957
Cash flows from investing activities
Disposal of property, plant and
equipment and computer software 8 36
Purchase of property, plant and
equipment and computer software (204) (270)
Movements in loans and other investments (2) (24)
Sale of businesses 654 396
Acquisition of businesses (11) (1,060)
-------- ---------------
Net cash inflow/(outflow) from
investing activities 445 (922)
------- ----------------------------------
Cash flows from financing activities
Net purchase of own shares for
share schemes (20) (7)
Dividends paid to non-controlling
interests (56) (34)
Purchase of shares of non-controlling
interests (21) -
Proceeds from bonds - 791
Repayment of bonds (489) (1,162)
Net movements on other borrowings 94 1,316
Equity dividends paid (876) (801)
-------- ---------------
Net cash (outflow)/inflow from
financing activities (1,368) 103
------- ----------------------------------
Net increase in net cash and cash
equivalents 114 138
Exchange differences (29) 15
Net cash and cash equivalents at
beginning of the period 382 532
------- ----------------------------------
Net cash and cash equivalents at
end of the period 467 685
======= ==================================
Net cash and cash equivalents consist
of:
Cash and cash equivalents 541 802
Bank overdrafts (74) (117)
------- ----------------------------------
467 685
======= ==================================
NOTES
1. Basis of preparation
This condensed set of financial statements has been prepared in
accordance with IAS 34 Interim Financial Reporting as issued by the
International Accounting Standards Board (IASB) and as adopted by
the EU.
The annual financial statements of the group are prepared in
accordance with International Financial Reporting Standards (IFRSs)
as issued by the IASB and as adopted by the EU. As required by the
Disclosure and Transparency Rules of the Financial Conduct
Authority, the condensed set of financial statements has 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 2015.
IFRS is subject to ongoing review and endorsement by the EU or
possible amendment by interpretative guidance and the issuance of
new standards by the IASB. In preparing these condensed interim
financial statements, the significant judgements made by management
when applying the group's accounting policies and the significant
areas where estimates were required were the same as those that
applied to the consolidated financial statements for the year ended
30 June 2015, with the exception of changes in estimates disclosed
in note 13 - Contingent liabilities and legal proceedings.
Having reassessed the principal risks the directors considered
it appropriate to adopt the going concern basis of accounting in
preparing the condensed consolidated financial statements.
New accounting standards
No amendments to the accounting standards were issued by the
IASB or the International Financial Reporting Interpretations
Committee (IFRIC) that are first applicable to Diageo in the year
ending 30 June 2016.
The following standards issued by the IASB (not yet endorsed by
the EU) have not yet been adopted by the group:
IFRS 9 - Financial instruments (effective in the year ending 30
June 2019) is ultimately intended to replace IAS 39 and covers the
classification, measurement and derecognition of financial
instruments together with a new hedge accounting model and new
impairment methodology.
Based on a preliminary assessment the group believes that the
adoption of IFRS 9 will have no significant impact on its
consolidated results or financial position.
IFRS 15 - Revenue from contracts with customers (effective in
the year ending 30 June 2019) is based on the principle that
revenue is recognised when control of goods or services is
transferred to the customer and provides a single, principles based
five-step model to be applied to all sales contracts. It replaces
the separate models for goods, services and construction contracts
under current IFRS.
Based on a preliminary assessment the group currently believes
that the adoption of IFRS 15 will have no significant impact on its
consolidated results or financial position.
IFRS 16 - Leases (effective in the year ending 30 June 2020)
sets out the principles for the recognition, measurement,
presentation and disclosure of leases for both the lessee and the
lessor. It eliminates the classification of leases as either
operating leases or finance leases and introduces a single lessee
accounting model where the lessee is required to recognise assets
and liabilities for all leases that have a term of greater than a
year.
The group is currently considering the implications of IFRS 16
which is expected to have an impact on the group's consolidated
results and financial position.
There are a number of amendments to IFRS, effective for the year
ending 30 June 2017, 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
2015 are not the company's statutory accounts for that financial
year. Those accounts have been reported on by the company's
previous auditor, KPMG LLP and delivered to the registrar of
companies. The report of the previous auditor, KPMG LLP was (i)
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).
(MORE TO FOLLOW) Dow Jones Newswires
January 28, 2016 02:00 ET (07:00 GMT)
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
International Supply Centre (ISC), which manufactures products for
other group companies and includes the production sites in the
United Kingdom, Ireland, Italy and Guatemala.
Continuing operations also include the Corporate function.
Corporate revenues and costs are in respect of central costs,
including finance, 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
ISC. 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 and the results of Gleneagles Hotel
(disposed on 30 June 2015).
Diageo uses shared services operations, including captive and
outsourced centres, to deliver transaction processing activities
for markets and operational entities. These centres are located in
Hungary, Romania, Kenya, Colombia, the Philippines and India. The
captive business service centre in Budapest also performs certain
central finance activities, including elements of financial
planning and reporting and treasury. The results of shared service
operations are recharged to the regions.
The segmental information for net sales and operating profit
before exceptional items is reported at budgeted exchange rates in
line with management reporting. For management reporting purposes
the group measures the current period at, and restates the prior
period net sales and operating profit to, the current year's
budgeted exchange rates. These exchange rates are set prior to the
financial year as part of the financial planning process and
provide a consistent exchange rate to measure the performance of
the business throughout the year. 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 year
ended 30 June 2015.
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.
Europe, Latin Eliminate
Russia America inter- Total Corporate
Six months North and and Asia segment operating and
ended America Turkey Africa Caribbean Pacific ISC sales segments other Total
31 December GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP
2015 million million million million million million million million million million
Sales 2,113 2,448 955 671 2,063 774 (774) 8,250 17 8,267
======= ======= ======= ========= ======= ======= ========= ========= ========= =======
Net sales
At budgeted
exchange
rates(i) 1,720 1,337 671 527 1,168 818 (774) 5,467 19 5,486
Acquisitions
and disposals 101 63 35 57 9 - - 265 - 265
ISC allocation 7 25 3 5 4 (44) - - - -
Retranslation
to actual
exchange
rates 39 (64) 7 (67) (58) - - (143) (2) (145)
------- ------- ------- --------- ------- ------- --------- --------- --------- -------
Net sales 1,867 1,361 716 522 1,123 774 (774) 5,589 17 5,606
======= ======= ======= ========= ======= ======= ========= ========= ========= =======
Operating
profit/(loss)
At budgeted
exchange
rates(i) 779 424 130 157 243 77 - 1,810 (67) 1,743
Acquisitions
and disposals 20 7 5 16 2 - - 50 - 50
ISC allocation 11 43 5 10 8 (77) - - - -
Retranslation
to
actual
exchange
rates (1) (24) (2) (29) (19) - - (75) (1) (76)
------- ------- ------- --------- ------- ------- --------- --------- --------- -------
Operating
profit/(loss)
before
exceptional
items 809 450 138 154 234 - - 1,785 (68) 1,717
Exceptional
items - - - (104) - - - (104) - (104)
------- ------- ------- --------- ------- ------- --------- --------- --------- -------
Operating
profit/(loss) 809 450 138 50 234 - - 1,681 (68) 1,613
======= ======= ======= ========= ======= ======= ========= ========= =========
Non-operating
items 211
Net finance
charges (176)
Share of after
tax results
of
associates
and joint
ventures 136
-------
Profit before
taxation 1,784
=======
Six months
ended
Europe, Latin Eliminate
Russia America inter- Total Corporate
31 December North and and Asia segment operating and
2014 America Turkey Africa Caribbean Pacific ISC sales segments other Total
GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP
million million million million million million million million million million
Sales 2,102 2,596 992 786 2,205 797 (797) 8,681 43 8,724
======= ======= ======= ========= ======= ======= ========= ========= ========= =========
Net sales
At budgeted
exchange
rates(i) 1,916 1,463 753 608 687 836 (797) 5,466 44 5,510
Acquisitions
and disposals 8 - - - 478 - - 486 - 486
ISC allocation 6 24 1 4 4 (39) - - - -
Retranslation
to actual
exchange
rates (63) (28) (8) 7 (3) - - (95) (1) (96)
------- ------- ------- --------- ------- ------- --------- --------- --------- ---------
Net sales 1,867 1,459 746 619 1,166 797 (797) 5,857 43 5,900
======= ======= ======= ========= ======= ======= ========= ========= ========= =========
Operating
profit/(loss)
At budgeted
exchange
rates(i) 851 459 174 198 176 52 - 1,910 (55) 1,855
Acquisitions
and disposals (8) - - - 30 - - 22 - 22
ISC allocation 7 31 3 6 5 (52) - - - -
Retranslation
to actual
exchange
rates (31) (10) (2) 3 3 - - (37) (1) (38)
------- ------- ------- --------- ------- ------- --------- --------- --------- ---------
Operating
profit/(loss)
before
exceptional
items 819 480 175 207 214 - - 1,895 (56) 1,839
Exceptional
items (11) (4) (1) (4) (147) 3 - (164) (7) (171)
------- ------- ------- --------- ------- ------- --------- --------- --------- ---------
Operating
profit/(loss) 808 476 174 203 67 3 - 1,731 (63) 1,668
(MORE TO FOLLOW) Dow Jones Newswires
January 28, 2016 02:00 ET (07:00 GMT)
======= ======= ======= ========= ======= ======= ========= ========= =========
Non-operating
items 98
Net finance
charges (239)
Share of after
tax results
of associates
and joint
ventures 113
---------
Profit before
taxation 1,640
=========
(i) These items represent the IFRS 8 performance measures
for the geographical and ISC segments.
(1) The net sales figures for ISC 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 ISC segment to the other operating
segments, inter-segmental 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 occur in the last four
months of each calendar year.
Weighted average exchange rates used in the translation of
income statements were US dollar - GBP1 = $1.52 (2014 - GBP1 =
$1.61) and euro - GBP1 = EUR1.39 (2014 - GBP1 = EUR1.26). Exchange
rates used to translate assets and liabilities at the balance sheet
date were US dollar - GBP1 = $1.47 (30 June 2015 - GBP1 = $1.57, 31
December 2014 - GBP1 = $1.56) and euro - GBP1 = EUR1.36 (30 June
2015 - GBP1 = EUR1.41, 31 December 2014 - GBP1 = EUR1.29). The
group uses foreign exchange transaction hedges to mitigate the
effect of exchange rate movements.
3. Exceptional items
Exceptional items are those which, in management's judgement,
need to be disclosed by virtue of their size or nature in order for
the user to obtain a proper understanding of the financial
information.
Six months Six months
ended ended
31 December 31 December
2015 2014
GBP million GBP million
Items included in operating profit
Impairment of Ypióca brand
and PUB goodwill (104) -
Restructuring programmes - (26)
Korea settlement - (145)
(104) (171)
Non-operating items
Sale of businesses
Jamaica, Singapore and Malaysia
beer interests 457 -
Wines in the United States and
Percy Fox (123) -
Argentina (17) -
South African associate interests (28) -
Kenya - glass business (CGI) 14 -
Bushmills - (5)
Step ups
United Spirits Limited - 103
Other
Provision for a receivable related
to a loan guarantee (92) -
----------- -----------
211 98
Exceptional items before taxation 107 (73)
Items included in taxation
Tax on exceptional operating items 10 38
Tax on exceptional non-operating
items 12 -
----------- -----------
22 38
Total exceptional items 129 (35)
=========== ===========
Attributable to:
Equity shareholders of the parent
company 121 (34)
Non-controlling interests 8 (1)
----------- -----------
Total exceptional items 129 (35)
=========== ===========
Exceptional items included in
operating profit are charged to:
Cost of sales - (10)
Other operating expenses (104) (161)
----------- -----------
(104) (171)
=========== ===========
(1) For further analysis see 'Additional Financial Information'
section.
Cash generated from operations includes GBP33 million (2014 -
GBP62 million) of cash outflows in respect of restructuring
programs.
4. Finance income and charges
Six months Six months
ended ended
31 December 31 December
2015 2014
GBP million GBP million
Interest income 73 81
Fair value gain on interest rate
instruments 28 65
----------- -----------
Total interest income 101 146
Interest charges (235) (279)
Fair value loss on interest rate
instruments (29) (61)
----------- -----------
Total interest charges (264) (340)
----------- -----------
Net interest charges (163) (194)
=========== ===========
Net finance income in respect
of post employment plans in surplus 9 6
Other finance income - 7
----------- -----------
Total other finance income 9 13
Net finance charge in respect
of post employment plans in deficit (11) (14)
Unwinding of discounts (5) (6)
Change in financial liability - (12)
Hyperinflation adjustment on Venezuela
operations (2) (24)
Other finance charges (4) (2)
----------- -----------
Total other finance charges (22) (58)
----------- -----------
Net other finance charges (13) (45)
=========== ===========
5. Taxation
For the six months ended 31 December 2015, the GBP296 million
taxation charge (2014 - GBP276 million) comprises a UK tax charge
of GBP66 million (2014 - GBP60 million) and a foreign tax charge of
GBP230 million (2014 - GBP216 million).
6. Inventories
31 December 30 June 31 December
2015 2015 2014
GBP million GBP million GBP million
Raw materials and consumables 343 333 386
Work in progress 65 66 95
Maturing inventories 3,451 3,586 3,470
Finished goods and goods
for resale 528 589 646
----------- ----------- -----------
4,387 4,574 4,597
=========== =========== ===========
7. Net borrowings
31 December 30 June 31 December
2015 2015 2014
GBP million GBP million GBP million
Borrowings due within one
year and bank overdrafts (1,935) (1,921) (2,845)
Borrowings due after one
year (7,930) (7,917) (8,518)
Fair value of foreign currency
forwards and swaps 327 82 170
Fair value of interest
rate hedging instruments 7 19 (1)
Finance lease liabilities (238) (262) (276)
----------- ----------- -----------
(9,769) (9,999) (11,470)
Cash and cash equivalents 541 472 802
----------- ----------- -----------
(9,228) (9,527) (10,668)
=========== =========== ===========
(MORE TO FOLLOW) Dow Jones Newswires
January 28, 2016 02:00 ET (07:00 GMT)
8. Reconciliation of movement in net borrowings
Six months Six months
ended ended
31 December 31 December
2015 2014
GBP million GBP million
Net increase in cash and cash
equivalents before exchange 114 138
Net decrease/(increase) in bonds
and other borrowings 395 (945)
----------- -----------
Decrease/(increase) in net borrowings
from cash flows 509 (807)
Exchange differences on net borrowings (259) (143)
Borrowings on disposal/(acquisition)
of businesses 7 (849)
Other non-cash items 42 (19)
Net borrowings at beginning of
the period (9,527) (8,850)
----------- -----------
Net borrowings at end of the period (9,228) (10,668)
=========== ===========
In the six months ended 31 December 2015, the group repaid bonds
of $750 million (GBP489 million).
All bonds, medium-term notes and commercial paper issued by the
group'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.
There were no significant changes in the measurement and
valuation techniques, or significant transfers between the levels
of the financial assets and liabilities in the six months ended 31
December 2015.
The group's financial assets and liabilities measured at fair
value are categorised as follows:
31 December 30 June 31 December
2015 2015 2014
GBP million GBP million GBP million
Available-for-sale investments - 80 72
----------- ----------- -----------
Unadjusted quoted prices in
active markets (Level 1) - 80 72
=========== =========== ===========
Derivative assets 480 338 393
Derivative liabilities (162) (198) (215)
----------- ----------- -----------
Valuation techniques based on
observable market input (Level
2) 318 140 178
=========== =========== ===========
Other financial liabilities (150) (139) (140)
----------- ----------- -----------
Valuation techniques based on
unobservable market input (Level
3) (150) (139) (140)
=========== =========== ===========
Finance lease liabilities amounted to GBP238 million at 31
December 2015 (30 June 2015 - GBP262 million).
The carrying amount of the group's financial assets and
liabilities are generally the same as their fair value apart from
borrowings. At 31 December 2015 the fair value of gross borrowings
(excluding finance lease liabilities and the fair value of
derivative instruments) was GBP10,240 million and the carrying
value was GBP9,865 million (30 June 2015 - GBP10,115 million and
GBP9,838 million respectively).
10. Dividends and other reserves
Six months
Six months ended ended
31 December 31 December
2015 2014
GBP million GBP million
Amounts recognised as distributions
to equity
shareholders in the period
Final dividend for the year
ended 30 June 2015 of
34.9 pence per share (2014
- 32.0 pence) 876 801
================ ===========
An interim dividend of 22.6 pence per share (2014 - 21.5 pence)
was approved by the board on 27 January 2016. As the approval was
after the balance sheet date, it has not been included as a
liability.
Other reserves of GBP2,050 million at 31 December 2015 (2014 -
GBP2,393 million) include a capital redemption reserve of GBP3,146
million (2014 - GBP3,146 million) and hedging and exchange reserve
of GBP1,096 million deficit (2014 - GBP753 million deficit).
11. Sale of businesses
Cash consideration received and net assets disposed of in
respect of sale of businesses completed in the six months ended 31
December 2015, were as follows:
Jamaica,
Singapore
and Malaysia Other Total
GBP million GBP million GBP million
Sale consideration
Cash received in year 511 173 684
Cash disposed of (14) (1) (15)
Transaction costs paid (7) (8) (15)
------------- ------------ ------------
Net cash received 490 164 654
------------- ------------ ------------
Transaction costs payable (1) 3 2
Deferred consideration
receivable 20 - 20
Other cash payable - (4) (4)
------------- ------------ ------------
509 163 672
------------- ------------ ------------
Net assets disposed of
Property, plant and equipment (40) (16) (56)
Assets and liabilities
held for sale - (113) (113)
Investment in associates (18) - (18)
Working capital 1 (12) (11)
Borrowings - 6 6
Non-controlling interests 24 - 24
Exchange recycled from
other comprehensive income (13) (30) (43)
Directly attributable
costs (6) (11) (17)
------------- ------------ ------------
(52) (176) (228)
------------- ------------ ------------
Gain/(loss) on disposal
before taxation 457 (13) 444
Taxation (8) - (8)
------------- ------------ ------------
Gain/(loss) on disposal
after taxation 449 (13) 436
============= ============ ============
On 7 October 2015, the group completed the sale of Diageo's
57.87% shareholding in Desnoes & Geddes Limited (D&G) and
49.99% stake in GAPL Pte Limited (GAPL) (Jamaica, Singapore and
Malaysian beer interests) to Heineken. As part of the transaction,
Diageo agreed to purchase an additional 20% shareholding in
Guinness Ghana Breweries Limited (GGBL) which increased Diageo's
shareholding in GGBL to 72.42%. In the period from 1 July 2015 to 7
October 2015, D&G contributed net sales of GBP28 million (six
months ended 31 December 2014 - GBP52 million), operating profit of
GBP5 million (six months ended 31 December 2014 - GBP12 million)
and profit after taxation of GBP4 million (six months ended 31
December 2014 - GBP10 million). GAPL which owned 51% of Diageo's
Malaysian beer interests contributed GBP3 million to share of
associates in the period from 1 July 2015 to 7 October 2015 (six
months ended 31 December 2014 - GBP7 million).
Other includes the sale of the group's 42.25% equity stake in
DHN Drinks, 25% equity stake in the Sedibeng Breweries Limited and
15.01% equity stake in Namibia Brewery Limited (South African
associate interests) disposed of on 1 December 2015 which were
accounted for as assets held for sale at 30 June 2015. In addition,
it includes the group's shareholding in Central Glass Industries
Limited (CGI) disposed of on 30 September 2015 and the Bouvet wine
business in France.
(MORE TO FOLLOW) Dow Jones Newswires
January 28, 2016 02:00 ET (07:00 GMT)
12. Assets and liabilities held for sale
At 31 December 2015 assets and liabilities held for sale include
Diageo's interests in the US based Chateau & Estate Wines and
the UK based Percy Fox businesses of GBP376 million disposed of on
1 January 2016.
Wines
in United
States
and Percy
Fox Argentina Other Total
GBP million GBP million GBP million GBP million
Intangible assets 87 - - 87
Property, plant and equipment 55 - 11 66
Biological assets 68 - - 68
Inventories 262 2 - 264
Trade and other receivables 51 15 - 66
Cash 10 - - 10
Deferred tax assets - 2 - 2
------------ ------------ ------------ ------------
Assets held for sale 533 19 11 563
------------ ------------ ------------ ------------
Trade and other payables (52) (11) - (63)
Provisions (52) - - (52)
Borrowings and bank overdrafts (10) (7) - (17)
Deferred tax liabilities (43) - - (43)
Liabilities held for sale (157) (18) - (175)
------------ ------------ ------------ ------------
Total 376 1 11 388
============ ============ ============ ============
Assets and liabilities held for sale are carried at
their net realisable value at 31 December 2015.
13. Contingent liabilities and legal proceedings
(a) Guarantees and related matters
As of 31 December 2015, the group has no material guarantees or
indemnities in respect of liabilities of third parties with the
exception of the following:
Diageo Holdings Netherlands B.V. (DHN) has issued a conditional
backstop guarantee to Standard Chartered Bank (Standard Chartered)
pursuant to a guarantee commitment agreement (the guarantee
agreement). The guarantee is in respect of the liabilities of
Watson Limited (Watson), a company affiliated with Dr Vijay Mallya,
under a $135 million (GBP92 million) facility from Standard
Chartered. The guarantee agreement was entered into as part of the
arrangements put in place and announced at 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 to 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. However, DHN and Standard
Chartered agreed to extend the date from which the guarantee could
be called to 29 January 2016 to allow additional time for
enforcement of the security package underlying the facility. As
part of this agreement, DHN deposited $135 million in an escrow
account with Standard Chartered. As the loan remains in default,
the guarantee is expected to be called on 29 January 2016 and the
funds held in escrow would then have to be released to Standard
Chartered.
The underlying security package for this loan includes shares in
United Breweries Limited (UBL) and Watson's interest in the joint
venture that owns the Force India Formula One (F1) team. On 19 June
2015, a consortium of banks led by State Bank of India (SBI)
obtained an order from the Debt Recovery Tribunal (DRT) in
Bangalore preventing the sale or any other transfer of such UBL
shares as part of the enforcement process pending further orders
from the DRT. This order was passed following the filing of a
memorandum by Dr Mallya with the tribunal that he had no objection
to it issuing the order in respect of the UBL shares. There was a
further order of the DRT on 15 July 2015 restraining the UBL shares
being handed over to DHN or to any other party pending further
orders of the DRT. DHN filed a petition before the High Court of
Karnataka (the High Court) against such orders of the DRT, and on 7
November 2015, the High Court passed an interim order granting an
interim stay of the order of the DRT dated 15 July 2015 and
directing that the UBL shares shall not be dealt with until further
orders. The next hearing date for this petition is yet to be fixed.
DHN is also in the process of being joined in the proceedings
before the DRT. DHN intends to continue to vigorously pursue these
matters in order to lift the DRT orders so as to allow for the sale
of the UBL shares as part of the 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 UBL shares would be in breach of representations
and warranties given to Standard Chartered at the time the security
was granted and further believes that Dr Mallya's filing of the
memorandum with the tribunal and his failure to object to the order
for status quo are breaches of his obligations to Standard
Chartered.
Under the terms of the guarantee, there are arrangements to pass
on to DHN the benefit of the security package upon payment under
the guarantee of all amounts owed to Standard Chartered. However,
DHN's ability to assume or enforce security over elements of the
security package is subject to regulatory consent. It is not at
this stage possible to determine whether such consent would be
forthcoming. In addition, DHN has the benefit of
counter-indemnities from Watson and Dr Mallya in respect of its
liabilities under the guarantee. In the event that the funds held
in escrow by Standard Chartered are released to Standard Chartered
and/or DHN makes any payment under the guarantee, DHN intends, in
addition to pursuing recovery against the security package, to also
pursue claims under these counter-indemnities to seek to recover
any outstanding amounts.
In light of the litigation risk associated with the UBL shares
and the potential loss of realisable value of the F1 security
during enforcement, Diageo believes the outstanding amounts may not
be fully recoverable through the security enforcement process
and/or otherwise paid under the counter-indemnities. Accordingly,
Diageo has fully provided for the $135 million (GBP92 million)
guarantee deposit held by Standard Chartered as at 31 December
2015.
Dr Mallya has indicated, both in response to DHN notifying its
intention to bring counter-indemnity claims in respect of any
liability incurred under DHN's guarantee of the Watson facility and
as a stand-alone matter, that he believes he has certain claims
against Diageo arising out of the failure to conclude a joint
venture with him in respect of certain emerging markets in Africa
and Asia (excluding India) and to provide significant financial
benefits to him.
The possibility of an emerging markets joint venture was
previously disclosed by Diageo in the announcement of its initial
USL transaction on 9 November 2012, alongside the details of a
non-binding memorandum of understanding for the establishment of a
joint venture to own United National Breweries' traditional sorghum
beer business in South Africa (UNB joint venture). That
announcement noted that it was not certain whether the emerging
markets joint venture would be established or, if so, on what
basis. Definitive agreement for the UNB joint venture was announced
by Diageo on 28 January 2013, and completion of the joint venture
took place on 27 June 2013 following receipt of necessary
regulatory and competition clearances. Subsequently, at the time of
completion of its initial USL transaction on 4 July 2013, Diageo
announced that, once Diageo and Dr Mallya's near-term priority of
the integration of USL into the Diageo group was successfully
underway, Diageo and Dr Mallya would explore the opportunity of
extending their relationship into other emerging markets in Africa
and Asia (excluding India) through a further joint venture
relationship on terms and with a scope yet to be determined. Like
the 9 November 2012 announcement, this announcement also stated
that it was not certain whether such a joint venture would be
established and, if so, on what basis. As announced on 2 April
2015, Diageo agreed to acquire the remaining 50% of the UNB joint
venture, and this acquisition completed on 29 May 2015 at which
point UNB became a wholly owned Diageo group subsidiary.
Diageo believes, consistent with its prior disclosures, that it
has no outstanding obligations to Dr Mallya as regards the
establishment of an emerging markets joint venture or the provision
of financial benefits. Diageo would contest vigorously any such
claim that may be brought by Dr Mallya whether in the context of a
counter-indemnity claim for DHN's liability under its guarantee of
the Watson facility or otherwise.
(b) Korean customs dispute
The litigation against Korea customs regarding the transfer
pricing methodology applicable to spirits imported between 2004 and
2010 has been substantially settled. Diageo Korea is in discussions
with customs on certain outstanding items, which are not material
to the group.
(c) Thalidomide litigation
(MORE TO FOLLOW) Dow Jones Newswires
January 28, 2016 02:00 ET (07:00 GMT)
In June 2014, claims forms alleging product liability and
negligence for injuries arising from the consumption of thalidomide
were filed in the High Court in London against Distillers Company
(Biochemicals) Limited, its parent Diageo Scotland Limited
(formerly Distillers Company Limited), as well as against Gr
nenthal GmbH, the developer of the drug (not a member of the
group). On 4 December 2014 these claims forms were served by
lawyers acting for the claimants. Since then the proceedings in
respect of the 28 individuals that have now issued claims in the
United Kingdom have been stayed until 31 May 2016.
Diageo is unable to meaningfully quantify the possible loss or
range of loss to which these lawsuits may give rise. Distillers
Company (Biochemicals) Limited distributed thalidomide in the
United Kingdom for a period in the late 1950s and early 1960s.
Diageo has worked voluntarily for many years with various
thalidomide organisations and has provided significant financial
support.
(d) 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 USL for a total consideration of INR 31.3 billion (GBP342
million), including 10,141,437 shares (6.98%) from UBHL. Through a
series of further transactions, as of 2 July 2014, Diageo has a
54.78% 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 (the High Court) had granted leave to UBHL under
sections 536 and 537 of the Indian Companies Act (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 (the Original 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 20 December Order). Following the 20 December Order,
Diageo filed special leave petitions (SLPs) in the Supreme Court of
India against the 20 December Order.
On 10 February 2014, the Supreme Court of India issued an order
admitting the SLPs and ordering that the status quo be maintained
with regard to the UBHL Share Sale. Following a number of
adjournments the SLPs are now likely to be listed before the
Supreme Court on 6 April 2016.
In separate proceedings, the various winding-up petitions
against UBHL have been progressing through the High Court since
closing of the UBHL Share Sale. In separate rulings issued by the
High Court on 22 November 2013 and 13 December 2013, the High Court
admitted two of the winding-up petitions against UBHL. An appeal
filed by UBHL against the first ruling issued on 22 November 2013
was dismissed by a division bench of the High Court on 16 December
2013. That dismissal is now the subject of a further appeal by UBHL
before the Supreme Court of India. On 6 February 2014, UBHL filed
an appeal with a division bench of the High Court against the
second ruling issued on 13 December 2013 and that appeal is still
pending. The appeal was last listed for hearing on 13 January 2016,
and the next hearing date is yet to be fixed. The High Court
admitted a further six winding-up petitions against UBHL on 2
January 2015. On 22 January 2015 and 27 March 2015, UBHL filed
appeals with a division bench of the High Court against the latest
admission order. Two of these appeals were last heard on 20 January
2016, and one appeal was listed for hearing on 13 January 2016. The
matters were adjourned following the last hearings and the next
hearing dates for these appeals are yet to be fixed. The various
winding-up petitions against UBHL also continue to be adjourned,
with the next date fixed for hearing of many of these winding-up
petitions being 29 January 2016.
Diageo continues to believe that the acquisition price of INR
1440 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
10,141,437 USL shares acquired from UBHL. Diageo believes 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.
Separately, Diageo's contractual rights in relation to the
acquisition of an additional 3,459,090 USL shares (representing
2.38% of the share capital of USL) under the SPA from the USL
Benefit Trust have not been capable of completion. Currently
certain lenders to USL are refusing to release security that they
hold over those shares notwithstanding that they have been repaid
in full. USL filed a petition against such lenders before the High
Court for release of the security and the High Court granted a stay
order in favour of USL in December 2015 restraining the lenders
from dealing with the 3,459,090 pledged USL shares until further
order of the High Court. As previously disclosed, if it is not
ultimately possible for Diageo to complete the acquisition in
relation to these shares, they would instead continue to be held by
the USL Benefit Trust subject to an undertaking that the trustees
would only vote the shares at the direction of USL.
(e) USL internal inquiry and related matters
In a notice to the Indian stock exchange dated 4 September 2014,
USL announced that its board of directors had directed an inquiry
into certain matters referred to in USL's financial statements and
the qualified auditor's report for the financial year ended 31
March 2014 (the Inquiry). The transactions noted in the Inquiry
occurred prior to Diageo gaining significant influence over USL on
4 July 2013 when it completed the transaction to purchase shares in
USL to take its aggregate shareholding to 25.02%. USL provided an
update on 25 April 2015 in relation to the Inquiry which covered
various matters, including certain doubtful receivables, advances
and deposits. Additional updates have been provided by USL in
subsequent quarterly announcements of their unaudited financial
results, including most recently on 27 January 2016 in respect of
the quarter to 31 December 2015.
As stated by USL in its most recent update, the Inquiry: (a)
revealed that funds involved in many of the commercial transactions
covered by the Inquiry were diverted from USL and/or its
subsidiaries to certain companies in the UBHL group, including in
particular Kingfisher Airlines Limited; (b) prima facie revealed
that certain accounting entries appear to have been made and
certain transactions entered into on behalf of USL appear to have
been undertaken in order to show a lower exposure of USL (and its
subsidiaries) to UBHL than that which actually existed at the
relevant time; and (c) also identified certain additional parties
and matters where documents identified raised concerns as to the
propriety of certain underlying commercial transactions with
counterparties referred to in the notes to USL's audited accounts
for the financial year to 31 March 2014. The inquiry suggests that
the manner in which these various transactions were conducted,
prima facie, indicates various improprieties and potential
violations of provisions, inter alia, of the Indian Companies Act
1956 and the listing agreements signed by USL with various stock
exchanges in India on which its securities are listed.
USL has recorded provisions in an aggregate amount of INR 6,712
million (approximately GBP69 million) with respect to (a) above,
and in an aggregate amount of INR 2,368 million (approximately
GBP24 million) with respect to (c) above. Diageo believes that
these provisions represent the full amount of funds indicated by
the Inquiry as having been diverted from USL and its subsidiaries
to companies in the UBHL group in respect of such transactions.
These amounts were fully provided for in the fair value balance
sheet consolidated by Diageo on 2 July 2014. Diageo does not expect
any further material financial impact on USL or Diageo's financial
results in connection with such transactions.
(MORE TO FOLLOW) Dow Jones Newswires
January 28, 2016 02:00 ET (07:00 GMT)
The USL board stated in its update of 25 April 2015 that it was
not in a position to make any final determinations with regard to
the position of any individuals involved and therefore directed USL
to report the relevant transactions to the authorities as required
under applicable law and to provide the inquiry report to USL's
auditors. The USL board also resolved that USL should take the
necessary steps to pursue all rights and claims against, and
expeditiously recover its dues from, the relevant parties to the
extent possible. As announced by USL on 2 November 2015, USL has
been taking steps for recovery against the relevant parties to the
extent possible. During the quarter ended 30 September 2015, USL
reached a settlement with one of the parties pursuant to which the
party withdrew claims aggregating to INR 279 million (approximately
GBP3 million).
In light of the above, and without making any determination as
to fault or culpability, the USL directors noted in the update of
25 April 2015 that they had lost confidence in Dr Vijay Mallya
continuing in his role as a director and as chairman of USL and
therefore the USL board called upon Dr Mallya to resign forthwith
as a director and as chairman of the board and step down from his
positions in USL's subsidiaries. The board of USL also resolved
that, in the event Dr Mallya declined to step down, it would
recommend to the shareholders of USL the removal of Dr Mallya as a
director and as the chairman of the board. Dr Mallya indicated at
the time that he would not tender his resignation and has to date
continued to refuse to do so.
Diageo is the majority shareholder in USL with a 54.78% holding
in USL. As previously announced by Diageo, it has certain
contractual obligations to support Dr Mallya continuing as
non-executive director and chairman of USL subject to certain
conditions and in the absence of certain defaults. Those matters
were agreed on 9 November 2012 as part of a broader shareholders'
agreement and came into effect on 4 July 2013 when Diageo completed
the purchase of shares to take its aggregate shareholding in USL to
25.02%.
Subsequent to its announcement of 25 April 2015, USL has
provided its inquiry report and all related materials to Diageo.
Diageo announced on 27 April 2015 that it noted the recommendation
of the USL board and was considering its position under its
agreements with Dr Mallya and UBHL in light of the inquiry report
and materials provided to it. Diageo's consideration of that matter
is ongoing and Diageo will continue to review closely developments
in respect of USL in this context.
USL made provisions in its financial statements for the two
years ended 31 March 2014 and 31 March 2015 in respect of the
issues identified by the Inquiry. The audit report on the financial
statements of USL for the year ended 31 March 2015 was also
qualified in respect of the issues.
Following USL's earlier updates, USL has received various
notices and enquiries from Indian regulatory authorities, including
the Ministry of Corporate Affairs, the stock exchange authorities
and the income tax authorities. USL is cooperating fully with the
authorities in relation to these matters. Diageo is unable to
assess if these notices or enquiries will result in 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.
(f) SEC Inquiry
Diageo has received requests for information from the US
Securities and Exchange Commission (SEC) regarding its distribution
in the United States. Diageo is currently responding to the SEC's
requests for information in this matter. Diageo is unable to assess
if the inquiry will evolve into a broader information request or an
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.
(g) Other
The group has extensive international operations and is
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 the
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. There
have been no transactions with these related parties during the six
months ended 31 December 2015 on terms other than those that
prevail in arm's length transactions.
INDEPENDENT REVIEW REPORT TO DIAGEO PLC
Report on the condensed set of financial statements
Our conclusion
We have reviewed Diageo plc's condensed set of financial
statements (the 'interim financial statements') in the half-yearly
financial report of Diageo plc for the six months ended 31 December
2015. Based on our review, nothing has come to our attention that
causes us to believe that the interim financial statements are not
prepared, in all material respects, in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and the Disclosure
Rules and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
What we have reviewed
The interim financial statements comprise:
-- the condensed consolidated balance sheet as at 31 December 2015;
-- the condensed consolidated income statement and condensed
consolidated statement of comprehensive income for the period then
ended;
-- the condensed consolidated statement of cash flows for the period then ended;
-- the condensed consolidated statement of changes in equity for the period then ended; and
-- the explanatory notes to the interim financial statements.
The interim financial statements included in the half-yearly
financial report have been prepared in accordance with
International Accounting Standard 34, 'Interim Financial
Reporting', as adopted by the European Union and the Disclosure
Rules and Transparency Rules of the United Kingdom's Financial
Conduct Authority.
As disclosed in note 1 to the interim financial statements, the
financial reporting framework that has been applied in the
preparation of the full annual financial statements of the group is
applicable law and International Financial Reporting Standards
(IFRSs) as adopted by the European Union.
Responsibilities for the interim financial statements and the
review
Our responsibilities and those of the directors
The half-yearly financial report, including the interim
financial statements, is the responsibility of, and has been
approved by, the directors. The directors are responsible for
preparing the half-yearly financial report in accordance with the
Disclosure Rules and Transparency Rules of the United Kingdom's
Financial Conduct Authority.
Our responsibility is to express a conclusion on the interim
financial statements in the half-yearly financial report based on
our review. This report, including the conclusion, has been
prepared for and only for the company for the purpose of complying
with the Disclosure Rules and Transparency Rules of the United
Kingdom's Financial Conduct Authority and for no other purpose. We
do not, in giving this conclusion, accept or assume responsibility
for any other purpose or to any other person to whom this report is
shown or into whose hands it may come save where expressly agreed
by our prior consent in writing.
What a review of interim financial statements involves
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410, 'Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity' issued by the Auditing Practices Board for use in
the United Kingdom. A review of interim financial information
consists of making enquiries, primarily of persons responsible for
financial and accounting matters, and applying analytical and other
review procedures.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK and
Ireland) and, consequently, does not enable us to obtain assurance
that we would become aware of all significant matters that might be
identified in an audit. Accordingly, we do not express an audit
opinion.
We have read the other information contained in the half-yearly
financial report and considered whether it contains any apparent
misstatements or material inconsistencies with the information in
the interim financial statements.
PricewaterhouseCoopers LLP
Chartered Accountants
London
27 January 2016
ADDITIONAL INFORMATION FOR SHAREHOLDERS
EXPLANATORY NOTES
Comparisons are to the six months ended 31 December 2014 (2014)
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 prior period reported numbers
at current period exchange rates and after adjusting for the effect
of 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 'Risk Factors' - 'Cautionary statement concerning
forward-looking statements' for more details.
(MORE TO FOLLOW) Dow Jones Newswires
January 28, 2016 02:00 ET (07:00 GMT)
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 the following
non-GAAP measures. They 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.
Volume
Volume is a non-GAAP measure 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
five.
Organic movements
In the discussion of the performance of the business, 'organic'
information is presented using pounds sterling amounts on a
constant currency basis excluding the impact of exceptional items
and acquisitions and disposals. Organic measures enable users to
focus on the performance of the business which is common to both
periods 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 amount in the row titled '2014 adjusted'. Organic operating
margin is calculated by dividing operating profit before
exceptional items by net sales after excluding the impact of
exchange rate movements and acquisitions and disposals.
(a) Exchange rates
'Exchange' in the organic movement calculation reflects the
adjustment to recalculate the prior period results as if they had
been generated at the current period's exchange rates.
Exchange impacts in respect of the external hedging of
intergroup sales of products and the intergroup recharging of third
party services are allocated to the geographical segment to which
they relate. Residual exchange impacts are reported in
Corporate.
Exchange impacts in respect of profit on intergroup sales of
products and the intergroup recharges are reported in 'other
operating expenses'.
(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
complete.
Where a business, brand, brand distribution right or agency
agreement was disposed of, or terminated, in the period up to the
date of the external results announcement, 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. In addition,
disposals include the elimination of the results (for volume,
sales, net sales and marketing only) of operations in India where
United Spirits Limited (USL) previously fully consolidated the
results and which are now operated on a royalty or franchise model
where USL now receives royalties only for sales made by that
operation.
(c) Exceptional items
Exceptional items are those which, in management's judgement,
need to be disclosed by virtue of their size or nature in order for
the user to obtain a proper understanding of the financial
information. Such items are included within the income statement
caption to which they relate but are excluded from the organic
movement calculations.
Organic movement calculations for the six months ended 31
December 2015 were as follows:
Latin
Europe, America
North Russia and Asia
America and Turkey Africa Caribbean Pacific Corporate Total
million million million million million million million
Volume
(equivalent
units)
2014 reported 25.6 24.0 13.9 11.2 59.4 - 134.1
Disposals(ii) (0.6) (1.0) (0.1) (0.3) (6.1) - (8.1)
----------- ---------- ----------- ---------- ----------- ----------- -----------
2014 adjusted 25.0 23.0 13.8 10.9 53.3 - 126.0
Acquisitions
and
disposals(ii) 0.3 0.6 1.6 0.4 0.1 - 3.0
Organic
movement (0.4) 0.5 0.9 0.4 (0.1) - 1.3
----------- ---------- ----------- ---------- ----------- -----------
2015 reported 24.9 24.1 16.3 11.7 53.3 - 130.3
-----------
Organic
movement
% (2) 2 7 4 - - 1
Latin
Europe, America
Russia and and
North Turkey Caribbean Asia
America GBP Africa GBP Pacific Corporate Total
GBP million million GBP million million GBP million GBP million GBP million
Sales
2014 reported 2,102 2,596 992 786 2,205 43 8,724
Exchange(i) 96 (210) (104) (179) (64) (2) (463)
Disposals(ii) (149) (107) (16) (42) (90) (25) (429)
----------- ---------- ----------- ---------- ----------- ----------- -----------
2014 adjusted 2,049 2,279 872 565 2,051 16 7,832
Acquisitions
and
disposals(ii) 95 67 46 53 7 - 268
Organic
movement (31) 102 37 53 5 1 167
----------- ---------- ----------- ---------- ----------- -----------
2015 reported 2,113 2,448 955 671 2,063 17 8,267
Organic
movement
% (2) 4 4 9 - 6 2
Net sales
2014 reported 1,867 1,459 746 619 1,166 43 5,900
Exchange(i) 83 (114) (76) (139) (34) (2) (282)
Disposals(ii) (144) (75) (11) (35) (42) (25) (332)
----------- ---------- ----------- ---------- ----------- ----------- -----------
2014 adjusted 1,806 1,270 659 445 1,090 16 5,286
Acquisitions
and
disposals(ii) 92 49 38 37 7 - 223
Organic
movement (31) 42 19 40 26 1 97
----------- ---------- ----------- ---------- ----------- -----------
2015 reported 1,867 1,361 716 522 1,123 17 5,606
Organic
movement
% (2) 3 3 9 2 6 2
Europe, Latin
Russia America
North and and Asia
America Turkey Africa Caribbean Pacific Corporate Total
GBP GBP GBP GBP GBP GBP GBP
million million million million million million million
Marketing
2014 reported 304 225 85 110 168 4 896
Exchange(i) 10 (3) (9) (21) (6) - (29)
Disposals(ii) (9) (5) - (4) (1) (2) (21)
--------- --------- ---------- --------- ---------- ---------- ----------
2014 adjusted 305 217 76 85 161 2 846
Acquisitions and
(MORE TO FOLLOW) Dow Jones Newswires
January 28, 2016 02:00 ET (07:00 GMT)
disposals(ii) 6 1 1 8 - - 16
Organic movement (36) - (3) 3 (4) - (40)
--------- --------- ---------- --------- ---------- ---------- ----------
2015 reported 275 218 74 96 157 2 822
Organic movement % (12) - (4) 4 (2) - (5)
Operating profit
before exceptional
items
2014 reported 819 480 175 207 214 (56) 1,839
Exchange(i) 30 (36) (38) (63) (15) (3) (125)
Acquisitions and
disposals(ii) (39) (20) (3) (8) (2) (3) (75)
--------- --------- ---------- --------- ---------- ---------- ----------
2014 adjusted 810 424 134 136 197 (62) 1,639
Acquisitions and
disposals(ii) 18 6 4 11 1 (1) 39
Organic movement (19) 20 - 7 36 (5) 39
--------- --------- ---------- --------- ---------- ----------
2015 reported 809 450 138 154 234 (68) 1,717
Organic movement % (2) 5 - 5 18 (8) 2
Organic operating
margin %
2015 44.6% 33.8% 19.8% 29.5% 20.9% n/a 31.17%
2014 44.9% 33.4% 20.3% 30.6% 18.1% n/a 31.01%
Margin
(decline)/improvement
(bps) (29) 46 (57) (108) 280 n/a 16
(1) For the reconciliation of sales to net sales and operating
profit before exceptional items to operating profit see 'Additional
Financial Information' and 'Notes' sections.
(2) Percentages and margin improvement are calculated on rounded figures.
Notes: Information in respect of the organic movement
calculations
(i) The exchange adjustments for sales, net sales, marketing and
operating profit are principally in respect of the Venezuelan
bolivar, the euro, the Brazilian real and the US dollar.
(ii) In the six months ended 31 December 2015 the acquisitions
and disposals that affected volume, sales, net sales, marketing and
operating profit were as follows:
Operating
Volume Sales Net sales Marketing profit
equ. units million GBP million GBP million GBP million GBP million
Six months ended 31 December 2014
Acquisitions
Transaction costs - - - - (1)
- - - - (1)
Disposals
Wine businesses in the United States
and Percy Fox (1.0) (195) (174) (9) (37)
Bushmills (0.4) (45) (34) (6) (19)
Jamaica incl Red Stripe (0.4) (54) (42) (4) (10)
Gleneagles - (26) (26) (1) (4)
Bouvet (0.1) (9) (9) - (1)
USL owned to franchise (6.0) (80) (33) (1) -
Others (0.2) (20) (14) - (3)
(8.1) (429) (332) (21) (74)
Acquisitions and disposals (8.1) (429) (332) (21) (75)
Six months ended 31 December 2015
Acquisitions
Don Julio 0.2 30 19 5 19
United National Breweries 1.4 26 26 1 4
Others 0.1 10 7 - -
Transaction costs - - - - (1)
1.7 66 52 6 22
Disposals
Wine businesses in the United States
and Percy Fox 0.9 147 131 8 11
Jamaica incl Red Stripe 0.3 35 25 2 4
Bouvet - 7 7 - 1
Others 0.1 13 8 - 1
1.3 202 171 10 17
Acquisitions and disposals 3.0 268 223 16 39
Earnings per share before exceptional items
Earnings per share before exceptional items is calculated by
dividing profit attributable to equity shareholders of the parent
company before exceptional items by the weighted average number of
shares in issue.
Earnings per share before exceptional items for the six months
ended 31 December 2015 and 31 December 2014 are set out in the
table below.
2015 2014
GBP million GBP million
Profit attributable to equity shareholders of the parent company 1,406 1,311
Exceptional operating items attributable to equity shareholders of the parent company 104 170
Non-operating items attributable to equity shareholders of the parent company (203) (98)
Tax in respect of exceptional operating and non-operating items (22) (38)
1,285 1,345
million million
Weighted average number of shares in issue 2,507 2,506
pence pence
Earnings per share before exceptional items 51.3 53.7
Free cash flow
Free cash flow comprises the net cash flow from operating
activities aggregated with the net movements in loans receivable
and other investments and with the net purchase of 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.
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 acquisitions and sales of businesses are discretionary.
Where appropriate, separate explanations are given for the
impacts of acquisitions and sale of businesses, dividends paid and
the purchase of own shares, each of which arises from decisions
that are independent from the running of the ongoing underlying
business.
Free cash flow reconciliations for the six months ended 31
December 2015 and 31 December 2014 are set out in the table
below:
Six months ended Six months ended
31 December 2015 31 December 2014
GBP million GBP million
Net cash from operating activities 1,037 957
Disposal of property, plant and equipment and computer software 8 36
Purchase of property, plant and equipment and computer software (204) (270)
Movements in loans and other investments (2) (24)
Free cash flow 839 699
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.
(MORE TO FOLLOW) Dow Jones Newswires
January 28, 2016 02:00 ET (07:00 GMT)
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 period.
Average total invested capital is calculated using the average
derived from the consolidated balance sheets at the beginning and
end of the period. Average capital employed comprises average net
assets attributable to equity shareholders of the parent company
for the period, excluding post employment benefit net 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 six months ended 31 December 2015 and 31 December 2014 are
set out in the table below:
2015 2014
(restated)(i)
GBP million GBP million
Operating profit 1,613 1,668
Exceptional operating items 104 171
Profit for the period attributable to non-controlling interests (74) (54)
Share of after tax results of associates and joint ventures 136 113
Tax at the tax rate before exceptional items of 19% (2015 - 18.3%) (338) (347)
1,441 1,551
Average net assets (excluding net post employment liabilities) 9,736 8,649
Average non-controlling interests (1,512) (1,118)
Average net borrowings 9,378 9,759
Average integration and restructuring costs (net of tax) 1,639 1,587
Goodwill at 1 July 2004 1,562 1,562
Adjustment in respect of acquisition of USL(ii) - 740
Average total invested capital 20,803 21,179
Return on average total invested capital 13.9% 14.6%
(i) The group revised the calculation of ROIC at 30 June 2015 by
excluding the net assets and net profit attributable to
non-controlling interests. Prior to this adjustment, in the six
months ended 31 December 2014 the ROIC reported was 13.9%.
(ii) For the six months ended 31 December 2014 average net
assets were adjusted for the inclusion of USL as though it was
owned throughout the period as it became a subsidiary on 2 July
2014.
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, classified as or 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 continuing operations before exceptional and
after exceptional items for the six months ended 31 December 2015
and 31 December 2014 are set out in the table below:
2015 2014
GBP million GBP million
Tax before exceptional items (a) 318 314
Tax in respect of exceptional items (22) (38)
Taxation on profit from continuing operations (b) 296 276
Profit from continuing operations before taxation and exceptional items (c) 1,677 1,713
Non-operating items 211 98
Exceptional operating items (104) (171)
Profit before taxation (d) 1,784 1,640
Tax rate before exceptional items (a/c) 19.0% 18.3%
Tax rate from continuing operations after exceptional items (b/d) 16.6% 16.8%
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.
References to emerging markets include Russia, Eastern Europe,
Turkey, Africa, Latin America and Caribbean, and Asia Pacific
(excluding Australia, Korea and Japan).
References to reserve brands include Johnnie Walker Blue Label,
Johnnie Walker Green Label, Johnnie Walker Gold Label 18 year old,
Johnnie Walker Gold Label Reserve, Johnnie Walker Platinum Label 18
year old, John Walker & Sons Collection, Johnnie Walker The
Gold Route, Johnnie Walker The Royal Route, and other Johnnie
Walker super premium brands; 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 Malacca; Cîroc, Ketel One vodka; Don Julio, Zacapa,
Bundaberg SDlx, Shui Jing Fang, Haig Club whisky and DeLeón
Tequila.
References to global giants include the following brand
families: Johnnie Walker, Smirnoff, Captain Morgan, Baileys,
Tanqueray and Guinness. Local stars spirits excluding ready to
drink include, but are not limited to, Bell's, Buchanan's,
Bundaberg, Bulleit, Cacique, Crown Royal, Don Julio, J B, Old Parr,
Yenì Raki, Ketel One vodka, scotch malts, White Horse, Windsor and
Ypióca.
References to ready to drink also include ready to serve
products, such as pre-mix cans in some markets, and progressive
adult beverages in the United States and certain markets supplied
by the United States.
References to beer include non-alcoholic products such as
Guinness Malta.
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 the annual report for the year ended 30 June
2015 and under 'Risk Factors' in the annual report on Form 20-F for
the year ended 30 June 2015.
These key risks and uncertainties have not materially changed
since 30 June 2015 and include: unfavourable economic conditions or
political or other developments and risks in the countries in which
Diageo operates; changes in consumer preferences and tastes and
adverse impacts of a declining economy, among many factors, may
adversely affect demand; litigation directed at the beverage
alcohol industry and other litigation; climate change, or legal,
regulatory or market measures to address climate change; water
scarcity or poor quality; increased costs of raw materials or
energy; regulatory decisions and changes in the legal and
regulatory environment could increase Diageo's costs and
liabilities or limit its business activities; increasing costs of
monitoring and maintaining compliance with anti-corruption laws;
failure to maintain Diageo's brand image and corporate reputation;
competition may reduce Diageo's market share and margins; expected
benefits may not be derived from Diageo's strategy focused on
premium drinks or from its acquisitions or its cost-saving and
restructuring programmes designed to enhance earnings;
contamination, counterfeiting or other events could harm integrity
of customer support for Diageo's brands and adversely affect the
sales of those brands; increased costs or shortages of talent;
disruption to production facilities, business service centres or
information systems and change programs may not deliver the
benefits intended; movements in the value of Diageo's pension
funds, fluctuations in exchange rates and interest rates; failure
to maintain or renegotiate distribution, supply, manufacturing and
licence agreements on favourable terms; inability to protect
Diageo's intellectual property rights; and difficulty in effecting
service of US process and enforcing US legal process against the
directors of Diageo.
(MORE TO FOLLOW) Dow Jones Newswires
January 28, 2016 02:00 ET (07:00 GMT)
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 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 Diageo's
strategic transactions and restructuring programmes, anticipated
tax rates, expected cash payments, outcomes of litigation,
anticipated deficit reductions in relation to pension schemes and
general economic conditions. By their nature, forward-looking
statements involve risk and uncertainty because they relate to
events and depend on circumstances that will occur in the future.
There are a number of factors that could cause actual results and
developments to differ materially from those expressed or implied
by these forward-looking statements, including factors that are
outside Diageo's control.
These factors include, but are not limited to:
-- changes in political or economic conditions in countries and
markets in which Diageo operates, including changes in levels of
consumer spending, failure of customer, supplier and financial
counterparties or imposition of import, investment or currency
restrictions;
-- changes in consumer preferences and tastes, demographic
trends or perceptions about health related issues, or
contamination, counterfeiting or other circumstances which could
harm the integrity or sales of Diageo's brands;
-- developments in any litigation or other similar proceedings
(including with tax, customs and other regulatory authorities)
directed at the drinks and spirits industry generally or at Diageo
in particular, or the impact of a product recall or product
liability claim on Diageo's profitability or reputation;
-- the effects of climate change and regulations and other
measures to address climate change including any resulting impact
on the cost and supply of water;
-- changes in the cost or supply of raw materials, labour and/or energy;
-- legal and regulatory developments, including changes in
regulations regarding production, product liability, distribution,
importation, labelling, packaging, consumption or advertising;
changes in tax law, rates or requirements (including with respect
to the impact of excise tax increases) or accounting standards; and
changes in environmental laws, health regulations and the laws
governing labour and pensions;
-- the costs associated with monitoring and maintaining
compliance with anti-corruption and other laws and regulations, and
the costs associated with investigating alleged breaches of
internal policies, laws or regulations, whether initiated
internally or by external regulators, and any penalties or fines
imposed as a result of any breaches;
-- ability to maintain Diageo's brand image and corporate
reputation, and exposure to adverse publicity, whether or not
justified, and any resulting impacts on Diageo's reputation and the
likelihood that consumers choose products offered by Diageo's
competitors;
-- increased competitive product and pricing pressures and
unanticipated actions by competitors that could impact Diageo's
market share, increase expenses and hinder growth potential;
-- the effects of Diageo's strategic focus on premium drinks,
the effects of business combinations, partnerships, acquisitions or
disposals, existing or future, and the ability to realise expected
synergies and/or costs savings;
-- Diageo's ability to complete existing or future business
combinations, restructuring programmes, acquisitions and
disposals;
-- contamination, counterfeiting or other events that could
adversely affect the perception of Diageo's brands;
-- increased costs or shortages of talent;
-- disruption to production facilities or business service
centres, and systems change programmes, existing or future, and the
ability to derive expected benefits from such programmes;
-- changes in financial and equity markets, including
significant interest rate and foreign currency exchange rate
fluctuations and changes in the cost of capital, which may reduce
or eliminate Diageo's access to or increase the cost of financing
or which may affect Diageo's financial results and movements to the
value of Diageo's pension funds;
-- renewal of supply, distribution, manufacturing or licence
agreements (or related rights) and licences on favourable terms
when they expire;
-- technological developments that may affect the distribution
of products or impede Diageo's ability 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 factors and by the 'Risk
factors' section above. 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 US Securities and Exchange
Commission (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. (c)
Diageo plc 2016.
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
Each of the directors of Diageo plc confirms, to the best of his
or her knowledge, that:
-- the condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting as issued by
the IASB and endorsed and adopted by the EU and give a true and
fair view of the assets, liabilities, financial position and profit
and loss of Diageo plc;
-- the interim management report includes a fair review of the information required by:
(a) DTR 4.2.7R of the Disclosure and Transparency Rules, being
an indication of important events that have occurred during the
first six months of the financial year and their impact on the
condensed set of financial statements; and a description of the
principal risks and uncertainties for the remaining six months of
the year; and
(b) DTR 4.2.8R of the Disclosure and Transparency Rules, being
related party transactions that have taken place in the first six
months of the current financial year and that have materially
affected the financial position or performance of the group during
that period; and any changes in the related party transactions
described in the last annual report that could do so.
The directors of Diageo plc are as follows: Dr Franz B Humer
(Chairman), Ivan Menezes (Chief Executive), Kathryn Mikells (Chief
Financial Officer), Lord Davies of Abersoch (Senior Non-Executive
Director and Chairman of the Remuneration Committee), Philip G
Scott (Non-Executive Director and Chairman of the Audit Committee)
and Non-Executive Directors: Peggy B Bruzelius, Betsy D Holden, Ho
Kwon Ping, Nicola Mendelsohn, Alan Stewart and Emma Walmsley.
Diageo will release its interims results for the six months
ended 31 December 2015 on Thursday 28 January 2016.
Webcast, presentation slides and transcript
At 08.00 (UK time) on Thursday 28 January, Ivan Menezes, Chief
Executive and Kathryn Mikells, Chief Financial Officer will present
Diageo's interim results as a webcast. This will be available to
view at www.diageo.com. The presentation slides and transcript will
also be available to download from www.diageo.com at 08.00 (UK
time).
Live Q&A conference call
Ivan Menezes, Chief Executive and Kathryn Mikells, Chief
Financial Officer will be hosting a Q&A conference call on
Thursday 28 January 2016 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.
UK Toll Number +44 (0) 20 3003 2666
UK Toll Free Number 0808 109 0700
US Toll Number +1 212 999 6659
US Toll Free Number 1 866 966 5335
Germany Toll Number +49 (0) 89 2444 32975
Singapore Toll Number +65 6494 8889
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.
UK Toll Number +44 (0) 20 8196 1998
UK Toll Free Number 0808 633 8453
US Toll Free Number 1 866 583 1035
Germany Toll Number +49 (0) 30 7675 7449
Singapore Toll Number +800 441 1300
(MORE TO FOLLOW) Dow Jones Newswires
January 28, 2016 02:00 ET (07:00 GMT)
Grafico Azioni Diageo (LSE:DGE)
Storico
Da Giu 2024 a Lug 2024
Grafico Azioni Diageo (LSE:DGE)
Storico
Da Lug 2023 a Lug 2024
