TIDMDGE
RNS Number : 0004U
Diageo PLC
28 July 2022
Diageo delivers strong performance while investing in long-term
growth
Delivered strong net sales growth across all regions
* Reported net sales of GBP15.5 billion, up 21.4%,
primarily driven by strong organic net sales growth,
up 21.4%, with strong double-digit growth across all
regions.
* Growth reflects continued recovery of the on-trade,
resilient consumer demand in the off-trade and market
share gains, and was underpinned by favourable
industry trends of spirits taking share of total
beverage alcohol and premiumisation(1) .
* Price/mix growth was 11.1 percentage points,
reflecting positive mix from strong performance in
super-premium-plus brands, and mid-single digit price
growth driven by price increases across all regions.
---------------------------------------------------------------
Expanded operating margin while increasing marketing investment
* Reported operating profit of GBP4.4 billion, up 18.2%,
primarily driven by organic operating profit growth.
Reported operating margin decreased 77bps, with
organic margin expansion more than offset by
exceptional operating items of GBP388 million.
* Organic operating profit grew 26.3%, with growth
across all regions.
* Organic operating margin increased 121bps, reflecting
a strong recovery in gross margin and leverage on
operating costs, while increasing marketing
investment.
* Price increases and supply productivity savings more
than offset the absolute impact of cost inflation,
and mostly offset the adverse impact on gross margin.
---------------------------------------------------------------
Delivered broad-based category growth and gained market share
* Growth was broad-based across categories, with
particularly strong growth of scotch, tequila and
beer.
* Premium-plus brands contributed 57% of reported net
sales and drove 71% of organic net sales growth.
* Off-trade market share grew or held in over 85%(2) of
total net sales value in measured markets.
---------------------------------------------------------------
Strengthened portfolio through acquisitions and disposals
* Acquired 21Seeds, a rapidly growing flavoured tequila
brand, and Mezcal Unión, a premium artisanal
mezcal brand.
* Disposed of Meta Abo Brewery in Ethiopia and Picon
brand; signed agreements for the sale of the Windsor
business in Korea and the disposal and franchising of
a portfolio of brands in India.
---------------------------------------------------------------
Invested to sustain long-term growth
* Increased organic marketing investment 24.7%, ahead
of organic net sales growth.
* Invested GBP1.1 billion of capex in production
capacity, sustainability, digital capabilities and
consumer experiences.
---------------------------------------------------------------
Delivered strong cash generation
* Net cash flow from operating activities increased
GBP0.3 billion to GBP3.9 billion, and free cash flow
decreased GBP0.3 billion to GBP2.8 billion, due to
lapping an exceptionally strong working capital
benefit in fiscal 21.
* Strong balance sheet, with leverage ratio(3) of 2.5x
at 30 June 2022, at the low end of our target range.
---------------------------------------------------------------
Continued progress in delivering Society 2030 goals
* Our brand moderation campaigns reached 456 million
people and we educated more than 607,000 people on
the dangers of underage drinking through the award
winning SMASHED programme.
* Strong momentum in creating a diverse and inclusive
organisation, with 44% female leaders globally, up 2%,
and 41% ethnically diverse leaders, up 4%.
* Continued water stewardship, delivering 3.7%
improvement in water efficiency globally and
generating annual capacity to replenish more than one
million cubic metres of water in water-stressed
areas.
---------------------------------------------------------------
Created long-term shareholder value
* Increased basic eps by 23.2% to 140.2 pence and
pre-exceptional eps by 29.3% to 151.9 pence.
* Increased recommended final dividend by 5% to 46.82
pence per share.
* Completed GBP3.6 billion of share buybacks as part of
return of capital programme of up to GBP4.5 billion.
* Expect to complete remaining GBP0.9 billion of the
programme during fiscal 23.
See page 48 for explanation and reconciliation of non-GAAP
measures, including organic net sales, organic operating profit,
free cash flow, eps before exceptionals, ROIC, adjusted net debt,
adjusted EBITDA and tax rate before exceptional items.
(1)IWSR, 2021.
(2)Internal estimates incorporating Nielsen, Association of
Canadian Distillers, Dichter & Neira, Frontline, INTAGE, IRI,
ISCAM, NABCA, Scentia, State Monopolies, TRAC, IPSOS and other
third-party providers. All analysis of data has been applied with a
tolerance of +/- 3 bps. Percentages represent percent of markets by
total Diageo net sales contribution that have held or gained
off-trade share. India and Canada share data represents total
trade. Measured markets indicate a market where we have purchased
any market share data. Market share data may include beer, wine,
spirits or other elements. Measured market net sales value sums to
87% of total Diageo net sales value in fiscal 22.
(3)Ratio of adjusted net borrowings to adjusted EBITDA. For
further details see page 57.
Ivan Menezes, Chief Executive, said:
I am very pleased with our fiscal 22 results. We delivered
double-digit organic net sales growth across all regions and we
gained or held off-trade market share in over 85%(1) of our total
net sales value in measured markets. We expanded operating margin
while increasing marketing investment ahead of net sales growth and
we used our strong cash generation to invest in long-term growth. I
am very proud of what my 28,000 colleagues have achieved through
their energy and creativity.
In a year of significant global supply chain disruption, our
double-digit volume growth demonstrates the tremendous agility and
resourcefulness of our teams. Our net sales growth was across
categories. We benefitted from the on-trade recovery, continued
global premiumisation trends, with our super-premium-plus brands up
31%, and from price increases across our regions. I am particularly
proud of the performance of Johnnie Walker, which delivered
double-digit growth across all regions to surpass 21 million cases
globally. This fantastic milestone exemplifies our world-class
brand-building and execution capabilities.
Looking ahead to fiscal 23, we expect the operating environment
to be challenging, with ongoing volatility related to Covid-19,
significant cost inflation, a potential weakening of consumer
spending power and global geopolitical and macroeconomic
uncertainty. Notwithstanding these factors, I am confident in the
resilience of our business and our ability to navigate these
headwinds.
We believe we have an advantaged portfolio with extraordinary
brands across geographies, categories and price points. And we
continue to actively shape our portfolio to fast-growing categories
through innovation and acquisitions. We are staying close to our
consumers and our digital tools and data capabilities enable us to
quickly understand trends and execute with precision. Continued
smart re-investment is being fuelled by our culture of everyday
efficiency and our expertise in revenue growth management is
enabling strategic pricing actions.
Total beverage alcohol is an attractive sector with strong
fundamentals and we are making good progress towards our ambition
of delivering a 50% increase in our value share to 6% by 2030.
Despite the challenging environment, we are executing our strategic
priorities, including our ambitious 10-year sustainability plan. I
am confident that we are well-positioned to deliver our medium-term
guidance for fiscal 23 to fiscal 25 of organic net sales growth
consistently in the range of 5% to 7% and organic operating profit
growth sustainably in the range of 6% to 9%.
Financial performance
Volume (equivalent units) Operating profit Earnings per share (eps)
EU263.0m GBP4,409m 140.2p
(F21: EU 238.4
m) (F21: GBP3,731m) (F21: 113.8p)
Reported movement 10% hReported movement 18% hReported movement 23% h
Eps before exceptional
Organic movement(2) 10% hOrganic movement(2) 26% h items(2) 29% h
---------------------- --- --------------------- --- ---------------------- ---
Net sales Net cash from operating Total recommended dividend
activities per share(3)
GBP15,452m GBP3,935m 76.18p
(F21: GBP12,733m) (F21: GBP3,654m) (F21: 72.55p)
F22 free cash flow(2)
Reported movement 21% h GBP2,783m Increase 5% h
Organic movement(2) 21% hF21 free cash flow(2)
GBP3,037m
---------------------- --- --------------------- --- ---------------------- ---
(1)Internal estimates incorporating Nielsen, Association of
Canadian Distillers, Dichter & Neira, Frontline, INTAGE, IRI,
ISCAM, NABCA, Scentia, State Monopolies, TRAC, IPSOS and other
third-party providers. All analysis of data has been applied with a
tolerance of +/- 3 bps. Percentages represent percent of markets by
total Diageo net sales contribution that have held or gained
off-trade share. India and Canada share data represents total
trade. Measured markets indicate a market where we have purchased
any market share data. Market share data may include beer, wine,
spirits or other elements. Measured market net sales value sums to
87% of total Diageo net sales value in fiscal 22.
(2)See page 48 for explanation and reconciliation of non-GAAP
measures.
(3)Includes recommended final dividend of 46.82p.
Key financial information
For the year ended 30 June 2022
Summary financial information
Organic Reported
growth growth
2022 2021 % %
---------------------------------------- ----------- ------ ------ ======= ========
Volume EUm 263.0 238.4 10 10
======================================== =========== ====== ====== ======= ========
Net sales GBP million 15,452 12,733 21 21
======================================== =========== ====== ====== ======= ========
Marketing GBP million 2,721 2,163 25 26
======================================== =========== ====== ====== ======= ========
Operating profit before exceptional
items GBP million 4,797 3,746 26 28
======================================== =========== ====== ====== ======= ========
Exceptional operating items(1) GBP million (388) (15)
======================================== =========== ====== ====== ======= ========
Operating profit GBP million 4,409 3,731 18
======================================== =========== ====== ====== ======= ========
Share of associate and joint venture
profit after tax GBP million 417 334 25
======================================== =========== ====== ====== ======= ========
Non-operating exceptional items(1) GBP million (17) 14
======================================== =========== ====== ====== ======= ========
Net finance charges GBP million (422) (373)
======================================== =========== ====== ====== ======= ========
Exceptional taxation credit/(charge)(1) GBP million 31 (84)
======================================== =========== ====== ====== ======= ========
Tax rate including exceptional
items % 23.9 24.5 (2)
======================================== =========== ====== ====== ======= ========
Tax rate before exceptional items % 22.5 22.2 1
Profit attributable to parent company's
shareholders GBP million 3,249 2,660 22
======================================== =========== ====== ====== ======= ========
Basic earnings per share pence 140.2 113.8 23
======================================== =========== ====== ====== ======= ========
Basic earnings per share before
exceptional items pence 151.9 117.5 29
======================================== =========== ====== ====== ======= ========
Recommended full year dividend pence 76.18 72.55 5
---------------------------------------- ----------- ------ ------ ------- --------
(1)For further details on exceptional items see pages 23 and
36.
Reported growth by region
Operating
profit before
exceptional Operating
Volume Net sales Marketing items profit
-------- ------------- ------------ ---------------- --------------
GBP GBP GBP GBP
% EUm % million % million % million % million
------------------ ---- --- -------- -------- ----- --------- ---- --------
North America 3 1.6 17 886 28 264 10 217 10 216
================== ==== === ======== ======== ===== ========= ==== ========
Europe 20 8.5 26 654 22 104 60 382 40 251
================== ==== === ======== ======== ===== ========= ==== ========
Asia Pacific 8 6.6 16 396 17 72 17 103 (23) (138)
================== ==== === ======== ======== ===== ========= ==== ========
Africa 12 3.9 19 270 18 31 84 144 84 144
================== ==== === ======== ======== ===== ========= ==== ========
Latin America and
Caribbean 17 4.0 46 479 51 82 78 235 78 235
Corporate - - 170 34 71 5 (14) (30) (14) (30)
------------------ ---- --- -------- -------- ----- --------- ---- --------
Diageo 10 24.6 21 2,719 26 558 28 1,051 18 678
------------------ ---- --- -------- -------- ----- --------- ---- --------
Organic growth by region
Operating profit
before exceptional
Volume Net sales Marketing items
-------- ---------------- --------------- ---------------------
% EUm % GBP million % GBP million % GBP million
---------------------------- ---- --- ----------- ----------- ------ -------------
North America 3 1.4 14 754 24 222 7 148
============================ ==== === =========== =========== ====== =============
Europe 20 8.5 30 766 26 122 64 418
============================ ==== === =========== =========== ====== =============
Asia Pacific 8 6.6 16 402 16 68 16 98
============================ ==== === =========== =========== ====== =============
Africa 13 4.0 22 308 22 36 79 152
============================ ==== === =========== =========== ====== =============
Latin America and Caribbean 17 4.0 43 451 49 79 70 218
Corporate - - 175 35 83 5 (18) (39)
---------------------------- ---- --- ----------- ----------- ------ -------------
Diageo 10 24.5 21 2,716 25 532 26 995
---------------------------- ---- --- ----------- ----------- ------ -------------
Fiscal 19 to fiscal 22 growth
Net sales
Reported net growth on Organic net
sales growth a constant Organic volume sales CAGR
%(1) basis %(1) CAGR %(2) %(2)
---------------------------- ------------- ----------- -------------- -----------
North America 37 41 5 12
============================ ============= =========== ============== ===========
Europe 9 18 5 6
============================ ============= =========== ============== ===========
Asia Pacific 7 11 - 4
============================ ============= =========== ============== ===========
Africa 5 24 5 8
============================ ============= =========== ============== ===========
Latin America and Caribbean 35 50 7 16
Corporate 2 2 - 1
---------------------------- ------------- ----------- -------------- -----------
Diageo 20 28 3 9
---------------------------- ------------- ----------- -------------- -----------
(1)For further details on fiscal 19 to fiscal 22 growth on a
constant basis see pages 49-52.
(2)F19 to F22 3-year CAGR indicative, and the impact from
disposals, acquisitions and re-classifications may not be fully
captured.
See page 48 for explanation and reconciliation of non-GAAP
measures.
Net sales (GBP million)
Reported net sales grew 21.4%
Organic net sales grew 21.4%
Reported net sales grew 21.4%, driven by strong organic growth.
An unfavourable foreign exchange impact was partially offset by a
hyperinflation adjustment in respect of Turkey.
Organic net sales growth of 21.4% reflects organic volume growth
of 10.3% and 11.1 percentage points of positive price/mix. All
regions delivered double-digit growth, reflecting the continued
recovery of the on-trade channel, resilient consumer demand in the
off-trade channel and market share gains. Growth was underpinned by
favourable industry trends of spirits taking share of total
beverage alcohol and premiumisation(1) .
Price/mix drove 11.1 percentage points of growth, reflecting
positive mix and mid-single digit price growth from price increases
across all regions.
Positive mix was driven by strong growth of our
super-premium-plus brands, particularly scotch, tequila and Chinese
white spirits. It also reflects continued recovery of the on-trade
channel in North America and Europe and the partial recovery of
Travel Retail, partially offset by negative market mix due to the
increased contribution to net sales from India.
Net sales GBP million
--------------------------- -----------
2021 12,733
=========================== ===========
Exchange(2) (221)
=========================== ===========
Acquisitions and disposals 35
=========================== ===========
Hyperinflation(3) 189
=========================== ===========
Volume 1,311
=========================== ===========
Price/mix 1,405
--------------------------- -----------
2022 15,452
--------------------------- -----------
(1)IWSR, 2021.
(2)Exchange rate movements reflect the adjustment to recalculate
the reported results as if they had been generated at the prior
period weighted average exchange rates.
(3)See pages 37-38 and 49-52 for details of hyperinflation
adjustment.
Operating profit (GBP million)
Reported operating profit grew 18.2%
Organic operating profit grew 26.3%
Reported operating profit increased 18.2%, primarily driven by
growth in organic operating profit. This was partially offset by
the negative impact of exceptional operating items, which were
mainly due to non-cash impairments related to India and Russia.
Organic operating profit grew 26.3%, ahead of organic net sales
growth, driven by growth across all regions.
Operating profit GBP million
------------------------------- -----------
2021 3,731
=============================== ===========
Exceptional operating items(1) (373)
=============================== ===========
Exchange (32)
=============================== ===========
Acquisitions and disposals (16)
=============================== ===========
FVR(2) 94
=============================== ===========
Hyperinflation(3) 10
=============================== ===========
Organic movement 995
------------------------------- -----------
2022 4,409
------------------------------- -----------
(1)For further details on exceptional operating items see pages
23 and 36.
(2)Fair value remeasurements. For further details see page 24
.
(3)See pages 37-38 and 49-52 for details of hyperinflation
adjustment.
Operating margin (%)
Reported operating margin decreased 77bps
Organic operating margin increased 121bps
Reported operating margin decreased 77bps, with organic margin
expansion more than offset by exceptional operating items of GBP388
million, primarily due to non-cash impairments related to India and
Russia.
Organic operating margin increased 121bps, reflecting a strong
recovery in gross margin and leverage on operating costs, while
increasing marketing investment. Strong operating margin expansion
in Latin America and Caribbean, Europe and Africa was partially
offset by a decline in North America.
Organic gross margin increased 112bps, primarily driven by
positive mix from premiumisation and the recovery of the on-trade
channel. It also benefitted from improved fixed cost absorption
from volume growth. Price increases and supply productivity savings
more than offset the absolute impact of cost inflation, and mostly
offset the adverse impact on gross margin.
Operating margin ppt
------------------------------- ------
2021 29.3
=============================== ======
Exceptional operating items(1) (2.39)
=============================== ======
Exchange 0.21
=============================== ======
Acquisitions and disposals (0.14)
=============================== ======
Other(2) 0.34
=============================== ======
Gross margin 1.12
=============================== ======
Marketing (0.46)
=============================== ======
Other operating items 0.55
------------------------------- ------
2022 28.5
------------------------------- ------
(1)For further details on exceptional operating items see pages
23 and 36.
(2)Fair value remeasurements and hyperinflation adjustment. For
further details on fair value remeasurements see page 24. See page
37-38 and 49-52 for details of hyperinflation adjustment.
Basic earnings per share (pence)
Basic eps increased 23.2% from 113.8 pence to 140.2 pence
Basic eps before exceptional items(1) increased 29.3% from 117.5
pence to 151.9 pence
Basic eps increased 26.4 pence, primarily driven by organic
operating profit growth, partially offset by higher tax and
exceptional items, primarily due to non-cash impairment charges
related to India and Russia.
Basic eps before exceptional items increased 34.4 pence.
(
Basic earnings per share pence
===================================== ======
2021 113.8
===================================== ======
Exceptional items after tax(2) (8.0)
===================================== ======
Exchange on operating profit (1.4)
===================================== ======
Acquisitions and disposals(3) (0.8)
===================================== ======
Organic operating profit 42.6
===================================== ======
Associates and joint ventures 3.5
===================================== ======
Finance charges(4) (0.7)
===================================== ======
Tax(5) (11.4)
===================================== ======
Share buyback 0.5
===================================== ======
Non-controlling interests (2.3)
===================================== ======
FVR(6) 4.0
===================================== ======
Hyperinflation (operating profit)(7) 0.4
------------------------------------- ------
2022 140.2
------------------------------------- ------
(1)See page 48 for explanation of the calculation and use of
non-GAAP measures.
(2)For further details on exceptional items see pages 23 and
36.
(3)Includes finance charges net of tax.
(4)Excludes finance charges related to acquisitions, disposals,
share buybacks and includes finance charges related to
hyperinflation adjustments (2022 - GBP(36) million; 2021 - GBP(6)
million).
(5)Excludes tax related to acquisitions, disposals and share
buybacks.
(6)Fair value remeasurements. For further details see page
24.
(7)Operating profit hyperinflation adjustment movement was GBP10
million compared to fiscal 21 (2022 - GBP10 million; fiscal 2021 -
GBPnil).
Net cash from operating activities and free cash flow (GBP
million)
Generated GBP3,935 million net cash from operating activities(1)
and GBP2,783 million free cash flow.
Net cash from operating activities was GBP3,935 million, an
increase of GBP281 million compared to fiscal 21. Free cash flow
decreased by GBP254 million to GBP2,783 million.
Free cash flow decreased as strong growth in operating profit
was more than offset by the impact of lapping an exceptionally
strong working capital benefit in fiscal 21, increased capex
investment, lower dividends from joint ventures and associates and
higher cash tax paid.
The working capital benefit in fiscal 21 was due to a large
increase in creditors as operating performance recovered during the
year, following reduced volumes and cost control measures in the
second half of fiscal 20.
Increased capex reflects investment in production capacity,
sustainability, digital capabilities and consumer experiences,
including projects delayed in fiscal 21 due to Covid-19.
The negative cash flow impact from 'other' items was due to
lapping a delayed dividend payment of GBP82 million from Moët
Hennessy, which was received in fiscal 21 for the year ended
December 2019.
The increase in cash tax payments primarily reflects higher tax
on increased earnings.
Free cash flow GBP million
-------------------------------------------------------- -----------
2021 Net cash from operating activities 3,654
======================================================== ===========
2021 Capex and movements in loans and other investments (617)
======================================================== ===========
2021 Free cash flow 3,037
======================================================== ===========
Exchange(2) (32)
======================================================== ===========
Operating profit(3) 1,003
======================================================== ===========
Working capital(4) (510)
======================================================== ===========
Capex (467)
======================================================== ===========
Tax (97)
======================================================== ===========
Interest 23
======================================================== ===========
Other(5) (174)
======================================================== ===========
2022 Free cash flow 2,783
======================================================== ===========
2022 Capex and movements in loans and other investments 1,152
-------------------------------------------------------- -----------
2022 Net cash from operating activities 3,935
-------------------------------------------------------- -----------
(1)Net cash from operating activities excludes net capex (2022 -
GBP(1,080) million; 2021 - GBP(613) million) and movements in loans
and other investments.
(2)Exchange on operating profit before exceptional items.
(3)Operating profit excludes exchange, depreciation and
amortisation, post employment charges of GBP(53) million and other
non-cash items.
(4)Working capital movement includes maturing inventory.
(5)Other items include dividends received from associates and
joint ventures, movements in loans and other investments and post
employment payments.
Return on average invested capital (%)(1)
ROIC increased 331bps
ROIC increased 331bps, driven mainly by organic operating profit
growth, partially offset by higher tax.
Return on average invested capital ppt
----------------------------------- ------
2021 13.5
=================================== ======
Exchange 0.29
=================================== ======
Acquisitions and disposals (0.27)
=================================== ======
Organic operating profit 4.44
=================================== ======
Associates and joint ventures 0.19
=================================== ======
Tax (1.32)
=================================== ======
Other (0.02)
----------------------------------- ------
2022 16.8
----------------------------------- ------
(1)ROIC calculation excludes exceptional operating items from
operating profit. For further details on ROIC see page 56.
Medium-term guidance, fiscal 23 to fiscal 25
Organic net sales and organic operating profit
We continue to expect to deliver our medium-term guidance of
consistent organic net sales growth in the range of 5% to 7% and
sustainable organic operating profit growth in the range of 6% to
9% for fiscal 23 to fiscal 25.
Everyday efficiency productivity savings
As previously disclosed, over the three-year period from fiscal
22 to fiscal 24, we continue to expect to deliver total gross
savings of around GBP1.2 billion.
Supply chain agility programme, fiscal 23 to fiscal 27
In addition to our everyday efficiency savings, as we continue
to build a more agile and sustainable business, we have initiated a
supply chain agility programme, spanning five years from fiscal 23.
We expect this programme to strengthen our end-to-end supply chain
and make it fit for the future by improving its resilience and
agility, driving efficiencies, delivering additional productivity
savings and making our supply operations more sustainable.
We expect the total implementation cost of the supply chain
agility programme to be up to GBP500 million over the five years,
starting in fiscal 23. This will comprise non-cash items and
one-off expenses, the majority of which are expected to be
recognised as exceptional operating items, starting in fiscal 23.
In addition, we expect to invest in capex, which is included in our
capital expenditure guidance below.
We expect the savings delivered from the supply chain agility
programme to be incremental to our ongoing annual gross
productivity savings (expected to be around GBP1.2 billion in the
period from fiscal 22 to fiscal 24). The programme is expected to
have a five-year payback period, with the majority of savings
delivered in fiscal 25 and beyond.
Capital expenditure
We expect annual capital expenditure to remain upweighted in the
range of GBP1.0 billion to GBP1.2 billion in fiscal 23 to fiscal
25, as we invest in long-term growth, including production capacity
for our strategic categories, our digital capabilities, our
ambitious sustainability agenda and our supply chain agility
programme.
Fiscal 23 outlook
Organic net sales
While we expect the environment to be challenging, we are
confident in the resilience of our business and our ability to
navigate ongoing volatility, including disruptions from Covid-19,
significant cost inflation, a potential weakening of consumer
spending power and global geopolitical and macroeconomic
uncertainty. We believe our portfolio is well positioned across
geographies, categories and price points. We will use our deep
understanding of consumers to quickly adapt to changes in trends
and behaviours while investing strongly in marketing and
innovation, and leveraging our revenue growth management
capabilities, including strategic pricing actions.
In North America, organic net sales grew 14% in fiscal 22. While
we expect net sales growth to moderate in fiscal 23, as we lap the
strong on-trade recovery, we expect our advantaged portfolio to
benefit from spirits continuing to take share of TBA,
premiumisation and strategic pricing actions. We continue to
closely monitor consumer trends to enable us to respond quickly to
potential shifts from weakening consumer spending power. We will
continue to invest strongly in marketing and innovation.
In Europe, organic net sales grew 30% in fiscal 22 as the
on-trade recovered strongly, and we therefore expect net sales
growth to be lower in fiscal 23. We expect to benefit from our
broad portfolio, strong innovation, strategic pricing actions and
effective marketing. We continue to stay close to the consumer to
quickly respond to potential shifts in consumer purchasing
patterns.
In Asia Pacific, Africa and Latin America and Caribbean, we
expect continued growth in fiscal 23, albeit moderating as we lap
the strong growth in fiscal 22. In a weakening macroeconomic
environment, we believe the breadth of our portfolio will provide
resilience, supported by marketing investment.
Organic operating margin
In a challenging inflationary environment, we will continue to
focus on revenue growth management, including strategic pricing
actions, and everyday efficiency. We continue to expect organic
operating margin to benefit from premiumisation trends and
operating leverage while investing strongly in marketing.
Exchange
We are not able to provide specific guidance for foreign
exchange in relation to fiscal 23. Using exchange rates of
GBP1=$1.20 and GBP1=EUR1.18, we would expect a favourable impact on
net sales and operating profit, primarily driven by the weakening
of sterling against the US dollar, as well as some impact from
emerging market currencies. In addition, we expect an unfavourable
impact related to hyperinflationary economies, primarily
Turkey.
Taxation
We expect the tax rate before exceptional items to continue to
be in the range of 22.0% to 24.0% in fiscal 23.
Effective interest rate
We expect the effective interest rate to be around 3.5% in
fiscal 23.
Notes to the business and financial review
Unless otherwise stated:
- movements in results are for the year ended 30 June 2022
compared to the year ended 30 June 2021;
- commentary below refers to organic movements unless stated as reported;
- volume is in millions of equivalent units (EUm);
- net sales are sales after deducting excise duties;
- percentage movements are organic movements unless stated as reported; and
- share refers to value share.
See page 48 for explanation of the calculation and use of
non-GAAP measures.
Business review
North America
-- Reported net sales grew 17%, primarily reflecting strong organic
growth. There were favourable impacts from foreign exchange, mainly
due to the strengthening of the US dollar, and from brand acquisitions.
-- Organic net sales increased 14%, building on strong growth in fiscal
21, largely driven by US Spirits.
-- US Spirits net sales grew 17%, reflecting the recovery of the on-trade
channel and resilient consumer demand in the off-trade channel, market
share gains and spirits taking share of total beverage alcohol, and
replenishment of stock levels by distributors. We drove particularly
strong growth in our super-premium-plus portfolio and increased prices.
-- US Spirits shipments were ahead of depletions, with a benefit of
approximately three percentage points from the replenishment of stock
levels by distributors, recovering from lower levels during Covid-19.
It also reflects distributors increasing inventories of certain imported
products due to longer product transit times in fiscal 22.
-- US Spirits growth was primarily driven by tequila, up 57%, as well
as double-digit growth in scotch and US whiskey and growth in Canadian
whisky. This more than offset declines in Baileys and rum.
-- Diageo Beer Company net sales increased 2%, reflecting increased
sales of Guinness driven by the on-trade recovery and growth in ready
to drink(1) , partially offset by a decline in flavoured malt beverages.
-- Organic operating margin decreased by 295bps, as we continued to
increase marketing investment, up 24%, ahead of net sales growth, to
support growth momentum across key brands. Price increases and productivity
savings partially offset cost inflation.
Key financials GBP million:
----------------------------------------------------------------------------------------------
Acquisitions Reported
and Organic movement
2021 Exchange disposals movement Other(3) 2022 %
------------------------ ----- -------- ------------ --------- -------- ----- ---------
Net sales 5,209 98 34 754 - 6,095 17
======================== ===== ======== ============ ========= ======== ===== =========
Marketing 936 19 24 222 (1) 1,200 28
======================== ===== ======== ============ ========= ======== ===== =========
Operating profit before
exceptional items 2,237 49 (19) 148 39 2,454 10
======================== ===== ======== ============ ========= ======== ===== =========
Exceptional operating
items(2) - (1)
======================== ===== ======== ============ ========= ======== ===== =========
Operating profit 2,237 2,453 10
------------------------ ----- -------- ------------ --------- -------- ----- ---------
Markets and categories: Global giants, local stars and
reserve(5) :
-------------------------- --------- ---------- ---------- ----------------------------------------------------
Organic Reported Organic Reported Organic Organic Reported
volume volume net sales net sales volume net sales net sales
movement movement movement movement movement(6) movement movement
% % % % % % %
--------------- --------- --------- ---------- ---------- -------------- ------------ ---------- ----------
North America 3 3 14 17 Crown Royal 2 6 8
=============== ========= ========= ========== ========== ============== ============ ========== ==========
Don Julio 30 36 38
=============== ========= ========= ========== ========== ============== ============ ========== ==========
US Spirits 4 4 17 19 Casamigos 81 88 91
=============== ========= ========= ========== ========== ============== ============ ========== ==========
DBC USA(1)(4) (2) - 2 6 Johnnie Walker 9 26 28
=============== ========= ========= ========== ========== ============== ============ ========== ==========
Canada (2) (2) 3 6 Smirnoff (4) (3) (2)
=============== ========= ========= ========== ========== ============== ============ ========== ==========
Captain Morgan (3) (5) (3)
=============== ========= ========= ========== ========== ============== ============ ========== ==========
Spirits 3 3 16 18 Ketel One(7) 7 12 13
=============== ========= ========= ========== ========== ============== ============ ========== ==========
Beer (4) (4) 1 2 Baileys (10) (8) (6)
=============== ========= ========= ========== ========== ============== ============ ========== ==========
Ready to
drink(4) 15 40 21 49 Guinness 5 7 9
--------------- --------- --------- ---------- ---------- ============== ============ ========== ==========
Bulleit 10 14 16
============== ============ ========== ==========
Cîroc
vodka (4) - 1
-------------- ------------ ---------- ----------
(1)Certain spirits-based ready to drink products in certain
states are distributed through DBC USA and those net sales are
captured within DBC USA.
(2)For further details on exceptional operating items see pages
23 and 36.
(3)Fair value remeasurements. For further details see page
24.
(4)Reported volume movement impacted by acquisitions. For
further details see page 53.
(5)Spirits brands excluding ready to drink and non-alcoholic
variants.
(6)Organic equals reported volume movement.
(7)Ketel One includes Ketel One vodka and Ketel One
Botanical.
North America contributed North America organic net sales grew
39% of Diageo reported net sales
in fiscal 22 14% in fiscal 22
Market highlights - US Spirits
-- Tequila net sales increased 57%, with Casamigos growing 89%
and Don Julio growing 36%, and both brands gained share of the
spirits market and the tequila category. This primarily reflects
strong volume growth and there was also a benefit from price
increases and innovation.
-- Crown Royal net sales increased 7%, with double-digit growth
in the core variant. However, supply constraints of aged liquid led
to slower growth in certain variants and a decline in Crown Royal's
share of the spirits market and the Canadian whisky category.
-- Scotch grew 19% and gained share of the spirits market and
the scotch category. Johnnie Walker net sales grew 23%, with
double-digit growth in Johnnie Walker Blue Label and Johnnie Walker
Black Label. Buchanan's net sales increased 14% and it gained share
of the scotch category. Scotch malts grew 8%.
-- Vodka net sales grew 1%. Ketel One net sales increased 11%,
driven by double-digit growth in the core variant, and slower
growth of Ketel One Botanical. Cîroc net sales declined 2%, lapping
double-digit growth in fiscal 21, with growth from recent
innovations more than offset by declines of other variants.
Smirnoff net sales decreased 4%, due to declines in certain flavour
variants, partially offset by growth from recent innovations; net
sales of the core variant were flat.
-- Captain Morgan net sales declined 6%, as the rum category
continued to lose spirits market share, however, Captain Morgan
gained share of the category.
-- US whiskey sales grew 11%, primarily driven by Bulleit, up
14%. Bulleit lost share of the US whiskey category due to glass
supply constraints, which have now been resolved.
-- Baileys net sales declined 8%, following strong growth in fiscal 21.
-- Spirits-based ready to drink(1) net sales grew 18%, primarily
driven by strong performance of Crown Royal cocktails and the
launch of Cîroc cocktails, partially offset by lower sales of Ketel
One Botanical Spritz.
(1)Certain spirits-based ready to drink products in certain
states are distributed through DBC USA and those net sales are
captured within DBC USA.
Europe
* Reported net sales increased 26%, driven by strong
organic growth. Net sales were unfavourably impacted
by foreign exchange, primarily due to the weakening
of the Turkish lira, which was partially offset by a
hyperinflation adjustment(1) .
* Organic net sales grew 30%, with strong double-digit
growth across all markets and a partial recovery of
Travel Retail Europe.
* Growth reflects the recovery of the on-trade channel,
particularly in Ireland, Great Britain and Southern
Europe, as well as resilient consumer demand in the
off-trade channel, where Diageo continued to gain
market share.
* Growth was also underpinned by the spirits category
gaining share of total beverage alcohol,
premiumisation, price increases and innovation.
* Spirits net sales grew 24%, with broad-based growth
across scotch, vodka, Baileys, gin, rum and raki.
-- Beer net sales grew 63%, following a 21% decline in fiscal 21, with
strong growth in Guinness driven by the on-trade recovery in Ireland
and Great Britain, as well as growth from innovation.
* Strong improvement in organic operating margin of
671bps primarily reflects leverage on operating costs
as net sales recovered strongly. Benefits from
positive channel and product mix, price increases,
productivity savings and improved fixed cost
absorption more than offset cost inflation.
* Marketing investment increased 26%, supporting the
on-trade recovery and off-trade share momentum.
Key financials GBP million:
Acquisitions Reported
and Organic movement
2021 Exchange disposals movement Other(2) Hyperinflation(1) 2022 %
------------------------ ----- -------- ------------ --------- -------- ----------------- ----- ---------
Net sales 2,558 (304) 3 766 - 189 3,212 26
======================== ===== ======== ============ ========= ======== ================= ===== =========
Marketing 473 (35) - 122 - 17 577 22
======================== ===== ======== ============ ========= ======== ================= ===== =========
Operating profit before
exceptional items 635 (110) 1 418 63 10 1,017 60
======================== ===== ======== ============ ========= ======== ================= ===== =========
Exceptional operating
items(3) (15) (146)
======================== ----- ======== ============ ========= ======== ================= ===== =========
Operating profit 620 871 40
------------------------ ----- -------- ------------ --------- -------- ----------------- ----- ---------
Markets and categories: Global giants and local stars(4)
:
--------------------------- --------- ---------- ---------- -----------------------------------------------
Organic Reported Organic Reported Organic Organic Reported
volume volume net sales net sales volume net sales net sales
movement movement movement movement movement(5) movement movement
% % % % % % %
================ ========= ========= ========== ========== --------- ------------ ---------- ----------
Europe 20 20 30 26 Guinness 42 65 62
================ ========= ========= ========== ========== ========= ============ ========== ==========
Johnnie
Walker 22 35 31
================ ========= ========= ========== ========== ========= ============ ========== ==========
Great Britain 15 15 20 20 Baileys 20 19 16
================ ========= ========= ========== ========== ========= ============ ========== ==========
Northern Europe 16 16 15 10 Smirnoff 35 38 35
================ ========= ========= ========== ========== ========= ============ ========== ==========
Captain
Southern Europe 30 27 33 26 Morgan 11 12 9
================ ========= ========= ========== ========== ========= ============ ========== ==========
Ireland 35 35 71 65 Tanqueray 36 37 33
================ ========= ========= ========== ========== ========= ============ ========== ==========
Yenì
Eastern Europe 7 8 18 18 Raki 9 15 14
================ ========= ========= ========== ========== ========= ============ ========== ==========
Turkey 18 18 49 25 J B 19 26 17
================ ========= ========= ========== ========== --------- ------------ ---------- ----------
Spirits 18 18 24 19
================ ========= ========= ========== ==========
Beer 36 36 63 60
================ ========= ========= ========== ==========
Ready to drink 23 23 23 22
---------------- --------- --------- ---------- ----------
(1)See page 37-38 and 49-52 for details of hyperinflation
adjustment.
(2)Fair value remeasurements. For further details see page
24.
(3)Exceptional items are in respect of Diageo's decision,
announced on 28 June 2022, to wind down its operations in Russia
over the following six months. For further details on exceptional
operating items see pages 23 and 36.
(4)Spirits brands excluding ready to drink and non-alcoholic
variants.
(5)Organic equals reported volume movement, except for Smirnoff,
which had reported volume movement of 36% due to a
reclassification.
Europe contributed Europe organic net sales grew
21% of Diageo reported net sales
in fiscal 22 30% in fiscal 22
Market highlights
-- Net sales in Great Britain grew 20%, reflecting a strong
recovery in the on-trade and resilient consumer demand in the
off-trade. Spirits grew 12%, with growth across vodka, rum, Baileys
and scotch, partially offset by a decline in gin. Guinness grew
strongly, up 52%, driven by the on-trade recovery, as well as
growth from innovation. Ready to drink grew double digits
reflecting category momentum and innovation.
-- Northern Europe net sales grew 15%, reflecting continued
strong performance in the off-trade and recovery in the on-trade.
Growth was broad-based across categories.
-- Southern Europe net sales grew 33%, as a result of on-trade
restrictions easing and a partial recovery of tourism. Scotch, gin,
vodka, rum and Baileys all delivered strong double-digit
growth.
-- Ireland net sales increased 71%, lapping a significant
decline in fiscal 21, driven by strong growth in Guinness as the
on-trade recovered.
-- Eastern Europe net sales increased 18%, reflecting continued
momentum in the off-trade and recovery in the on-trade. Following
an announcement in March 2022 to suspend exports to and sales in
Russia, net sales in Russia declined in fiscal 22. Diageo announced
on 28 June 2022 that it would wind down its operations in Russia
over the following six months.
-- Turkey net sales increased 49%, driven by price increases in
response to inflation, increases in excise duties and currency
devaluation. Growth also reflects strong volume growth, up 18%, as
on-trade restrictions eased, and premiumisation.
Asia Pacific
* Reported net sales grew 16%, primarily reflecting
strong organic growth.
* Organic net sales grew 16%, with strong growth in
India and Greater China, and a partial recovery of
Travel Retail Asia and Middle East.
-- Spirits grew 17%, mainly driven by scotch, Chinese white spirits
and IMFL whisky(1) .
* Organic operating margin was flat. Benefits from the
partial recovery of Travel Retail, positive category
mix and price increases were offset by strategic
investments in Greater China, cost inflation and
one-off costs.
-- Marketing investment increased 16%, mainly driven by Greater China,
across Chinese white spirits and scotch.
Key financials GBP million:
-------------------------------------------------------------------------------------------
Acquisitions Reported
and Organic movement
2021 Exchange disposals movement 2022 %
------------------------------- ----- -------- ------------ --------- ----- ---------
Net sales 2,488 (6) - 402 2,884 16
=============================== ===== ======== ============ ========= ===== =========
Marketing 418 4 - 68 490 17
=============================== ===== ======== ============ ========= ===== =========
Operating profit before
exceptional items 608 5 - 98 711 17
=============================== ===== ======== ============ ========= ===== =========
Exceptional operating items(2) - (241)
=============================== ===== ======== ============ ========= ===== =========
Operating profit 608 470 (23)
------------------------------- ----- -------- ------------ --------- ----- ---------
Markets and categories: Global giants, local stars
and reserve(3) :
---------------------------- --------- ---------- ---------- ---------------------------------------------------
Organic Reported Organic Reported Organic Organic Reported
volume volume net sales net sales volume net sales net sales
movement movement movement movement movement(4) movement movement
% % % % % % %
----------------- --------- --------- ---------- ---------- ------------- ------------ ---------- ----------
Johnnie
Asia Pacific 8 8 16 16 Walker 24 28 28
================= ========= ========= ========== ========== ============= ============ ========== ==========
Shui Jing
Fang(5) 16 19 24
================= ========= ========= ========== ========== ============= ============ ========== ==========
India 7 7 17 16 McDowell's 5 6 4
================= ========= ========= ========== ========== ============= ============ ========== ==========
Greater China 6 6 13 17 Guinness 5 9 7
================= ========= ========= ========== ========== ============= ============ ========== ==========
Australia 2 2 - (2) The Singleton 11 16 18
================= ========= ========= ========== ========== ============= ============ ========== ==========
South East
Asia 14 14 20 19 Smirnoff 13 14 14
================= ========= ========= ========== ========== ============= ============ ========== ==========
North Asia (5) (5) 12 6 Baileys 12 13 12
================= ========= ========= ========== ========== ============= ============ ========== ==========
Travel Retail
Asia and Middle
East 135 125 178 184 Windsor 1 (9) (13)
================= ========= ========= ========== ========== ------------- ------------ ---------- ----------
Spirits 8 8 17 18
================= ========= ========= ========== ==========
Beer 4 4 9 7
================= ========= ========= ========== ==========
Ready to drink 3 3 2 (1)
----------------- --------- --------- ---------- ----------
(1) Indian-Made Foreign Liquor (IMFL) whisky.
(2)For further details on exceptional operating items see pages
23 and 36.
(3)Spirits brands excluding ready to drink and non-alcoholic
variants.
(4)Organic equals reported volume movement, except for Smirnoff,
which had reported volume movement of 12% due to a
reclassification.
(5)Growth figures represent total Chinese white spirits of which
Shui Jing Fang is the principal brand.
Asia Pacific contributed Asia Pacific organic net sales grew
19% of Diageo reported net sales
in fiscal 22 16% in fiscal 22
Market highlights
-- India net sales grew 17%, driven by strong consumer demand in
the off-trade channel, recovery of the on-trade channel and strong
premiumisation. The prestige and above segment grew 22%, ahead of
popular segment growth of 3%. Scotch grew strong double digits,
driven by Johnnie Walker, and IMFL whisky grew 7%.
-- Greater China net sales increased 13%, primarily driven by
Chinese white spirits growth of 18%, despite the impact of
government restrictions related to Covid-19. Scotch growth of 6%
reflects double-digit growth in mainland China, driven by the
super-premium-plus segment, partially offset by a decline in
Taiwan.
-- Australia net sales were flat, following strong double-digit growth in fiscal 21.
-- South East Asia net sales growth was impacted in the first
half of the year by on-trade restrictions, international travel
restrictions and reduced tourism due to Covid-19, with performance
improving in the second half.
-- Travel Retail Asia and Middle East net sales grew triple
digits, following a significant decline in fiscal 21. This reflects
a partial recovery as international travel restrictions eased and
was primarily driven by Johnnie Walker.
Africa
* Reported net sales grew 19%, primarily driven by
strong organic growth. There were unfavourable
impacts from foreign exchange and the disposal of the
Meta Abo Brewery in Ethiopia.
* Organic net sales grew 22%, primarily driven by East
Africa and Nigeria. All markets grew double digits.
* Strong growth in East Africa and Nigeria was driven
by the continued recovery of the on-trade channel,
particularly in Kenya, as well as price increases and
focused execution of our total beverage alcohol
strategy.
* Beer net sales grew 22%, primarily driven by Malta
Guinness, Guinness and Senator.
* Spirits net sales grew 21%, driven by double-digit
growth in both mainstream and international spirits,
particularly scotch, gin and vodka.
* Organic operating margin improved 643bps, primarily
driven by price increases and leverage on operating
costs. The benefit from price increases and
productivity savings more than offset cost inflation.
* Marketing investment increased 22%, in line with
organic net sales growth. Investment focused on key
categories, as well as on e-commerce and new route to
consumer opportunities.
Key financials GBP million:
-----------------------------------------------------------------------------
Acquisitions Reported
and Organic movement
2021 Exchange disposals movement 2022 %
----------------- ----- -------- ------------ --------- ----- ---------
Net sales 1,412 (33) (5) 308 1,682 19
================= ===== ======== ============ ========= ===== =========
Marketing 168 (5) - 36 199 18
================= ===== ======== ============ ========= ===== =========
Operating profit 171 (10) 2 152 315 84
----------------- ----- -------- ------------ --------- ----- ---------
Markets and categories: Global giants and local stars(2)
:
-------------------------- --------- ---------- ---------- -----------------------------------------------------
Organic Reported Organic Reported Organic Organic Reported
volume volume net sales net sales volume net sales net sales
movement movement movement movement movement(3) movement movement
% % % % % % %
--------------- --------- --------- ---------- ---------- --------------- ------------ ---------- ----------
Africa(1) 13 12 22 19 Guinness 4 17 13
=============== ========= ========= ========== ========== =============== ============ ========== ==========
Johnnie
Walker 16 22 22
=============== ========= ========= ========== ========== =============== ============ ========== ==========
East Africa 22 22 25 24 Smirnoff 9 21 21
=============== ========= ========= ========== ========== --------------- ------------ ---------- ----------
Africa Regional
Markets(1) 9 7 14 9
=============== ========= ========= ========== ==========
Nigeria 1 1 30 26 Other beer:
=============== ========= ========= ========== ==========
South Africa(1) 6 4 12 10
=============== ========= ========= ========== ========== --------------- ------------ ---------- ----------
Malta
Guinness(1) 30 53 40
=============== ========= ========= ========== ========== =============== ============ ========== ==========
Spirits 12 12 21 20 Senator 38 36 33
=============== ========= ========= ========== ========== =============== ============ ========== ==========
Beer(1) 14 13 22 19 Tusker 14 27 26
=============== ========= ========= ========== ========== =============== ============ ========== ==========
Ready to
drink(1) 11 5 28 20 Serengeti 9 9 10
--------------- --------- --------- ---------- ---------- --------------- ------------ ---------- ----------
(1)Reported volume movement impacted by disposals. For further
details see page 53.
(2)Spirits brands excluding ready to drink and non-alcoholic
variants.
(3)Organic equals reported volume movement, except for Malta
Guinness, which had reported volume movement of 27%.
Africa contributed Africa organic net sales grew
11% of Diageo reported net sales
in fiscal 22 22% in fiscal 22
Market highlights
-- East Africa grew 25%, with double-digit growth in both beer
and spirits across all markets. This reflected the continued
recovery of the on-trade, benefitting beer in particular, as well
as price increases.
-- Nigeria net sales grew 30%, primarily driven by price
increases, as well as an improved route to consumer for certain
brands. Beer, mainstream spirits and international spirits all grew
double digits. Growth in beer was primarily driven by Malta
Guinness and Guinness.
-- Africa Regional Markets net sales grew 14%, led by strong
growth in Ghana. Double-digit growth in beer, particularly Malta
Guinness, was driven by the recovery of the on-trade channel and
price increases.
-- South Africa grew double digits. While restrictions related
to Covid-19 eased compared to fiscal 21, the operating environment
remained challenging.
Latin America and Caribbean
* Reported net sales grew 46%, primarily reflecting
strong organic growth. A favourable currency impact
primarily reflects the strengthening of the Brazilian
real and Mexican peso.
* Organic net sales increased 43%, following
double-digit growth in fiscal 21, with strong
double-digit growth in all markets, particularly
PEBAC, CCA and Colombia.
* Growth reflects further recovery of the on-trade
channel and strong consumer demand in the off-trade
channel, where Diageo continued to gain share in all
markets except Mexico.
-- Strong price/mix was driven by price increases across all markets,
and positive mix from the strong performance of premium-plus scotch
across the region.
* Spirits net sales grew 45%, primarily driven by
strong double-digit scotch growth, as well as strong
growth across other categories, particularly tequila
and gin.
* Organic operating margin improved by 564bps,
primarily driven by price increases and
premiumisation. This was partially offset by cost
inflation and an increase in marketing investment.
* Marketing investment increased 49%, ahead of net
sales growth.
Key financials GBP million:
---------------------------------------------------------------------------------------
Acquisitions Reported
and Organic movement
2021 Exchange disposals movement Other(1) 2022 %
----------------- ----- -------- ------------ --------- -------- ----- ---------
Net sales 1,046 25 3 451 - 1,525 46
================= ===== ======== ============ ========= ======== ===== =========
Marketing 161 2 1 79 - 243 51
================= ===== ======== ============ ========= ======== ===== =========
Operating profit 303 25 - 218 (8) 538 78
----------------- ----- -------- ------------ --------- -------- ----- ---------
Markets and categories: Global giants, local stars and
reserve(2) :
-------------------------- --------- ---------- ---------- ----------------------------------------------------
Organic Reported Organic Reported Organic Organic Reported
volume volume net sales net sales volume net sales net sales
movement movement movement movement movement(3) movement movement
% % % % % % %
--------------- --------- --------- ---------- ---------- -------------- ------------ ---------- ----------
Latin America
and Caribbean Johnnie Walker 42 59 63
=============== ============== ============ ========== ==========
17 17 43 46 Buchanan's 48 59 60
=============== ========= ========= ========== ========== ============== ============ ========== ==========
Don Julio 9 34 37
=============== ========= ========= ========== ========== ============== ============ ========== ==========
PUB 12 12 36 41 Old Parr 47 61 62
=============== ========= ========= ========== ========== ============== ============ ========== ==========
Mexico 6 7 24 28 Smirnoff 22 17 18
=============== ========= ========= ========== ========== ============== ============ ========== ==========
CCA 34 34 56 61 Black & White (3) 9 10
=============== ========= ========= ========== ========== ============== ============ ========== ==========
Andean 18 18 45 38 Baileys 20 31 32
=============== ========= ========= ========== ========== ============== ============ ========== ==========
PEBAC 31 31 64 62 Tanqueray 37 41 45
=============== ========= ========= ========== ========== -------------- ------------ ---------- ----------
Spirits 17 17 45 48
=============== ========= ========= ========== ==========
Beer 2 2 6 2
=============== ========= ========= ========== ==========
Ready to
drink 36 36 42 45
--------------- --------- --------- ---------- ----------
(1)Fair value remeasurements. For further details see page
24.
(2)Spirits brands excluding ready to drink and non-alcoholic
variants.
(3)Organic equals reported volume movement.
Latin America and Caribbean organic
Latin America and Caribbean contributed net sales grew
10% of Diageo reported net sales
in fiscal 22 43% in fiscal 22
Market highlights
-- PUB (Paraguay, Uruguay and Brazil) net sales increased 36%,
mainly driven by Brazil, up 32%, reflecting continued momentum in
the off-trade channel, price increases, premiumisation and further
recovery in the on-trade channel. PUB growth was mainly driven by
scotch, up 43%, as well as double-digit growth in ready to drink,
gin and vodka.
-- Mexico net sales grew 24%, driven by scotch, up 29%, and
tequila, up 25%. The strong performance in scotch reflects
double-digit growth in both Johnnie Walker and Buchanan's and the
benefit from price increases.
-- CCA (Central America and Caribbean) net sales grew 56%,
primarily reflecting the recovery of the on-trade. Growth was
mainly driven by scotch, up 62%.
-- Andean (Colombia and Venezuela) net sales increased 45%,
reflecting strong growth in Colombia. Growth was mainly driven by
scotch, which benefitted from price increases.
-- PEBAC (Peru, Ecuador, Bolivia, Argentina and Chile) net sales
increased 64%, mainly driven by Chile and Peru, reflecting strong
performance of the off-trade, price increases and the recovery of
the on-trade channel. Growth was mainly driven by scotch, up 52%,
primarily driven by Johnnie Walker.
Category and brand review
* Spirits grew 21%, with broad-based growth across
categories, and particularly strong performance in
scotch, tequila, vodka, gin and Chinese white
spirits.
* Scotch grew 29%, led by Johnnie Walker up 34%, with
both growing strong double digits across all regions.
* Tequila grew 55%, with Don Julio and Casamigos
continuing to gain share of the fast-growing tequila
category within the US spirits market.
* Vodka grew 11%, with growth across all regions,
particularly Europe. Smirnoff and Ketel One both grew
double digits.
* Gin grew 18%, primarily driven by strong double-digit
growth in Europe, Africa and Latin America and
Caribbean. Tanqueray and Gordon's both grew double
digits.
-- Beer grew 25%, primarily due to the strong recovery of Guinness,
up 32%, driven by Ireland and Great Britain as on-trade restrictions
eased, as well as double-digit growth in Africa.
* Ready to drink grew 18%, with double-digit growth
across Europe, Africa, Latin America and Caribbean
and North America.
Key categories
Organic Organic Reported
volume net sales net sales
movement(1) movement movement
% % %
----------------------------------------- ------------- ----------- -----------
Spirits(2) 10 21 21
========================================= ============= =========== ===========
Scotch 18 29 29
========================================= ============= =========== ===========
Tequila 47 55 57
========================================= ============= =========== ===========
Vodka(3)(4) 12 11 11
========================================= ============= =========== ===========
Canadian whisky (1) 6 7
========================================= ============= =========== ===========
Rum(3) 5 6 6
========================================= ============= =========== ===========
Liqueurs 11 10 8
========================================= ============= =========== ===========
Gin(3) 16 18 18
========================================= ============= =========== ===========
Indian-Made Foreign Liquor (IMFL) whisky 5 7 5
========================================= ============= =========== ===========
US whiskey 5 14 16
========================================= ============= =========== ===========
Beer 14 25 22
----------------------------------------- ------------- ----------- -----------
Ready to drink 14 18 21
----------------------------------------- ------------- ----------- -----------
(1)Organic equals reported volume movement except for tequila
48%, liqueurs 10%, beer 13% and ready to drink 15%.
(2)Spirits brands excluding ready to drink and non-alcoholic
variants.
(3)Vodka, rum, gin, including IMFL brands.
(4)Vodka includes Ketel One Botanical.
Scotch
24% of Diageo's reported net sales and grew 29%
-- Strong double-digit growth across all regions, particularly
in Latin America and Caribbean and Asia Pacific. Growth also
reflects the partial recovery of Travel Retail where scotch grew
strongly.
-- Johnnie Walker net sales increased 34%, with strong double-digit growth across all regions.
- Johnnie Walker Black Label grew 39%, with double-digit growth across all regions.
- Johnnie Walker Blue Label grew 63%, with growth across all
regions, particularly North America and Asia Pacific.
- Johnnie Walker Red Label grew 22%, with double-digit growth in
Europe, Latin America and Caribbean, and Asia Pacific, partially
offset by a decline in North America.
-- Scotch malts grew 17%, primarily driven by strong growth in Asia Pacific and Europe.
-- Primary scotch brands grew 14%, primarily driven by
double-digit growth of Black Dog and Black & White in
India.
Tequila
10% of Diageo's reported net sales and grew 55%
-- Growth reflects the strong performance of Casamigos and Don
Julio which continued to gain share of the fast-growing tequila
category within the US spirits market.
Vodka
10% of Diageo's reported net sales and grew 11%
-- Growth was across all regions, with a particularly strong performance in Europe.
-- Smirnoff net sales increased 10%, with double-digit growth in
all regions, except North America, where net sales declined.
-- Ketel One grew 16%, primarily driven by North America, with
double-digit growth in the core variant.
-- Cîroc grew 6%, with strong growth in Europe. Net sales were
broadly flat in North America, lapping double-digit growth in
fiscal 21, with growth from recent innovations more than offset by
declines in other variants.
Canadian whisky
7% of Diageo's reported net sales and grew 6%
-- Growth was driven by Crown Royal in North America, with
double-digit growth in the core variant.
-- Supply constraints of aged liquid led to slower growth in
certain variants and a decline in Crown Royal's share of spirits
and the Canadian whisky category within the US spirits market.
Rum
5% of Diageo's reported net sales and grew 6%
-- Captain Morgan grew across all regions except North America,
with particularly strong growth in Europe.
-- Zacapa grew in all regions, particularly in Europe.
Liqueurs
5% of Diageo's reported net sales and grew 10%
-- Growth was driven by Baileys Original in Europe and Latin America and Caribbean.
-- Baileys net sales declined in North America, primarily due to
lapping strong growth in fiscal 21.
Gin
5% of Diageo's reported net sales and grew 18%
-- Growth was across all regions except North America, with
strong double-digit growth in Europe, Africa, Latin America and
Caribbean and Asia Pacific.
-- Tanqueray grew double digits in Europe, Latin America and Caribbean and Asia Pacific.
-- Gordon's grew in all regions except North America.
-- Growth in Africa was mainly driven by Gilbey's and Gordon's.
IMFL whisky
4% of Diageo's reported net sales and grew 7%
-- Growth was mainly driven by Royal Challenge and McDowell's
No.1.
US whiskey
2% of Diageo's reported net sales and grew 14%
-- Performance was driven by strong growth in Bulleit in North
America, despite glass supply constraints, which have now been
resolved.
Beer
16% of Diageo's reported net sales and grew 25%
-- Growth was primarily driven by Guinness, up 32%, particularly
in Europe due to the on-trade recovery.
-- Malta Guinness and Senator also grew strong double digits in
Africa, with beer benefitting from the continued recovery of the
on-trade, price increases and an improved route to consumer in
Nigeria.
-- Net sales of Smirnoff flavoured malt beverages decreased in
North America, with growth in Smirnoff Ice more than offset by a
decline in Smirnoff seltzers.
Ready to drink
4% of Diageo's reported net sales and grew 18%
-- Growth was double digit across Europe, Africa, Latin America and Caribbean and North America.
-- Growth was primarily driven by Smirnoff Ice, as well as
strong double-digit growth in Crown Royal cocktails.
Global giants, local stars and reserve(1) :
Organic Organic Reported
volume net sales net sales
movement(2) movement movement
% % %
------------------ ------------- ---------- ----------
Global giants
================== ============= ========== ==========
Johnnie Walker 25 34 35
================== ============= ========== ==========
Guinness 16 32 30
================== ============= ========== ==========
Smirnoff 11 11 11
================== ============= ========== ==========
Baileys 10 9 8
================== ============= ========== ==========
Captain Morgan 3 2 2
================== ============= ========== ==========
Tanqueray 18 20 20
------------------ ------------- ---------- ----------
Local stars
================== ============= ========== ==========
Crown Royal 1 6 8
================== ============= ========== ==========
Shui Jing Fang(3) 16 19 24
================== ============= ========== ==========
McDowell's 5 5 4
================== ============= ========== ==========
Buchanan's 36 39 40
================== ============= ========== ==========
J B 17 22 16
================== ============= ========== ==========
Old Parr 47 59 59
================== ============= ========== ==========
Black & White 7 20 20
================== ============= ========== ==========
Yenì Raki 9 15 14
================== ============= ========== ==========
Windsor 1 (9) (13)
================== ============= ========== ==========
Bundaberg 1 (4) (6)
================== ============= ========== ==========
Ypióca (9) 8 12
------------------ ------------- ---------- ----------
Reserve
================== ============= ========== ==========
Don Julio 24 36 38
================== ============= ========== ==========
Casamigos 83 90 93
================== ============= ========== ==========
Scotch malts 14 17 16
================== ============= ========== ==========
Cîroc vodka 4 6 7
================== ============= ========== ==========
Ketel One(4) 12 12 14
================== ============= ========== ==========
Bulleit 12 16 17
------------------ ------------- ---------- ----------
(1)Brands excluding ready to drink, non-alcoholic variants and
beer except Guinness.
(2)Organic equals reported volume movement.
(3)Growth figures represent total Chinese white spirits of which
Shui Jing Fang is the principal brand.
(4)Ketel One includes Ketel One vodka and Ketel One
Botanical.
Global giants
37% of Diageo's reported net sales and grew by 22%
-- All global giants delivered net sales growth, led by Johnnie
Walker, up 34%, which grew double digits across all regions.
Local stars
19% of Diageo's reported net sales and grew 14%
-- Growth was largely driven by double-digit growth in
Buchanan's in Latin America and Caribbean and North America,
Chinese white spirits in Greater China, Crown Royal in North
America and Old Parr in Latin America and Caribbean.
Reserve
27% of Diageo's reported net sales and grew 31%
-- Growth was largely driven by the strong performance of
Casamigos and Don Julio in US Spirits, Johnnie Walker Reserve
variants in all regions, Chinese white spirits in Greater China and
scotch malts.
Additional financial information
Year ended 30 June 2022
Summary income statement
Acquisitions Fair value
Exchange and disposals Organic remeasurement
2021 (a) (b) movement(1) (d) Hyperinflation(1) 2022
GBP million GBP million GBP million GBP million GBP million GBP million GBP million
-------------- ----------- ----------- -------------- ------------ -------------- ----------------- -----------
Sales 19,153 (838) 38 3,567 - 528 22,448
============== =========== =========== ============== ============ ============== ================= ===========
Excise duties (6,420) 617 (3) (851) - (339) (6,996)
-------------- ----------- ----------- -------------- ------------ -------------- ----------------- -----------
Net sales 12,733 (221) 35 2,716 - 189 15,452
============== =========== =========== ============== ============ ============== ================= ===========
Cost of sales (5,038) 127 (22) (901) (5) (134) (5,973)
-------------- ----------- ----------- -------------- ------------ -------------- ----------------- -----------
Gross profit 7,695 (94) 13 1,815 (5) 55 9,479
============== =========== =========== ============== ============ ============== ================= ===========
Marketing (2,163) 15 (25) (532) 1 (17) (2,721)
============== =========== =========== ============== ============ ============== ================= ===========
Other
operating
items (1,786) 47 (4) (288) 98 (28) (1,961)
-------------- ----------- ----------- -------------- ------------ -------------- ----------------- -----------
Operating
profit
before
exceptional
items 3,746 (32) (16) 995 94 10 4,797
============== =========== =========== ============== ============ ============== ================= ===========
Exceptional
operating
items (c) (15) (388)
-------------- ----------- ----------- -------------- ------------ -------------- ----------------- -----------
Operating
profit 3,731 4,409
============== =========== =========== ============== ============ ============== ================= ===========
Non-operating
items
(c) 14 (17)
============== =========== =========== ============== ============ ============== ================= ===========
Net finance
charges (373) (422)
============== =========== =========== ============== ============ ============== ================= ===========
Share of after
tax
results of
associates
and joint
ventures 334 417
-------------- ----------- ----------- -------------- ------------ -------------- ----------------- -----------
Profit before
taxation 3,706 4,387
============== =========== =========== ============== ============ ============== ================= ===========
Taxation (e) (907) (1,049)
Profit for the
year 2,799 3,338
-------------- ----------- ----------- -------------- ------------ -------------- ----------------- -----------
(1) For the definition of organic movement and hyperinflation
see pages 48-50.
(a) Exchange
The impact of movements in exchange rates on reported figures
for net sales and operating profit was principally in respect of
the translation exchange impact of the strengthening of sterling
against the euro and the Turkish lira, partially offset by
weakening of sterling against the US dollar.
The effect of movements in exchange rates and other movements on
profit before exceptional items and taxation for the year ended 30
June 2022 is set out in the table below.
Gains/(losses)
GBP million
--------------------------------------------- --------------
Translation impact (37)
============================================= ==============
Transaction impact 5
--------------------------------------------- --------------
Operating profit before exceptional items (32)
============================================= ==============
Net finance charges - translation impact 4
============================================= ==============
Net finance charges - transaction impact (3)
--------------------------------------------- --------------
Net finance charges 1
--------------------------------------------- --------------
Associates - translation impact (19)
--------------------------------------------- --------------
Profit before exceptional items and taxation (50)
--------------------------------------------- --------------
Year
ended Year ended
30 June 30 June
2022 2021
--------------------- -------- ----------
Exchange rates
===================== ======== ==========
Translation GBP1 = $1.33 $1.35
===================== ======== ==========
Transaction GBP1 = $1.29 $1.34
===================== ======== ==========
Translation GBP1 = EUR1.18 EUR1.13
===================== ======== ==========
Transaction GBP1 = EUR1.15 EUR1.14
--------------------- -------- ----------
(b) Acquisitions and disposals
The acquisitions and disposals movement was primarily
attributable to the disposal of the Picon brand and Meta Abo
Brewery Share Company (Meta Abo Brewery) in the year ended 30 June
2022 and to the impact of prior year's acquisitions.
See pages 25, 41, 43 and 50-53 for further details.
(c) Exceptional items
Exceptional operating items in the year ended 30 June 2022 were
GBP388 million loss before tax (2021 - GBP15 million).
In the year ended 30 June 2022, an impairment charge of GBP336
million was recognised in exceptional operating items in respect of
the McDowell's No.1 brand (GBP240 million), Bell's brand (GBP77
million) and Smirnov related goodwill (GBP19 million). For further
information see note 12.
In March 2022, a decision was taken to suspend exporting to and
selling in Russia and on 28 June 2022, Diageo decided that it would
wind down its operations in Russia over the following six months.
Losses of GBP50 million directly attributable to the wind down
primarily include provisions for onerous contracts (GBP14 million)
and redundancies (GBP13 million). Total impact of winding down
operations in Russia resulted in a loss of GBP146 million,
including impairment of the Bell's brand (GBP77 million), Smirnov
related goodwill (GBP19 million), and directly attributable
items.
An exceptional charge of $3 million (GBP2 million) (2021 - GBP5
million) was recognised as part of the 'Raising the Bar' programme,
in addition to the commitment of $100 million (GBP81 million)
announced in the year ended 30 June 2020. The additional charge
represents the re-investment of corporate tax benefit in the fund
in certain markets, where a corporate tax deduction is available,
and was recognised as an exceptional operating item, consistent
with the initial commitment. Diageo also provided other forms of
support to help our communities and the industry, which amounted to
GBP8 million in the year ended 30 June 2020.
In the year ended 30 June 2021, an additional provision of GBP15
million was recorded as an exceptional item in respect of ongoing
litigation in Turkey, bringing the provision's balance to GBP23
million following a settlement of GBP1 million during that
year.
On 20 November 2020, the High Court of Justice of England and
Wales issued a ruling that requires pension schemes to equalise
pension benefits for men and women for the calculation of their
guaranteed minimum pension liability (GMP) on historic transfers
out, which resulted in an additional liability of GBP5 million in
the year ended 30 June 2021. The corresponding expense was
recognised as an exceptional operating item consistently with the
charge in relation to the initial GMP ruling.
In the year ended 30 June 2021, an inventory provision of GBP7
million was released in respect of obsolete inventories that had
earlier been expected to be returned and destroyed as a direct
consequence of the Covid-19 pandemic, resulting in an exceptional
gain. The provision release was recognised as an exceptional
operating item consistently with the original charge in the year
ended 30 June 2020.
In the year ended 30 June 2021, an additional gain of $4 million
(GBP3 million) was recognised in exceptional operating items for
excess receipts in respect of substitution drawback claims that had
been filed and were to be filed with the US Government in relation
to prior years. The changes in estimates were recognised as an
exceptional operating item consistently with the initial income of
GBP83 million in the year ended 30 June 2020.
Non-operating items in the year ended 30 June 2022 were GBP17
million loss before tax (2021 - GBP14 million gain).
On 25 April 2022, Diageo completed the sale of its Ethiopian
subsidiary, Meta Abo Brewery Share Company. A loss of GBP95 million
was recognised as a non-operating item attributable to the sale,
including cumulative translation losses in the amount of GBP63
million recycled to the income statement.
On 25 March 2022, Diageo agreed to the sale of its Windsor
business in Korea. At 30 June 2022, assets and liabilities
attributable to Windsor business were classified as held for sale
and were measured at the lower of their cost and fair value less
cost of disposal. In the year ended 30 June 2022, a loss of GBP19
million was recognised as a non-operating item, mainly in relation
to transaction and other costs directly attributable to the
prospective sale of the business. At 30 June 2022, cumulative
translation gains recognised in exchange reserves were GBP141
million which will be recycled to the income statement on
completion of the transaction, in the year ending 30 June 2023.
On 10 May 2022, Diageo sold its Picon brand. The sale resulted
in an exceptional non-operating gain of GBP91 million, net of
disposal costs. Disposal costs relating to the transaction amounted
to GBP9 million.
In the year ended 30 June 2022, ZAR 133 million (GBP6 million)
of deferred consideration was paid to Diageo in respect of the sale
of United National Breweries, the full amount of which represented
a non-operating gain (2021 - a gain of GBP10 million).
Certain subsidiaries of United Spirits Limited (USL) were sold
in the year ended 30 June 2021. The sale of these subsidiaries
resulted in an exceptional gain of GBP3 million.
In the year ended 30 June 2021, the group reversed GBP1 million
from provisions in relation to the sale of a portfolio of 19 brands
to Sazerac on 20 December 2018.
(d) Fair value remeasurement
The adjustment to cost of sales reflects the elimination of fair
value changes for biological assets in respect of growing agave
plants of GBP5 million loss for the year ended 30 June 2022. The
adjustments to marketing and other operating expenses were the
elimination of fair value changes to contingent consideration
liabilities and earn out arrangements in respect of prior year
acquisitions of GBP65 million gain for the year ended 30 June 2022
and GBP34 million loss for the year ended 30 June 2021.
(e) Taxation
The reported tax rate for the year ended 30 June 2022 was 23.9%
compared with 24.5% for the year ended 30 June 2021.
The reported tax charge for the year ended 30 June 2022 included
an exceptional tax credit of GBP31 million, mainly comprising
exceptional tax credits on the impairment of the McDowell's and
Bell's brands of GBP35 million and GBP20 million, respectively,
offset by a GBP23 million exceptional tax charge in respect of the
gain on the sale of the Picon brand and a further GBP3 million tax
charge in respect of winding down operations in Russia.
On 24 May 2021, legislation was substantively enacted in the UK
to increase the corporate tax rate to 25% with effect from 1 April
2023. As a result of the change, an exceptional tax charge of GBP46
million was recognised for the year ended 30 June 2021 in relation
to the remeasurement of deferred tax assets and liabilities. In
addition, there was a one-off charge of GBP48 million to other
comprehensive income and equity, mainly in respect of the
remeasurement of the deferred tax liabilities on post employment
assets.
On 15 December 2020, legislation was substantively enacted in
the Netherlands to maintain the headline corporate tax rate at 25%,
reversing a previously enacted reduction in the corporate tax rate
to 21.7% from 2021. As a result of the change, an exceptional tax
charge of GBP42 million was recognised for the year ended 30 June
2021 in relation to the remeasurement of deferred tax
liabilities.
The tax rate before exceptional items for the year ended 30 June
2022 was 22.5% compared with 22.2% for the year ended 30 June
2021.
We expect the tax rate before exceptional items for the year
ending 30 June 2023 to be in the range of 22%-24%.
(f) Dividend
The group aims to increase the dividend each year. The decision
in respect of the dividend is made with reference to the dividend
cover as well as current performance trends, including sales and
profit after tax together with cash generation. Diageo targets
dividend cover (the ratio of basic earnings per share before
exceptional items to dividend per share) within the range of
1.8-2.2 times. For the year ended 30 June 2022 dividend cover is
2.0 times. The recommended final dividend for the year ended 30
June 2022, to be put to the shareholders for approval at the Annual
General Meeting is 46.82 pence, an increase of 5% on the prior year
final dividend. This brings the full year dividend to 76.18 pence
per share, an increase of 5% on the prior year. The group will keep
future returns of capital, including dividends, under review
through the year ending 30 June 2023 to ensure Diageo's capital is
allocated in the best way to maximise value for the business and
stakeholders.
Subject to approval by shareholders, the final dividend will be
paid to holders of ordinary shares and US ADRs on register as of 26
August 2022. The ex-dividend date both for holders of ordinary
shares and for US ADR holders is 25 August 2022. The final
dividend, once approved by shareholders, will be paid to holders of
ordinary shares on 20 October 2022 and payment to US ADR holders
will be made on 25 October 2022. A dividend reinvestment plan is
available to holders of ordinary shares in respect of the final
dividend and the plan notice date is 23 September 2022.
(g) Return of capital
Diageo's current return of capital programme, initially approved
by the Board on 25 July 2019, seeks to return up to GBP4.5 billion
to shareholders and is expected to be completed by 30 June 2023.
Under the first two phases of the programme, which ended on 31
January 2020 and 11 February 2022 respectively, the company
returned capital to shareholders via share buyback, at a cost,
excluding transaction costs, of GBP2.25 billion. On 21 February
2022, the company announced the third phase of the programme with a
value of up to GBP1.7 billion returned to shareholders, via share
buybacks, to be completed no later than 5 October 2022. At 30 June
2022, GBP1.4 billion had been completed as part of the third phase.
The remaining GBP0.9 billion of the programme is expected to be
completed by 30 June 2023.
In the year ended 30 June 2022, the company purchased 61 million
ordinary shares at a cost of GBP2,284 million (including
transactions costs of GBP16 million). All shares purchased under
the share buyback programme were cancelled. A financial liability
of GBP117 million was established at 30 June 2022, representing the
3.3 million shares that were expected to be purchased by 28 July
2022.
Movements in net borrowings and equity
Movements in net borrowings
2022 2021
GBP million GBP million
------------------------------------------------------- ----------- -----------
Net borrowings at the beginning of the year (12,109) (13,246)
======================================================= =========== ===========
Free cash flow (a) 2,783 3,037
======================================================= =========== ===========
Acquisitions (b) (271) (488)
======================================================= =========== ===========
Sale of businesses and brands 82 14
======================================================= =========== ===========
Share buyback programme (c) (2,284) (109)
Net sale of own shares for share schemes (d) 18 49
======================================================= =========== ===========
Purchase of treasury shares in respect of subsidiaries (15) -
======================================================= =========== ===========
Dividend paid to non-controlling interests (81) (77)
Net movements in bonds (e) 742 (216)
======================================================= =========== ===========
Purchase of shares of non-controlling interests (f) - (42)
======================================================= =========== ===========
Net movements in other borrowings (g) 79 (753)
======================================================= =========== ===========
Equity dividend paid (1,718) (1,646)
------------------------------------------------------- ----------- -----------
Net decrease in cash and cash equivalents (665) (231)
======================================================= =========== ===========
Net (increase)/decrease in bonds and other borrowings (825) 967
======================================================= =========== ===========
Exchange differences (h) (334) 598
======================================================= =========== ===========
Other non-cash items (i) (204) (197)
Net borrowings at the end of the year (14,137) (12,109)
------------------------------------------------------- ----------- -----------
(a) See page 54 for the analysis of free cash flow.
(b) Diageo completed a number of acquisitions in the year ended
30 June 2022, including: (i) on 27 January 2022, the acquisition of
Casa UM, to expand its Reserve portfolio with the premium artisanal
mezcal brand Mezcal Unión, (ii) on 31 March 2022, the acquisition
of 21Seeds, to support Diageo's participation in the super premium
flavoured tequila segment and (iii) on 29 June 2022, the
acquisition of Vivanda, owner of the technology behind 'What's your
Whisky' platform and the Journey of Flavour experience at Johnnie
Walker Princes Street to support Diageo's ambition to provide
customised brand experiences across all channels.
The final earn-out payment in respect of the Casamigos
acquisition amounting to $113 million (GBP83 million) was made on
17 September 2021.
Contingent consideration paid in respect of other prior year
acquisitions is primarily attributable to Aviation Gin and Davos
Brands.
In the year ended 30 June 2021, Diageo completed the acquisition
of Aviation Gin and Davos Brands for a total consideration of $337
million (GBP263 million) in cash and contingent consideration of up
to $275 million (GBP214 million) over a 10-year period linked to
performance targets. Diageo also completed a number of additional
acquisitions for a total consideration of GBP95 million in cash and
contingent consideration of GBP86 million, in each case linked to
performance targets.
(c) See page 24 for details of Diageo's return of capital
programmes.
(d) Net sale of own shares comprised receipts from employees on
the exercise of share options of GBP32 million (2021 - GBP57
million) less purchase of own shares for the future settlement of
obligations under the employee share option schemes of GBP14
million (2021 - GBP8 million).
(e) In the year ended 30 June 2022, the group issued bonds of
EUR1,650 million (GBP1,371 million - net of discount and fee) and
GBP892 million (including GBP8 million discount and fee) and repaid
bonds of EUR900 million (GBP769 million) and $1000 million (GBP752
million).
In the year ended 30 June 2021, the group issued bonds of EUR700
million (GBP636 million - net of discount and fee) and GBP395
million (including GBP5 million discount and fee) and repaid bonds
of $696 million (GBP551 million) and EUR775 million (GBP696
million).
(f) In the year ended 30 June 2021, East African Breweries
Limited, a subsidiary of Diageo, completed the purchase of 30% of
the share capital of Serengeti Breweries Limited for $55 million
(GBP42 million).
(g) In the year ended 30 June 2022, the net movements in other
borrowings principally arose from cash movement of foreign currency
swaps and forwards partially offset by the repayment of lease
liabilities.
In the year ended 30 June 2021, the net movements in other
borrowings principally arose from cash movement of foreign currency
swaps and forwards.
(h) In the year ended 30 June 2022, exchange losses arising on
net borrowings of GBP334 million were primarily driven by adverse
exchange movements on US dollar denominated borrowings, partially
offset by favourable movement on euro denominated borrowings, cash
and cash equivalents, foreign currency swaps and forwards.
In the year ended 30 June 2021, exchange gains arising on net
borrowings of GBP598 million were primarily driven by favourable
exchange movements on US dollar and euro denominated borrowings,
partially offset by an adverse movement on cash and cash
equivalents, foreign currency swaps and forwards.
(i) In the year ended 30 June 2022, other non-cash items were
principally in respect of additional leases entered into during the
year.
In the year ended 30 June 2021, other non-cash items are
principally in respect of fair value losses of cross currency
interest rate swaps and interest rate swaps partially offset by the
fair value gains of borrowings.
Movements in equity
2022 2021
GBP million GBP million
--------------------------------------------------------------- ----------- -----------
Equity at the beginning of the year 8,431 8,440
=============================================================== =========== -----------
Adjustment to 2021 closing equity in respect of hyperinflation
in Turkey (a) 251 -
--------------------------------------------------------------- ----------- -----------
Adjusted equity at the beginning of the year 8,682 8,440
=============================================================== =========== ===========
Profit for the year 3,338 2,799
=============================================================== =========== ===========
Exchange adjustments (b) 799 (836)
=============================================================== =========== ===========
Remeasurement of post employment plans net of taxation 497 (27)
=============================================================== =========== ===========
Purchase of shares of non-controlling interests (c) - (42)
=============================================================== =========== ===========
Hyperinflation adjustments net of taxation (a) 291 (12)
Associates' transactions with non-controlling interest - (91)
=============================================================== =========== ===========
Dividend to non-controlling interests (72) (72)
=============================================================== =========== ===========
Equity dividend paid (1,718) (1,646)
=============================================================== =========== ===========
Share buyback programme (d) (2,310) (200)
=============================================================== =========== ===========
Other reserve movements 7 118
--------------------------------------------------------------- ----------- -----------
Equity at the end of the year 9,514 8,431
--------------------------------------------------------------- ----------- -----------
(a) See page 37-38 for details of hyperinflation adjustment.
(b) Exchange movements in the year ended 30 June 2022 primarily
arose from exchange gains driven by the US dollar and the Indian
rupee partially offset by the Turkish lira. Exchange movements in
the year ended 30 June 2021 primarily arose from exchange losses
driven by the Indian rupee, the US dollar and the Turkish lira.
(c) In the year ended 30 June 2021, East African Breweries
Limited completed the purchase of 30% of the share capital of
Serengeti Breweries Limited for $55 million (GBP42 million).
(d) See page 24 for details of Diageo's return of capital
programmes.
Post employment benefit plans
The net surplus of the group's post employment benefit plans
increased by GBP707 million from GBP444 million at 30 June 2021 to
GBP1,151 million at 30 June 2022. The increase in net surplus was
predominantly attributable to the favourable change in the discount
rate assumptions in the United Kingdom and Ireland due to the
increase in returns from 'AA' rated corporate bonds used to
calculate the discount rates on the liabilities of the post
employment plans (UK from 1.9% to 3.8%; Ireland from 1.0% to 3.2%)
that was partially offset by the unfavourable actual change in the
market value of assets held by the post employment benefit plans in
the United Kingdom and Ireland, and the change in inflation rate
assumptions in the United Kingdom and Ireland (UK from 3.0% to
3.1%; Ireland from 1.6% to 2.4%).
The operating profit charge before exceptional items decreased
by GBP48 million from GBP87 million for the year ended 30 June 2021
to GBP39 million for the year ended 30 June 2022. The operating
profit for the year ended 30 June 2022 includes settlement gains of
GBP27 million in respect of the Enhanced Transfer Values exercise
carried out in the Guinness Ireland Group Pension Scheme (GIGPS)
and the Grand Metropolitan Pension Fund, and past service gain of
GBP28 million as a result of the changes in the benefits of the
GIGPS.
Total cash contributions by the group to all post employment
benefit plans in the year ending 30 June 2023 are estimated to be
approximately GBP70 million.
Condensed consolidated income statement
Year Year
ended ended
30 June 30 June
2022 2021
Notes GBP million GBP million
Sales 2 22,448 19,153
=================================================== ===== ============== ================
Excise duties (6,996) (6,420)
--------------------------------------------------- ----- -------------- ----------------
Net sales 2 15,452 12,733
=================================================== ===== ============== ================
Cost of sales (5,973) (5,038)
--------------------------------------------------- ----- -------------- ----------------
Gross profit 9,479 7,695
=================================================== ===== ============== ================
Marketing (2,721) (2,163)
=================================================== ===== ============== ================
Other operating items (2,349) (1,801)
--------------------------------------------------- ----- -------------- ----------------
Operating profit 2 4,409 3,731
=================================================== ===== ============== ================
Non-operating items 3 (17) 14
=================================================== ===== ============== ================
Finance income 4 497 278
=================================================== ===== ============== ================
Finance charges 4 (919) (651)
=================================================== ===== ============== ================
Share of after tax results of associates and joint
ventures 417 334
--------------------------------------------------- ----- -------------- ----------------
Profit before taxation 4,387 3,706
=================================================== ===== ============== ================
Taxation 5 (1,049) (907)
Profit for the year 3,338 2,799
--------------------------------------------------- ----- -------------- ----------------
Attributable to:
=================================================== ===== ============== ================
Equity shareholders of the parent company 3,249 2,660
Non-controlling interests 89 139
--------------------------------------------------- ----- -------------- ----------------
3,338 2,799
--------------------------------------------------- ----- -------------- ----------------
Weighted average number of shares million million
--------------------------------------------------- ----- -------------- ----------------
Shares in issue excluding own shares 2,318 2,337
=================================================== ===== ============== ================
Dilutive potential ordinary shares 7 8
--------------------------------------------------- ----- -------------- ----------------
2,325 2,345
--------------------------------------------------- ----- -------------- ----------------
pence pence
--------------------------------------------------- ----- -------------- ----------------
Basic earnings per share 140.2 113.8
Diluted earnings per share 139.7 113.4
Condensed consolidated statement of comprehensive income
Year ended Year ended
30 June 30 June
2022 2021
GBP million GBP million
-------------------------------------------------------------- ----------- -----------
Other comprehensive income
============================================================== =========== ===========
Items that will not be recycled subsequently to the income
statement
============================================================== =========== ===========
Net remeasurement of post employment benefit plans
============================================================== =========== ===========
Group 616 16
============================================================== =========== ===========
Associates and joint ventures 5 3
============================================================== =========== ===========
Non-controlling interests (1) -
============================================================== =========== ===========
Tax on post employment benefit plans (123) (46)
============================================================== =========== ===========
Changes in the fair value of equity investments at fair
value through other comprehensive income (12) -
-------------------------------------------------------------- ----------- -----------
485 (27)
============================================================== =========== ===========
Items that may be recycled subsequently to the income
statement
============================================================== =========== ===========
Exchange differences on translation of foreign operations
============================================================== =========== ===========
Group 1,128 (1,233)
============================================================== =========== ===========
Associates and joint ventures 60 (240)
============================================================== =========== ===========
Non-controlling interests 171 (173)
============================================================== =========== ===========
Net investment hedges (623) 810
============================================================== =========== ===========
Exchange loss recycled to the income statement
============================================================== =========== ===========
On disposal of foreign operations 63 -
Tax on exchange differences - group (6) (9)
============================================================== =========== ===========
Tax on exchange differences - non-controlling interests - (1)
============================================================== =========== ===========
Effective portion of changes in fair value of cash flow
hedges
============================================================== =========== ===========
Hedge of foreign currency debt of the group 233 (298)
============================================================== =========== ===========
Transaction exposure hedging of the group (172) 101
============================================================== =========== ===========
Hedges by associates and joint ventures (15) (1)
============================================================== =========== ===========
Commodity price risk hedging of the group 78 41
============================================================== =========== ===========
Recycled to income statement - hedge of foreign currency
debt of the group (239) 175
============================================================== =========== ===========
Recycled to income statement - transaction exposure hedging
of the group 42 10
============================================================== =========== ===========
Recycled to income statement - commodity price risk hedging
of the group (46) (2)
============================================================== =========== ===========
Tax on effective portion of changes in fair value of cash
flow hedges 32 (6)
============================================================== =========== ===========
Hyperinflation adjustments 365 (17)
============================================================== =========== ===========
Tax on hyperinflation adjustments (74) 5
-------------------------------------------------------------- ----------- -----------
997 (838)
-------------------------------------------------------------- ----------- -----------
Other comprehensive income/(loss), net of tax, for the
year 1,482 (865)
============================================================== =========== ===========
Profit for the year 3,338 2,799
-------------------------------------------------------------- ----------- -----------
Total comprehensive income for the year 4,820 1,934
-------------------------------------------------------------- ----------- -----------
Attributable to:
============================================================== =========== ===========
Equity shareholders of the parent company 4,561 1,969
Non-controlling interests 259 (35)
-------------------------------------------------------------- ----------- -----------
Total comprehensive income for the year 4,820 1,934
-------------------------------------------------------------- ----------- -----------
Condensed consolidated balance sheet
30 June 2022 30 June 2021
------------------------ ------------------------
Notes GBP million GBP million GBP million GBP million
------------------------------------------- ----- ----------- ----------- ----------- -----------
Non-current assets
------------------------------------------- ----- ----------- ----------- ----------- -----------
Intangible assets 12 11,902 10,764
------------------------------------------- ----- ----------- ----------- ----------- -----------
Property, plant and equipment 5,848 4,849
------------------------------------------- ----- ----------- ----------- ----------- -----------
Biological assets 94 66
------------------------------------------- ----- ----------- ----------- ----------- -----------
Investments in associates and joint
ventures 3,652 3,308
------------------------------------------- ----- ----------- ----------- ----------- -----------
Other investments 37 40
------------------------------------------- ----- ----------- ----------- ----------- -----------
Other receivables 37 36
------------------------------------------- ----- ----------- ----------- ----------- -----------
Other financial assets 345 327
------------------------------------------- ----- ----------- ----------- ----------- -----------
Deferred tax assets 114 100
------------------------------------------- ----- ----------- ----------- ----------- -----------
Post employment benefit assets 1,553 1,018
------------------------------------------- ----- ----------- ----------- ----------- -----------
23,582 20,508
------------------------------------------- ----- ----------- ----------- ----------- -----------
Current assets
------------------------------------------- ----- ----------- ----------- ----------- -----------
Inventories 6 7,094 6,045
------------------------------------------- ----- ----------- ----------- ----------- -----------
Trade and other receivables 2,933 2,385
------------------------------------------- ----- ----------- ----------- ----------- -----------
Assets held for sale 14 222 -
------------------------------------------- ----- ----------- ----------- ----------- -----------
Corporate tax receivables 5 149 145
------------------------------------------- ----- ----------- ----------- ----------- -----------
Other financial assets 251 121
------------------------------------------- ----- ----------- ----------- ----------- -----------
Cash and cash equivalents 7 2,285 2,749
------------------------------------------- ----- ----------- ----------- ----------- -----------
12,934 11,445
------------------------------------------- ----- ----------- ----------- ----------- -----------
Total assets 36,516 31,953
------------------------------------------- ----- ----------- ----------- ----------- -----------
Current liabilities
------------------------------------------- ----- ----------- ----------- ----------- -----------
Borrowings and bank overdrafts 7 (1,522) (1,862)
------------------------------------------- ----- ----------- ----------- ----------- -----------
Other financial liabilities (444) (257)
------------------------------------------- ----- ----------- ----------- ----------- -----------
Share buyback liability (117) (91)
------------------------------------------- ----- ----------- ----------- ----------- -----------
Trade and other payables (5,887) (4,648)
------------------------------------------- ----- ----------- ----------- ----------- -----------
Liabilities held for sale 14 (61) -
------------------------------------------- ----- ----------- ----------- ----------- -----------
Corporate tax payables 5 (252) (146)
------------------------------------------- ----- ----------- ----------- ----------- -----------
Provisions (159) (138)
------------------------------------------- ----- ----------- ----------- ----------- -----------
(8,442) (7,142)
------------------------------------------- ----- ----------- ----------- ----------- -----------
Non-current liabilities
------------------------------------------- ----- ----------- ----------- ----------- -----------
Borrowings 7 (14,498) (12,865)
------------------------------------------- ----- ----------- ----------- ----------- -----------
Other financial liabilities (703) (384)
------------------------------------------- ----- ----------- ----------- ----------- -----------
Other payables (380) (338)
------------------------------------------- ----- ----------- ----------- ----------- -----------
Provisions (258) (274)
------------------------------------------- ----- ----------- ----------- ----------- -----------
Deferred tax liabilities (2,319) (1,945)
------------------------------------------- ----- ----------- ----------- ----------- -----------
Post employment benefit liabilities (402) (574)
------------------------------------------- ----- ----------- ----------- ----------- -----------
(18,560) (16,380)
------------------------------------------- ----- ----------- ----------- ----------- -----------
Total liabilities (27,002) (23,522)
------------------------------------------- ----- ----------- ----------- ----------- -----------
Net assets 9,514 8,431
------------------------------------------- ----- ----------- ----------- ----------- -----------
Equity
------------------------------------------- ----- ----------- ----------- ----------- -----------
Share capital 723 741
------------------------------------------- ----- ----------- ----------- ----------- -----------
Share premium 1,351 1,351
------------------------------------------- ----- ----------- ----------- ----------- -----------
Other reserves 2,174 1,621
------------------------------------------- ----- ----------- ----------- ----------- -----------
Retained earnings 3,550 3,184
------------------------------------------- ----- ----------- ----------- ----------- -----------
Equity attributable to equity shareholders
of the parent company 7,798 6,897
------------------------------------------- ----- ----------- ----------- ----------- -----------
Non-controlling interests 1,716 1,534
------------------------------------------- ----- ----------- ----------- ----------- -----------
Total equity 9,514 8,431
------------------------------------------- ----- ----------- ----------- ----------- -----------
Condensed consolidated statement of changes in equity
Retained earnings/(deficit)
-----------------------------
Equity
attributable
Other to parent
Share Share Other Own retained company Non-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 2020 742 1,351 2,272 (1,936) 4,343 2,407 6,772 1,668 8,440
================ ======== ======== ======== ========= ======== ======== ============ =============== ========
Profit for the
year - - - - 2,660 2,660 2,660 139 2,799
================ ======== ======== ======== ========= ======== ======== ============ =============== ========
Other
comprehensive
loss - - (652) - (39) (39) (691) (174) (865)
================ ======== ======== ======== ========= ======== ======== ============ =============== ========
Total
comprehensive
(loss)/income
for the year - - (652) - 2,621 2,621 1,969 (35) 1,934
================ ======== ======== ======== ========= ======== ======== ============ =============== ========
Employee share
schemes - - - 59 (10) 49 49 - 49
================ ======== ======== ======== ========= ======== ======== ============ =============== ========
Share-based
incentive plans - - - - 49 49 49 - 49
================ ======== ======== ======== ========= ======== ======== ============ =============== ========
Share-based
incentive plans
in respect of
associates - - - - 3 3 3 - 3
================ ======== ======== ======== ========= ======== ======== ============ =============== ========
Tax on
share-based
incentive
plans - - - - 9 9 9 - 9
Purchase of
non-controlling
interests - - - - (15) (15) (15) (27) (42)
Associates'
transactions
with
non-controlling
interests - - - - (91) (91) (91) - (91)
================ ======== ======== ======== ========= ======== ======== ============ =============== ========
Change in fair
value of
put option - - - - (2) (2) (2) - (2)
================ ======== ======== ======== ========= ======== ======== ============ =============== ========
Share buyback
programme (1) - 1 - (200) (200) (200) - (200)
================ ======== ======== ======== ========= ======== ======== ============ =============== ========
Dividend
declared for
the
year - - - - (1,646) (1,646) (1,646) (72) (1,718)
---------------- -------- -------- -------- --------- -------- -------- ------------ --------------- --------
At 30 June 2021 741 1,351 1,621 (1,877) 5,061 3,184 6,897 1,534 8,431
================ ======== ======== ======== ========= ======== ======== ============ =============== ========
Adjustment to
2021 closing
equity in
respect of
hyperinflation
in Turkey - - - - 251 251 251 - 251
---------------- -------- -------- -------- --------- -------- -------- ------------ --------------- --------
Adjusted opening
balance 741 1,351 1,621 (1,877) 5,312 3,435 7,148 1,534 8,682
================ ======== ======== ======== ========= ======== ======== ============ =============== ========
Profit for the
year - - - - 3,249 3,249 3,249 89 3,338
================ ======== ======== ======== ========= ======== ======== ============ =============== ========
Other
comprehensive
income - - 535 - 777 777 1,312 170 1,482
================ ======== ======== ======== ========= ======== ======== ============ =============== ========
Total
comprehensive
income
for the year - - 535 - 4,026 4,026 4,561 259 4,820
Employee share
schemes - - - 39 50 89 89 - 89
================ ======== ======== ======== ========= ======== ======== ============ =============== ========
Share-based
incentive plans - - - - 59 59 59 - 59
================ ======== ======== ======== ========= ======== ======== ============ =============== ========
Share-based
incentive plans
in respect of
associates - - - - 4 4 4 - 4
================ ======== ======== ======== ========= ======== ======== ============ =============== ========
Tax on
share-based
incentive
plans - - - - 9 9 9 - 9
================ ======== ======== ======== ========= ======== ======== ============ =============== ========
Share based
payments and
purchase of own
shares in
respect of
subsidiaries - - - - (11) (11) (11) (6) (17)
Unclaimed
dividend - - - - 3 3 3 1 4
================ -------- -------- -------- --------- -------- -------- ------------ --------------- --------
Change in fair
value of
put option - - - - (34) (34) (34) - (34)
================ ======== ======== ======== ========= ======== ======== ============ =============== ========
Share buyback
programme (18) - 18 - (2,310) (2,310) (2,310) - (2,310)
================ ======== ======== ======== ========= ======== ======== ============ =============== ========
Dividend
declared for
the
year - - - - (1,720) (1,720) (1,720) (72) (1,792)
---------------- -------- -------- -------- --------- -------- -------- ------------ --------------- --------
At 30 June 2022 723 1,351 2,174 (1,838) 5,388 3,550 7,798 1,716 9,514
---------------- -------- -------- -------- --------- -------- -------- ------------ --------------- --------
Condensed consolidated statement of cash flows
Year ended Year ended
30 June 2022 30 June 2021
------------------------- --------------------------
GBP million GBP million GBP million GBP million
------------------------------------------------ ------------ ----------- ------------ ------------
Cash flows from operating activities
================================================ ============ =========== ============ ============
Profit for the year 3,338 2,799
Taxation 1,049 907
================================================ ============ =========== ============ ============
Share of after tax results of associates
and joint ventures (417) (334)
================================================ ============ =========== ============ ============
Net finance charges 422 373
================================================ ============ =========== ============ ============
Non-operating items 17 (14)
------------------------------------------------ ------------ ----------- ------------ ------------
Operating profit 4,409 3,731
================================================ ============ =========== ============ ============
Increase in inventories (740) (443)
================================================ ============ =========== ============ ============
Increase in trade and other receivables (378) (446)
================================================ ============ =========== ============ ============
Increase in trade and other payables and
provisions 939 1,220
------------------------------------------------ ------------ ----------- ------------ ------------
Net (increase)/decrease in working capital (179) 331
================================================ ============ =========== ============ ============
Depreciation, amortisation and impairment 828 447
================================================ ============ =========== ============ ============
Dividends received 190 290
================================================ ============ =========== ============ ============
Post employment payments less amounts included
in operating profit (89) (30)
================================================ ============ =========== ============ ============
Other items 53 88
------------------------------------------------ ------------ ----------- ------------ ------------
982 795
------------------------------------------------ ------------ ----------- ------------ ------------
Cash generated from operations 5,212 4,857
================================================ ============ =========== ============ ============
Interest received 110 89
================================================ ============ =========== ============ ============
Interest paid (438) (440)
================================================ ============ =========== ============ ============
Taxation paid (949) (852)
------------------------------------------------ ------------ ----------- ------------ ------------
(1,277) (1,203)
------------------------------------------------ ------------ ----------- ------------ ------------
Net cash inflow from operating activities 3,935 3,654
================================================ ============ =========== ============ ============
Cash flows from investing activities
================================================ ============ =========== ============ ============
Disposal of property, plant and equipment
and computer software 17 13
================================================ ============ =========== ============ ============
Purchase of property, plant and equipment
and computer software (1,097) (626)
================================================ ============ =========== ============ ============
Movements in loans and other investments (72) (4)
================================================ ============ =========== ============ ============
Sale of businesses and brands 82 14
================================================ ============ =========== ============ ============
Acquisition of businesses (271) (488)
------------------------------------------------ ------------ ----------- ------------ ------------
Net cash outflow from investing activities (1,341) (1,091)
================================================ ============ =========== ============ ============
Cash flows from financing activities
================================================ ============ =========== ============ ============
Share buyback programme (2,284) (109)
Net sale of own shares for share schemes 18 49
================================================ ============ =========== ============ ============
Purchase of treasury shares in respect of
subsidiaries (15) -
================================================ ============ =========== ============ ============
Dividends paid to non-controlling interests (81) (77)
Proceeds from bonds 2,263 1,031
================================================ ============ =========== ============ ============
Repayment of bonds (1,521) (1,247)
================================================ ============ =========== ============ ============
Purchase of shares of non-controlling interests - (42)
================================================ ============ =========== ============ ============
Cash inflow from other borrowings(1) 503 34
================================================ ============ =========== ============ ============
Cash outflow from other borrowings(1) (424) (787)
================================================ ============ =========== ============ ============
Equity dividends paid (1,718) (1,646)
------------------------------------------------ ------------ ----------- ------------ ------------
Net cash outflow from financing activities (3,259) (2,794)
------------------------------------------------ ------------ ----------- ------------ ------------
Net decrease in net cash and cash equivalents (665) (231)
================================================ ============ =========== ============ ============
Exchange differences 239 (285)
================================================ ============ =========== ============ ============
Net cash and cash equivalents at beginning
of the year 2,637 3,153
------------------------------------------------ ------------ ----------- ------------ ------------
Net cash and cash equivalents at end of
the year 2,211 2,637
------------------------------------------------ ------------ ----------- ------------ ------------
Net cash and cash equivalents consist of:
================================================ ============ =========== ============ ============
Cash and cash equivalents 2,285 2,749
================================================ ============ =========== ============ ============
Bank overdrafts (74) (112)
------------------------------------------------ ------------ ----------- ------------ ------------
2,211 2,637
------------------------------------------------ ------------ ----------- ------------ ------------
(1) For the year ended 30 June 2021, the previously reported
line item of "Net movements in other borrowings" has been replaced
with "Cash inflow from other borrowings" and "Cash outflow from
other borrowings" to gross up the amounts shown above within these
lines which had previously been shown net.
Notes
1. Basis of preparation
On 31 December 2020, International Financial Reporting Standards
(IFRSs) as adopted by the European Union (EU) at that date were
brought into UK law and became UK-adopted International Accounting
Standards, with future changes being subject to endorsement by the
UK Endorsement Board. Diageo plc transitioned to UK-adopted
International Accounting Standards in its consolidated financial
statements on 1 July 2021. This change constitutes a change in
accounting framework. However, there is no impact on recognition,
measurement or disclosure in the period reported as a result of the
change in framework.
The consolidated financial statements are prepared in accordance
with international accounting standards in conformity with the
requirements of the Companies Act 2006 and International Financial
Reporting Standards adopted by the UK, IFRSs as adopted by the EU
and IFRSs, as issued by the IASB, including interpretations issued
by the IFRS Interpretations Committee. IFRS as adopted by the UK
and by the EU differs in certain respects from IFRS as issued by
the IASB. The differences have no impact on the group's
consolidated financial statements for the years presented. The
consolidated financial statements are prepared on a going concern
basis under the historical cost convention, unless stated
otherwise. In preparing these condensed consolidated 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
2021, with the exception of changes in estimates disclosed in note
15 Contingent liabilities and legal proceedings.
Going concern
Management has prepared cash flow forecasts which have also been
sensitised to reflect severe but plausible downside scenarios
taking into consideration the group's principal risks. In the base
case scenario, management has included assumptions for mid-single
digit net sales growth, operating margin improvement and global TBA
market share growth. In light of the ongoing geopolitical
volatility, the base case outlook and plausible downside scenarios
have incorporated considerations for a slower post-pandemic
economic recovery, supply chain disruptions, higher inflation and
further geopolitical deterioration. Even under these scenarios, the
group's cash position is still expected to remain strong, as the
group's liquidity was protected by issuing EUR1,650 million of
fixed rate euro and GBP900 million of fixed rate sterling
denominated bonds in the year ended 30 June 2022. Mitigating
actions, should they be required, are all within management's
control and could include reductions in discretionary spending such
as acquisitions and capital expenditure, as well as a temporary
suspension of the share buyback programme and dividend payments in
the next 12 months, or drawdowns on committed facilities. Having
considered the outcome of these assessments, the Directors are
comfortable that the company is a going concern for at least 12
months from the date of signing the group's condensed consolidated
financial statements.
Weighted average exchange rates used in the translation of
income statements were US dollar - GBP1 = $1.33 (2021 - GBP1 =
$1.35) and euro - GBP1 = EUR1.18 (2021 - GBP1 = EUR1.13). Exchange
rates used to translate assets and liabilities at the balance sheet
date were US dollar - GBP1 = $1.21 (30 June 2021 - GBP1 = $1.39)
and euro - GBP1 = EUR1.16 (30 June 2021 - GBP1 = EUR1.17). The
group uses foreign exchange transaction hedges to mitigate the
effect of exchange rate movements.
New accounting standards and interpretations
The following amendment to the accounting standards, issued by
the IASB and endorsed by the UK and EU, has been adopted by the
group from 1 July 2021 with no impact on the group's consolidated
results, financial position or disclosures:
- Amendments to IFRS 16 - Covid-19-related rent concessions beyond 30 June 2021.
The following amendment issued by the IASB and endorsed by the
UK and EU, has been adopted by the group:
- Amendments to IFRS 9, IAS 39 and IFRS 7 - Interest rate
benchmark reform (phase 2). The amendment to IFRS 9 provides relief
from applying specific hedge accounting and financial instrument
derecognition requirements directly affected by interbank offered
rate (IBOR) reform. By applying the practical expedient, Diageo is
not required to discontinue its hedging relationships as a result
of changes in reference rates due to IBOR reform. The amendment to
IFRS 7 requires additional disclosure explaining the nature and
extent of risk related to the reform and the progress of the
transition. The adoption of Phase 2 Amendments in respect of
disclosures and other accounting matters relating to Interest Rate
Benchmark Reform had no material impact on the group's consolidated
results or financial position and not resulted in any change to its
risk management strategy.
The following standard issued by the IASB has been endorsed by
the UK and EU and has not been adopted by the group:
- IFRS 17 - Insurance contracts (effective from the year ending
30 June 2024) is ultimately intended to replace IFRS 4. Based on a
preliminary assessment, the group believes that the adoption of
IFRS 17 will not have a significant impact on its consolidated
results or financial position.
There are a number of other amendments and clarifications to
IFRSs, effective in future years, which are not expected to
significantly impact the group's consolidated results or financial
position.
The comparative figures for the financial year ended 30 June
2021 are not the company's statutory accounts (within the meaning
of section 435 of the Companies Act 2006) for that financial year.
Those statutory accounts have been reported on by the company's
auditor, PricewaterhouseCoopers LLP, and delivered to the Registrar
of Companies. The report of the auditor (i) was unqualified, (ii)
did not include a reference to any matters to which the auditor
drew attention by way of emphasis without qualifying their report
and (iii) did not contain a statement under section 498 (2) or (3)
of the Companies Act 2006.
The financial information for the year ended 30 June 2022 set
out in this document does not constitute the company's statutory
accounts for that financial year, but is derived from those
accounts. Those statutory accounts have been reported on by the
company's auditor, PricewaterhouseCoopers LLP, and will be
delivered to the Registrar of Companies in due course. The report
of the auditor (i) was unqualified, (ii) did not include a
reference to any matters to which the auditor drew attention by way
of emphasis without qualifying their report and (iii) did not
contain a statement under section 498 (2) or (3) of the Companies
Act 2006.
2. Segmental information
The segmental information presented is consistent with
management reporting provided to the Executive Committee (the chief
operating decision maker).
The Executive Committee considers the business principally from
a geographical perspective based on the location of third-party
sales and the business analysis is presented by geographical
segment. In addition to these geographical selling segments, a
further segment reviewed by the Executive Committee is the Supply
Chain and Procurement (SC&P) segment, which manufactures
products for other group companies and includes production sites in
the United Kingdom, Ireland, Italy, Guatemala and Mexico, as well
as comprises the global procurement function.
The group's operations also include the Corporate segment.
Corporate revenues and costs are in respect of central costs,
including finance, marketing, corporate relations, human resources
and legal, as well as certain information systems, facilities and
employee costs that are not allocable to the geographical segments
or to the SC&P. They also include rents receivable and payable
in respect of properties not used by the group in the manufacture,
sale or distribution of premium drinks.
Diageo uses shared services operations to deliver transaction
processing activities for markets and operational entities. These
centres are located in India, Hungary, Colombia and the
Philippines. These captive business service centres also perform
certain central finance activities, including elements of financial
planning and reporting, treasury and HR services. The costs of
shared services operations are recharged to the regions.
For planning and management reporting purposes, Diageo uses
budgeted exchange rates that are set at the prior year's weighted
average exchange rate. In order to ensure a consistent basis on
which performance is measured through the year, prior period
results are also restated to the budgeted exchange rate. Segmental
information for net sales and operating profit before exceptional
items are reported on a consistent basis with management reporting.
The adjustments required to retranslate the segmental information
to actual exchange rates and to reconcile it to the group's
reported results are shown in the tables below. The comparative
segmental information, prior to retranslation, has not been
restated at the current year's budgeted exchange rates but is
presented at the budgeted rates for the respective year.
In addition, for management reporting purposes, Diageo presents
the result of acquisitions and disposals completed in the current
and prior year separately from the results of the geographical
segments. The impact of acquisitions and disposals on net sales and
operating profit is disclosed under the appropriate geographical
segments in the tables below at budgeted exchange rates.
(a) Segmental information for the consolidated income
statement
Latin Eliminate
America inter- Total Corporate
North Asia and segment operating and
America Europe Pacific Africa Caribbean SC&P sales segments other Total
Year ended 30 GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP
June 2022 million million million million million million million million million million
---------------- ------- ------- -------- -------- --------- -------- --------- --------- --------- --------
Sales 6,682 5,740 5,624 2,403 1,945 2,010 (2,010) 22,394 54 22,448
---------------- ------- ------- -------- -------- --------- -------- --------- --------- --------- --------
Net sales
================ ======= ======= ======== ======== ========= ======== ========= ========= ========= ========
At budgeted
exchange
rates(1) 5,955 3,258 2,879 1,699 1,486 2,095 (2,016) 15,356 55 15,411
================ ======= ======= ======== ======== ========= ======== ========= ========= ========= ========
Acquisitions and
disposals 34 23 - 15 3 - - 75 - 75
================ ======= ======= ======== ======== ========= ======== ========= ========= ========= ========
SC&P allocation 9 46 9 3 12 (79) - - - -
================ ======= ======= ======== ======== ========= ======== ========= ========= ========= ========
Retranslation to
actual
exchange rates 97 (304) (4) (35) 24 (6) 6 (222) (1) (223)
================ ======= ======= ======== ======== ========= ======== ========= ========= ========= ========
Hyperinflation - 189 - - - - - 189 - 189
---------------- ------- ------- -------- -------- --------- -------- --------- --------- --------- --------
Net sales 6,095 3,212 2,884 1,682 1,525 2,010 (2,010) 15,398 54 15,452
---------------- ------- ------- -------- -------- --------- -------- --------- --------- --------- --------
Operating
profit/(loss)
================ ======= ======= ======== ======== ========= ======== ========= ========= ========= ========
At budgeted
exchange
rates(1) 2,388 1,086 703 346 528 (22) - 5,029 (256) 4,773
================ ======= ======= ======== ======== ========= ======== ========= ========= ========= ========
Acquisitions and
disposals (28) 11 - (10) - - - (27) - (27)
================ ======= ======= ======== ======== ========= ======== ========= ========= ========= ========
SC&P allocation (1) (18) (2) (1) - 22 - - - -
================ ======= ======= ======== ======== ========= ======== ========= ========= ========= ========
Fair value
remeasurement
of contingent
considerations,
equity option
and earn
out
arrangements 32 36 - - (3) - - 65 - 65
================ ======= ======= ======== ======== ========= ======== ========= ========= ========= ========
Fair value
remeasurement
of biological
assets - - - - (5) - - (5) - (5)
================ ======= ======= ======== ======== ========= ======== ========= ========= ========= ========
Retranslation to
actual
exchange rates 63 (108) 10 (20) 18 - - (37) 18 (19)
================ ======= ======= ======== ======== ========= ======== ========= ========= ========= ========
Hyperinflation - 10 - - - - - 10 - 10
---------------- ------- ------- -------- -------- --------- -------- --------- --------- --------- --------
Operating
profit/(loss)
before
exceptional
items 2,454 1,017 711 315 538 - - 5,035 (238) 4,797
================ ======= ======= ======== ======== ========= ======== ========= ========= ========= ========
Exceptional
items (1) (146) (241) - - - - (388) - (388)
---------------- ------- ------- -------- -------- --------- -------- --------- --------- --------- --------
Operating
profit/(loss) 2,453 871 470 315 538 - - 4,647 (238) 4,409
---------------- ------- ------- -------- -------- --------- -------- --------- --------- --------- --------
Non-operating
items (17)
================ ======= ======= ======== ======== ========= ======== ========= ========= ========= ========
Net finance
charges (422)
================ ======= ======= ======== ======== ========= ======== ========= ========= ========= ========
Share of after
tax results
of associates
and joint
ventures 417
---------------- ------- ------- -------- -------- --------- -------- --------- --------- --------- --------
Profit before
taxation 4,387
---------------- ------- ------- -------- -------- --------- -------- --------- --------- --------- --------
Latin Eliminate
America inter- Total Corporate
North Asia and segment operating and
America Europe Pacific Africa Caribbean SC&P sales segments other Total
Year ended 30 GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP
June 2021 million million million million million million million million million million
---------------- ------- ------- -------- -------- --------- -------- --------- --------- --------- --------
Sales 5,803 4,795 5,146 2,020 1,369 1,537 (1,537) 19,133 20 19,153
---------------- ------- ------- -------- -------- --------- -------- --------- --------- --------- --------
Net sales
================ ======= ======= ======== ======== ========= ======== ========= ========= ========= ========
At budgeted
exchange
rates(1) 5,527 2,579 2,561 1,541 1,176 1,627 (1,548) 13,463 20 13,483
================ ======= ======= ======== ======== ========= ======== ========= ========= ========= ========
Acquisitions and
disposals 28 2 - 5 - - - 35 - 35
================ ======= ======= ======== ======== ========= ======== ========= ========= ========= ========
SC&P allocation 9 45 9 3 13 (79) - - - -
================ ======= ======= ======== ======== ========= ======== ========= ========= ========= ========
Retranslation to
actual
exchange rates (355) (68) (82) (137) (143) (11) 11 (785) - (785)
---------------- ------- ------- -------- -------- --------- -------- --------- --------- --------- --------
Net sales 5,209 2,558 2,488 1,412 1,046 1,537 (1,537) 12,713 20 12,733
---------------- ------- ------- -------- -------- --------- -------- --------- --------- --------- --------
Operating
profit/(loss)
================ ======= ======= ======== ======== ========= ======== ========= ========= ========= ========
At budgeted
exchange
rates(1) 2,469 728 628 228 422 (97) - 4,378 (218) 4,160
================ ======= ======= ======== ======== ========= ======== ========= ========= ========= ========
Acquisitions and
disposals (18) (3) - - - - - (21) - (21)
================ ======= ======= ======== ======== ========= ======== ========= ========= ========= ========
SC&P allocation (30) (32) (5) (3) (27) 97 - - - -
================ ======= ======= ======== ======== ========= ======== ========= ========= ========= ========
Fair value
remeasurement
of contingent
considerations,
equity option
and earn
out
arrangements (9) (27) - - - - - (36) - (36)
Retranslation to
actual
exchange rates (175) (31) (15) (54) (92) - - (367) 10 (357)
---------------- ------- ------- -------- -------- --------- -------- --------- --------- --------- --------
Operating
profit/(loss)
before
exceptional
items 2,237 635 608 171 303 - - 3,954 (208) 3,746
================ ======= ======= ======== ======== ========= ======== ========= ========= ========= ========
Exceptional
items - (15) - - - - - (15) - (15)
---------------- ------- ------- -------- -------- --------- -------- --------- --------- --------- --------
Operating
profit/(loss) 2,237 620 608 171 303 - - 3,939 (208) 3,731
---------------- ------- ------- -------- -------- --------- -------- --------- --------- --------- --------
Non-operating
items 14
================ ======= ======= ======== ======== ========= ======== ========= ========= ========= ========
Net finance
charges (373)
================ ======= ======= ======== ======== ========= ======== ========= ========= ========= ========
Share of after
tax results
of associates
and joint
ventures 334
---------------- ------- ------- -------- -------- --------- -------- --------- --------- --------- --------
Profit before
taxation 3,706
---------------- ------- ------- -------- -------- --------- -------- --------- --------- --------- --------
(1)These items represent the IFRS 8 performance measures for the
geographical and SC&P segments.
(i)The net sales figures for SC&P reported to the Executive
Committee primarily comprise inter-segment sales and these are
eliminated in a separate column in the above segmental analysis.
Apart from sales by the SC&P segment to the geographical
segments, inter-segment sales are not material.
(ii)Approximately 37% of annual net sales occurred in the last
four months of calendar year 2021.
(b) Category and geographical analysis
Category analysis Geographical analysis
--------- ----------------------------------------------- ----------------------------------------------------------
Ready Rest
Year to United Great Nether- of
ended Spirits Beer drink Other Total States India Britain lands world Total
30 June GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP
2022 million million million million million million million million million million million
--------- -------- -------- ------- -------- -------- -------- -------- -------- -------- -------- --------
Sales(1) 18,164 3,128 882 274 22,448 6,327 3,219 2,142 89 10,671 22,448
--------- -------- -------- ------- -------- -------- -------- -------- -------- -------- -------- --------
Year
ended
30 June
2021
--------- -------- -------- ------- -------- -------- -------- -------- -------- -------- -------- --------
Sales(1) 15,634 2,562 741 216 19,153 5,441 3,011 1,822 70 8,809 19,153
--------- -------- -------- ------- -------- -------- -------- -------- -------- -------- -------- --------
(1)The geographical analysis of sales is based on the location
of third-party sales.
3. Exceptional items
Exceptional items are those that in management's judgement need
to be disclosed separately. See page 49 for the definition of
exceptional items and the criteria used to determine whether an
exceptional item is accounted for as operating or
non-operating.
Year ended Year ended
30 June 30 June
2022 2021
GBP million GBP million
------------------------------------------------------ ----------- -----------
Exceptional operating items
------------------------------------------------------ ----------- -----------
Brand, goodwill, tangible and other assets impairment (336) -
====================================================== =========== ===========
Winding down Russian operations (50) -
====================================================== =========== ===========
Donations (2) (5)
====================================================== =========== ===========
Ongoing litigation in Turkey - (15)
====================================================== =========== ===========
Guaranteed minimum pension equalisation - (5)
====================================================== =========== ===========
Obsolete inventories - 7
====================================================== =========== ===========
Substitution drawback - 3
(388) (15)
====================================================== =========== ===========
Non-operating items
====================================================== =========== ===========
Sale of businesses and brands
====================================================== =========== ===========
Meta Abo Brewery (95) -
====================================================== =========== ===========
Windsor business (19) -
====================================================== =========== ===========
Picon brand 91 -
====================================================== =========== ===========
United National Breweries 6 10
====================================================== =========== ===========
USL businesses - 3
====================================================== =========== ===========
Portfolio of 19 brands - 1
(17) 14
====================================================== =========== ===========
Exceptional items before taxation (405) (1)
====================================================== =========== ===========
Items included in taxation
====================================================== =========== ===========
Tax on exceptional operating items 54 4
====================================================== =========== ===========
Tax on exceptional non-operating items (23) -
====================================================== =========== ===========
Exceptional taxation - (88)
------------------------------------------------------ ----------- -----------
31 (84)
====================================================== =========== ===========
Total exceptional items (374) (85)
------------------------------------------------------ ----------- -----------
Attributable to:
====================================================== =========== ===========
Equity shareholders of the parent company (271) (86)
====================================================== =========== ===========
Non-controlling interests (103) 1
------------------------------------------------------ ----------- -----------
Total exceptional items (374) (85)
------------------------------------------------------ ----------- -----------
Operating exceptional items are charged to other operating
expenses.
See page 23 for detailed explanation on exceptional items.
4. Finance income and charges
Year ended Year ended
30 June 30 June
2022 2021
GBP million GBP million
Interest income 127 119
========================================================== =========== ===========
Fair value gain on financial instruments 341 124
---------------------------------------------------------- ----------- -----------
Total interest income 468 243
========================================================== =========== ===========
Interest charge on bank loans, bonds and overdrafts (371) (365)
========================================================== =========== ===========
Interest charge on leases (12) (16)
========================================================== =========== ===========
Fair value loss on financial instruments (346) (126)
========================================================== =========== ===========
Interest charge on other borrowings (92) (84)
---------------------------------------------------------- ----------- -----------
Total interest charges (821) (591)
---------------------------------------------------------- ----------- -----------
Net interest charges (353) (348)
---------------------------------------------------------- ----------- -----------
Net finance income in respect of post employment plans
in surplus 22 18
Hyperinflation adjustment in respect of Venezuela (a) 1 2
========================================================== =========== ===========
Interest income in respect of direct and indirect tax 2 15
========================================================== =========== ===========
Unwinding of discounts 4 -
Total other finance income 29 35
========================================================== =========== ===========
Foreign exchange revaluation of monetary items in respect
of Lebanon (a) (3) (8)
========================================================== =========== ===========
Net finance charge in respect of post employment plans
in deficit (12) (13)
========================================================== =========== ===========
Unwinding of discounts (11) (20)
========================================================== =========== ===========
Interest charge in respect of direct and indirect tax (16) (11)
========================================================== =========== ===========
Change in financial liability (Level 3) (20) (7)
Hyperinflation adjustment in respect of Turkey (a) (34) -
========================================================== =========== ===========
Guarantee fees (1) (1)
========================================================== =========== ===========
Other finance charges (1) -
---------------------------------------------------------- ----------- -----------
Total other finance charges (98) (60)
---------------------------------------------------------- ----------- -----------
Net other finance charges (69) (25)
---------------------------------------------------------- ----------- -----------
(a) Hyperinflation adjustment
The group applied hyperinflationary accounting for its
operations in Turkey, Venezuela and Lebanon.
In March 2022, the three-year cumulative inflation in Turkey
exceeded 100% and as a result, hyperinflationary accounting was
applied for the year ended 30 June 2022 in respect of the group's
operations in Turkey. The group's consolidated financial statements
include the results and financial position of its Turkish
operations restated to the measuring unit current at the end of the
period, with hyperinflationary gains and losses in respect of
monetary items being reported in finance charges. Comparative
amounts presented in the consolidated financial statements were not
restated. Hyperinflationary accounting needs to be applied as if
Turkey has always been a hyperinflationary economy, hence, as per
Diageo's accounting policy choice, the differences between equity
at 30 June 2021 as reported and the equity after the restatement of
the non-monetary items to the measuring unit current at 30 June
2021 were recognised in retained earnings. Such restatement
includes impairment of TRL 2,133 million (GBP177 million)
recognised on the goodwill in the Turkey cash-generating unit and
TRL 1,627 million (GBP135 million) in respect of the Yenì Raki
brand, as a result of the increased carrying values for those due
to hyperinflation adjustments. When applying IAS 29 on an ongoing
basis, comparatives in stable currency are not restated and the
effect of inflating opening balances to the measuring unit current
at the end of the reporting period is presented in other
comprehensive income. The inflation rate used by the group is the
official rate published by the Turkish Statistical Institute,
TurkStat. The movement in the publicly available official price
index for the year ended 30 June 2022 was 79% (2021 - 18%).
Venezuela is a hyperinflationary economy where the government
maintains a regime of strict currency controls with multiple
foreign currency rate systems. The exchange rate used to translate
the results of the group's Venezuelan operations was VES/GBP 759
for the year ended 30 June 2022 (2021 - VES/GBP 237). These rates
reflect management's estimate of the exchange rate considering
inflation and the most appropriate official exchange rate. Movement
in the price index for the year ended 30 June 2022 was 268% (2021 -
1,991%). The inflation rate used by the group is provided by an
independent valuer because no reliable, officially published rate
is available for Venezuela.
The following table presents the contribution of the group's
Venezuelan operations to the consolidated income statement, cash
flow statement and net assets for the year ended 30 June 2022 and
30 June 2021 and with the amounts that would have resulted if the
official reference exchange rate had been applied:
Year ended 30 June Year ended 30 June
2022 2021
------------------------- -------------------------
At official At official
At estimated reference At estimated reference
exchange exchange exchange exchange
rate rate rate(1) rate(1)
759 VES/GBP 7 VES/GBP 237 VES/GBP 4 VES/GBP
GBP million GBP million GBP million GBP million
----------------------------------------- ------------ ----------- ------------ -----------
Net sales - 15 - 4
========================================= ============ =========== ============ ===========
Operating (loss)/profit (1) (1) (1) 11
========================================= ============ =========== ============ ===========
Other finance income - hyperinflation
adjustment 1 157 2 122
========================================= ============ =========== ============ ===========
Net cash (outflow)/inflow from operating
activities - (5) - 9
========================================= ============ =========== ============ ===========
Net assets 41 4,606 38 2,016
----------------------------------------- ------------ ----------- ------------ -----------
(1)Prior year rates have been restated to reflect the Central
Bank of Venezuela's decision to cut six zeros from the bolivar
currency from 1 October 2021.
Sterling amounts presented at the official reference exchange
rate are results of simple mathematical conversion.
The impact of hyperinflationary accounting for Lebanon was
immaterial both in the current and comparative periods.
5. Taxation
For the year ended 30 June 2022, the GBP1,049 million tax charge
(2021 - GBP907 million) comprises a UK tax charge of GBP186 million
(2021 - GBP168 million) and a foreign tax charge of GBP863 million
(2021 - GBP739 million).
The group has a number of ongoing tax audits worldwide for which
provisions are recognised in line with the relevant accounting
standard taking into account best estimates and management's
judgements concerning the ultimate outcome of the tax audit. For
the year ended 30 June 2022, the ongoing audits that are provided
for individually are not expected to result in a material tax
liability. The current tax asset of GBP149 million (30 June 2021 -
GBP145 million) and tax liability of GBP252 million (30 June 2021 -
GBP146 million) include GBP156 million (30 June 2021 - GBP129
million) of provisions for tax uncertainties.
On 20 December 2021, the OECD released a framework for Pillar
Two Model Rules which will introduce a global minimum corporate tax
rate of 15% applicable to multinational enterprise groups with
global revenue over EUR750 million. In addition, on 20 July 2022,
HM Treasury released draft UK legislation that would commence for
accounting periods starting on or after 31 December 2023 (i.e. year
ending 30 June 2025 for Diageo). Diageo is reviewing this draft
legislation and monitoring the status of implementation outside of
the UK to understand the potential impact on the group.
The tax rate before exceptional items for the year ended 30 June
2022 was 22.5% compared with 22.2% for the year ended 30 June
2021.
6. Inventories
30 June 30 June
2022 2021
GBP million GBP million
Raw materials and consumables 489 348
==================================== =========== ===========
Work in progress 86 60
==================================== =========== ===========
Maturing inventories 5,229 4,668
==================================== =========== ===========
Finished goods and goods for resale 1,290 969
------------------------------------ ----------- -----------
7,094 6,045
------------------------------------ ----------- -----------
7. Net borrowings
30 June 30 June
2022 2021
GBP million GBP million
Borrowings due within one year and bank overdrafts (1,522) (1,862)
=================================================== =========== ===========
Borrowings due after one year (14,498) (12,865)
=================================================== =========== ===========
Fair value of foreign currency forwards and swaps 356 169
=================================================== =========== ===========
Fair value of interest rate hedging instruments (283) 63
=================================================== =========== ===========
Lease liabilities (475) (363)
--------------------------------------------------- ----------- -----------
(16,422) (14,858)
=================================================== =========== ===========
Cash and cash equivalents 2,285 2,749
--------------------------------------------------- ----------- -----------
(14,137) (12,109)
--------------------------------------------------- ----------- -----------
8. Reconciliation of movement in net borrowings
Year ended Year ended
30 June 30 June
2022 2021
GBP million GBP million
Net decrease in cash and cash equivalents before exchange (665) (231)
---------------------------------------------------------- ----------- -----------
Net (increase)/decrease in bonds and other borrowings(1) (825) 967
---------------------------------------------------------- ----------- -----------
Net (increase)/decrease in net borrowings from cash flows (1,490) 736
---------------------------------------------------------- ----------- -----------
Exchange differences on net borrowings (334) 598
Other non-cash items(2) (204) (197)
Net borrowings at beginning of the year (12,109) (13,246)
---------------------------------------------------------- ----------- -----------
Net borrowings at end of the year (14,137) (12,109)
---------------------------------------------------------- ----------- -----------
(1)In the year ended 30 June 2022, net increase in bonds and
other borrowings excludes GBP4 million cash outflow in respect of
derivatives designated in forward point hedges (2021 - GBP2
million).
(2)In the year ended 30 June 2022, other non-cash items were
principally in respect of additional leases entered into during the
period. In the year ended 30 June 2021, other non-cash items are
principally in respect of fair value changes of cross currency
interest rate swaps and interest rate swaps, partially offset by
the fair value changes of borrowings.
In the year ended 30 June 2022, the group issued bonds of
EUR1,650 million (GBP1,371 million, net of discount and fee) and
GBP892 million (including GBP8 million discount and fee) and repaid
bonds of EUR900 million (GBP769 million) and $1000 million (GBP752
million). In the year ended 30 June 2021, the group issued bonds of
EUR700 million (GBP636 million, net of discount and fee) and GBP395
million (including GBP5 million discount and fee) and repaid bonds
of $696 million (GBP551 million) and EUR775 million (GBP696
million).
All bonds and commercial papers issued by Diageo plc's 100%
owned subsidiaries are fully and unconditionally guaranteed by
Diageo plc.
9. Financial instruments
Fair value measurements of financial instruments are presented
through the use of a three-level fair value hierarchy that
prioritises the valuation techniques used in fair value
calculations.
The group maintains policies and procedures to value instruments
using the most relevant data available. If multiple inputs that
fall into different levels of the hierarchy are used in the
valuation of an instrument, the instrument is categorised on the
basis of the most subjective input.
Foreign currency forwards and swaps, cross currency swaps and
interest rate swaps are valued using discounted cash flow
techniques. These techniques incorporate inputs at levels 1 and 2,
such as foreign exchange rates and interest rates. These market
inputs are used in the discounted cash flow calculation
incorporating the instrument's term, notional amount and discount
rate, and taking credit risk into account. As significant inputs to
the valuation are observable in active markets, these instruments
are categorised as level 2 in the hierarchy.
Other financial liabilities include a put option, which does not
have an expiry date, held by Industrias Licoreras de Guatemala
(ILG) to sell the remaining 50% equity stake in Rum Creation &
Products Inc., the owner of the Zacapa rum brand, to Diageo. The
liability is fair valued and as at 30 June 2022 an amount of GBP216
million (30 June 2021 - GBP149 million) is recognised as a
liability with changes in the fair value of the put option included
in retained earnings. As the valuation of this option uses
assumptions not observable in the market, it is categorised as
level 3 in the hierarchy. As at 30 June 2022, because it is unknown
when or if ILG will exercise the option, the liability is measured
as if the exercise date is on the last day of the next financial
year considering forecast future performance. The option is
sensitive to reasonably possible changes in assumptions. If the
option were to be exercised as at 30 June 2024, the fair value of
the liability would increase by approximately GBP69 million.
Included in other financial liabilities, the contingent
consideration on acquisition of businesses represents the present
value of payments up to GBP381 million linked to certain
performance targets which are expected to be paid over the next
eight years.
There were no significant changes in the measurement and
valuation techniques, or significant transfers between the levels
of the financial assets and liabilities in the year ended 30 June
2022.
The group's financial assets and liabilities measured at fair
value are categorised as follows:
30 June 30 June
2022 2021
GBP million GBP million
-------------------------------------------------------- ----------- -----------
Derivative assets 480 443
-------------------------------------------------------- ----------- -----------
Derivative liabilities (456) (129)
-------------------------------------------------------- ----------- -----------
Valuation techniques based on observable market input
(Level 2) 24 314
-------------------------------------------------------- ----------- -----------
Financial assets - other 184 138
-------------------------------------------------------- ----------- -----------
Financial liabilities - other (587) (578)
-------------------------------------------------------- ----------- -----------
Valuation techniques based on unobservable market input
(Level 3) (403) (440)
-------------------------------------------------------- ----------- -----------
In the years ended 30 June 2022 and 30 June 2021, the increase
in financial assets - other of GBP46 million (2021 - GBP22 million)
is principally in respect of acquisitions.
The movements in level 3 instruments, measured on a recurring
basis, are as follows:
Contingent Contingent
consideration consideration
Zacapa recognised Zacapa recognised
financial on acquisition financial on acquisition
liability of businesses(1) liability of businesses(1)
Year ended Year ended Year ended Year ended
30 June 30 June 30 June 30 June
2022 2022 2021 2021
GBP million GBP million GBP million GBP million
------------------------------------------ ----------- ----------------- ----------- -----------------
At the beginning of the year (149) (429) (167) (249)
========================================== =========== ================= =========== =================
Net (losses)/gains included in the income
statement (20) 62 (7) (47)
========================================== =========== ================= =========== =================
Net (losses)/gains included in exchange
in other comprehensive income (26) (39) 21 31
========================================== =========== ================= =========== =================
Net losses included in retained earnings (34) - (2) -
========================================== =========== ================= =========== =================
Acquisitions - (70) - (253)
========================================== =========== ================= =========== =================
Settlement of liabilities 13 105 6 89
------------------------------------------ ----------- ----------------- ----------- -----------------
At the end of the year (216) (371) (149) (429)
------------------------------------------ ----------- ----------------- ----------- -----------------
(1)Included in the balance at 30 June 2022 is GBP157 million in
respect of the acquisition of Aviation Gin and Davos Brands (2021 -
GBP177 million), GBP59 million in respect of the acquisition of
21Seeds, GBP57 million in respect of the acquisition of Lone River
Ranch Water (2021 - GBP49 million) and GBPnil in respect of the
acquisition of Casamigos as it was fully repaid on 17 September
2021 (2021-- GBP80 million).
The carrying amount of the group's financial assets and
liabilities is generally the same as their fair value apart from
borrowings. At 30 June 2022, the fair value of gross borrowings
(excluding lease liabilities and the fair value of derivative
instruments) was GBP15,628 million, and the carrying value was
GBP16,020 million (30 June 2021 - GBP15,895 million and GBP14,727
million, respectively).
10. Dividends and other reserves
Year
ended Year ended
30 June 30 June
2022 2021
GBP million GBP million
----------------------------------------------------------- ----------- -----------
Amounts recognised as distributions to equity shareholders
----------------------------------------------------------- ----------- -----------
Final dividend for the year ended 30 June 2021 of 44.59
pence per share (2020 - 42.47 pence) 1,040 992
=========================================================== =========== ===========
Interim dividend for the year ended of 30 June 2022 of
29.36 pence per share (2021 - 27.96 pence) 680 654
----------------------------------------------------------- ----------- -----------
1,720 1,646
----------------------------------------------------------- ----------- -----------
A final dividend of 46.82 pence per share was recommended by the
Board of Directors on 27 July 2022 for approval by shareholders at
the Annual General Meeting scheduled to be held on 6 October 2022
bringing the full year dividend to 76.18 pence per share for the
year ended 30 June 2022. As the approval will be after the balance
sheet date, the final dividend has not been included as a
liability.
Other reserves of GBP2,174 million at 30 June 2022 (2021 -
GBP1,621 million) include a capital redemption reserve of GBP3,220
million (2021 - GBP3,202 million), a hedging reserve surplus of
GBP26 million (2021 - GBP113 million) and an exchange reserve
deficit of GBP1,072 million (2021 - GBP1,694 million). Currency
basis spreads included in the hedging reserve represent the cost of
hedging arising as a result of imperfections of foreign exchange
markets. Exclusion of currency basis spreads would result in a
GBP22 million (2021 - GBP22 million) credit to hedging reserve.
11. Acquisition of businesses
Fair value of assets and liabilities acquired and cash
consideration paid in respect of acquisition of subsidiaries in the
year ended 30 June 2022 were as follows:
Total
GBP million
Brands and other intangibles 120
Inventories 6
======================================== ===========
Other working capital 3
======================================== ===========
Deferred tax (31)
======================================== ===========
Cash 1
---------------------------------------- -----------
Fair value of assets and liabilities 99
======================================== ===========
Goodwill arising on acquisition 70
Settlement of pre-existing relationship (1)
======================================== ===========
Step acquisitions (6)
---------------------------------------- -----------
Consideration payable 162
---------------------------------------- -----------
Satisfied by:
======================================== ===========
Cash consideration paid (88)
======================================== ===========
Contingent consideration payable (70)
======================================== ===========
Deferred consideration payable (4)
---------------------------------------- -----------
(162)
---------------------------------------- -----------
Cash consideration paid in respect of the acquisition of
businesses and purchase of shares of non-controlling interests in
the three years ended 30 June 2022 were as follows:
Consideration
GBP million
------------------------------------------------ -------------
Acquisitions in the year - subsidiaries
================================================ =============
Cash consideration paid (88)
================================================ =============
Prior year acquisitions - subsidiaries
================================================ =============
Contingent consideration paid for Casamigos (83)
================================================ =============
Other consideration (36)
================================================ =============
Investments in associates
================================================ =============
Cash consideration paid (4)
================================================ =============
Capital injection (61)
================================================ =============
Cash acquired 1
------------------------------------------------ -------------
Net cash outflow on acquisition of businesses (271)
================================================ =============
Purchase of shares of non-controlling interests -
------------------------------------------------ -------------
Total net cash outflow (271)
------------------------------------------------ -------------
Diageo completed a number of acquisitions in the year ended 30
June 2022, including: (i) on 27 January 2022, the acquisition of
Casa UM, to expand its Reserve portfolio with the premium artisanal
mezcal brand, Mezcal Unión, (ii) on 31 March 2022, the acquisition
of 21Seeds, to support Diageo's participation in the super premium
flavoured tequila segment and (iii) on 29 June 2022, the
acquisition of Vivanda, owner of the technology behind 'What's your
Whisky' platform and the Journey of Flavour experience at Johnnie
Walker Princes Street to support Diageo's ambition to provide
customised brand experiences across all channels. The fair values
of assets and liabilities acquired in respect of 21Seeds are
provisional and will be finalised in the year ending 30 June
2023.
The final earn-out payment of Casamigos amounting to $113
million (GBP83 million) was made on 17 September 2021.
Contingent consideration paid in respect of other prior year
acquisitions is primarily attributable to Aviation Gin and Davos
Brands.
12. Intangible assets
Following the announcement by USL of the sale and franchise
agreements for selected Popular brands on 27 May 2022, the
cash-generating unit structure of the USL brands has been revised,
in order to reflect the strategic changes in the management and
operation of USL's portfolio of the remaining brands. As a result,
the former Popular brands category has been abandoned and the
impairment reviews have been performed on an individual brand basis
for the year ended 30 June 2022.
Value in use calculation and fair value less costs of disposal
methodologies were both considered to assess the recoverable amount
of the McDowell's No.1 cash-generating unit. The value in use that
was calculated exceeded the fair value less costs of disposal. As a
result of the impairment review, an impairment charge of GBP240
million for the year ended 30 June 2022 was recognised in
exceptional operating items in respect of the McDowell's No.1
brand. The charge was a result of higher discount rate reflecting
the adverse inflationary and macroeconomic environment and of a
reduction in forecast cash flow assumptions of McDowell's No.1
Popular segment, which is reflective of USL's stated position on
participation in the popular segment and aligned with the recently
announced sale and franchising of the majority of the portfolio of
Popular brands. The brand impairment reduced the deferred tax
liability by GBP35 million. The recoverable amount of the
McDowell's No.1 cash generating unit is GBP892 million.
Value in use calculation and fair value less costs of disposal
methodologies were both considered to assess the recoverable amount
of the Bell's cash-generating unit. The value in use that was
calculated exceeded the fair value less costs of disposal. As a
result of the impairment review, an impairment charge of GBP77
million for the year ended 30 June 2022 was recognised in
exceptional operating items in respect of the Bell's brand.
Forecast cash flow assumptions were reduced principally due to the
wind down of the Russian operations, as well as the increase in
discount rates due to the inflationary and higher macroeconomic
risk environment in the world. The brand impairment reduced the
deferred tax liability by GBP20 million. The recoverable amount of
the Bell's cash-generating unit is GBP145 million.
In March 2022, a decision was taken to suspend exporting to and
selling in Russia and on 28 June 2022, Diageo decided that it would
wind down its operations in Russia over the following six months.
As a result, an impairment charge of GBP19 million for the year
ended 30 June 2022 in respect of the Smirnov goodwill was
recognised in exceptional operating items.
The Turkish economy became hyperinflationary for the year ended
30 June 2022, resulting in the recognition of hyperinflation
adjustments on the Turkey cash-generating unit for the opening
balances at 1 July 2021 and for the year-end balances at 30 June
2022. During the impairment review of the Turkey cash-generating
unit, including goodwill and the Yenì Raki brand, value in use
calculation and fair value less costs of disposal methodologies
were both considered to assess the recoverable amount. The value in
use that was calculated exceeded the fair value less costs of
disposal. As a result of the impairment reviews, an impairment
charge of TRY 3,760 million (GBP312 million) on the opening
carrying amount of the Turkey cash-generating unit was recognised
in retained earnings. From this impairment charge, TRY 1,627
million (GBP135 million) was directly attributable to the Yenì Raki
brand and the remaining TRY 2,133 million (GBP177 million)
impairment charge was recognised on the Turkey goodwill.
Impairment testing for the year ended 30 June 2022 has
identified the following cash-generating units as being sensitive
to reasonably possible changes in assumptions. The table below
shows the headroom at 30 June 2022 and the impairment charge that
would be required if the assumptions in the calculation of their
value in use were changed:
Decrease
in annual Further
Increase Decrease growth rate Decrease Decrease devaluation
in discount in terminal in forecast in cash in future of local
rate growth rate period 2023-2029 flows volume forecast currency
----------- -------- -------- ---------------------- ---------------------- ---------------------- ---------------------- ---------------------- -----------------------
Carrying
value Potential Potential Potential Potential Potential Potential
of impairment impairment impairment impairment impairment impairment
CGU Headroom Reasonably charge Reasonably charge Reasonably charge Reasonably charge Reasonably charge Reasonably charge
GBP GBP possible GBP possible GBP possible GBP possible GBP possible GBP possible GBP
million million change million change million change million change million change million change million
McDowell's
No.1 892 - 1ppt (92) n/a n/a 2ppt (121) n/a n/a n/a n/a n/a n/a
=========== ======== ======== ========== ========== ========== ========== ========== ========== ========== ========== ========== ========== ========== ===========
Bell's 145 - 3ppt (27) 1ppt (9) n/a n/a 10% (15) n/a n/a n/a n/a
=========== ======== ======== ========== ========== ========== ========== ========== ========== ========== ========== ========== ========== ========== ===========
Yenì
Raki 346 44 7ppt (95) n/a n/a n/a n/a n/a n/a 4% (20) n/a n/a
=========== ======== ======== ========== ========== ========== ========== ========== ========== ========== ========== ========== ========== ========== ===========
Turkey 688 14 7ppt (249) 1ppt (13) n/a n/a 10% (88) 1% (124) 66% (69)
----------- -------- -------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- ---------- -----------
13. Sale of businesses and brands
Cash consideration received and net assets disposed of in
respect of sale of businesses and brands in the year ended 30 June
2022 were as follows:
Total
GBP million
Sale consideration
======================================================= ===========
Cash received 106
======================================================= ===========
Overdraft disposed of 2
======================================================= ===========
Transaction and other directly attributable costs paid (26)
------------------------------------------------------- -----------
Net cash received 82
------------------------------------------------------- -----------
Transaction costs payable (16)
------------------------------------------------------- -----------
66
------------------------------------------------------- -----------
Net assets disposed of
======================================================= ===========
Goodwill (14)
======================================================= ===========
Property, plant and equipment (11)
======================================================= ===========
Inventories (4)
======================================================= ===========
Other working capital 15
======================================================= ===========
Other borrowings 1
======================================================= ===========
Corporation tax (5)
======================================================= ===========
Deferred tax (2)
------------------------------------------------------- -----------
(20)
Exchange recycled from other comprehensive income (63)
------------------------------------------------------- -----------
Loss on disposal before taxation (17)
======================================================= ===========
Taxation (23)
------------------------------------------------------- -----------
Loss on disposal after taxation (40)
------------------------------------------------------- -----------
On 25 April 2022, Diageo sold its Ethiopian subsidiary, Meta Abo
Brewery Share Company. A loss of GBP95 million was recognised as a
non-operating item attributable to the sale, including cumulative
translation losses in the amount of GBP63 million recycled to the
income statement.
On 10 May 2022, Diageo completed the sale of the Picon brand for
an upfront consideration of EUR117 million (GBP100 million). The
gain of GBP91 million, net of disposal cost, was recognised as a
non-operating item in the income statement.
In the year ended 30 June 2022, ZAR 133 million (GBP6 million)
(2021 - GBP10 million) of deferred consideration was paid to Diageo
in respect of the sale of United National Breweries. The disposal
was completed on 1 April 2020 for an aggregate consideration of ZAR
600 million (GBP27 million) from which ZAR 378 million (GBP17
million) was deferred.
14. Assets and liabilities held for sale
Windsor USL Popular
business brands 2022
GBP million GBP million GBP million
------------------------------ ------------ ------------ ------------
Intangible assets 145 20 165
============================== ============ ============ ============
Property, plant and equipment 3 9 12
============================== ============ ============ ============
Other investments 1 - 1
============================== ============ ============ ============
Inventories 6 15 21
============================== ============ ============ ============
Trade and other receivables 1 22 23
Assets held for sale 156 66 222
------------------------------ ------------ ------------ ------------
Trade and other payables (5) (13) (18)
============================== ============ ============ ============
Corporation tax (6) - (6)
============================== ============ ============ ============
Deferred tax (28) (7) (35)
============================== ============ ============ ============
Leases (2) - (2)
------------------------------ ------------ ------------ ------------
Liabilities held for sale (41) (20) (61)
------------------------------ ------------ ------------ ------------
Total 115 46 161
------------------------------ ------------ ------------ ------------
Diageo signed a share purchase agreement on 25 March 2022 with
Bayside/Metis Private Equity Consortium to dispose of the Windsor
business in Korea. The sale is considered to be highly probable and
it is anticipated to complete in the year ending 30 June 2023.
Following the strategic review of its selected Popular brands,
on 27 May 2022, United Spirits Limited reached agreement with
Inbrew Beverages Pvt Limited for the sale of 32 brands, including
Old Tavern and White Mischief. The sale covers the related
contracts, permits, intellectual property rights, associated
employees, working capital and a manufacturing facility. The
transaction is highly probable to be completed in the year ending
30 June 2023.
It is unlikely that any significant change would take place to
the plan to sell these asset groups, hence the impacted assets and
liabilities were classified as held for sale at 30 June 2022.
Assets and liabilities were measured at their cost as the lower of
cost and fair value less cost of disposal.
15. Contingent liabilities and legal proceedings
(a) Guarantees and related matters
As of 30 June 2022, the group has no material unprovided
guarantees or indemnities in respect of liabilities of third
parties.
(b) Acquisition of USL shares from UBHL and related proceedings
in relation to the USL transaction
On 4 July 2013, Diageo completed its acquisition, under a share
purchase agreement with United Breweries (Holdings) Limited (UBHL)
and various other sellers (the SPA), of shares representing 14.98%
in USL, including shares representing 6.98% from UBHL. The SPA was
signed on 9 November 2012 as part of the transaction announced by
Diageo in relation to USL on that day (the Original USL
Transaction). Following a series of further transactions, as of 30
June 2022, Diageo has a 55.94% investment in USL (excluding 2.38%
owned by the USL Benefit Trust).
Prior to the acquisition from UBHL on 4 July 2013, the High
Court of Karnataka (High Court) had granted leave to UBHL under the
Indian Companies Act 1956 (the Leave Order) to enable the sale by
UBHL to Diageo to take place (the UBHL Share Sale) notwithstanding
the continued existence of certain winding-up petitions that were
pending against UBHL on the date of the SPA. At the time of the
completion of the UBHL Share Sale, the Leave Order remained subject
to review on appeal. However, as stated by Diageo at the time of
closing, it was considered unlikely that any appeal process in
respect of the Leave Order would definitively conclude on a timely
basis and, accordingly, Diageo waived the conditionality under the
SPA relating to the absence of insolvency proceedings in relation
to UBHL and acquired the 6.98% stake in USL from UBHL at that
time.
Following appeal and counter-appeal in respect of the Leave
Order, this matter is now before the Supreme Court of India which
has issued an order that the status quo be maintained with regard
to the UBHL Share Sale pending a hearing on the matter before it.
Following a number of adjournments, the next date for a substantive
hearing is yet to be fixed.
In separate proceedings, the High Court passed a winding-up
order against UBHL on 7 February 2017, and appeals filed by UBHL
against that order have since been dismissed, initially by a
division bench of the High Court and subsequently by the Supreme
Court of India.
Diageo continues to believe that the acquisition price of INR
1,440 per share paid to UBHL for the USL shares is fair and
reasonable as regards UBHL, UBHL's shareholders and UBHL's secured
and unsecured creditors. However, adverse results for Diageo in the
proceedings referred to above could, absent leave or relief in
other proceedings, ultimately result in Diageo losing title to the
6.98% stake in USL acquired from UBHL. Diageo believes , including
by reason of its rights under USL's articles of association to
nominate USL's CEO and CFO and the right to appoint, through USL, a
majority of the directors on the boards of USL's subsidiaries as
well as its ability as promoter to nominate for appointment up to
two-thirds of USL's directors for so long as the chairperson of USL
is an independent director , that it would remain in control of USL
and would continue to be able to consolidate USL as a subsidiary
for accounting purposes regardless of the outcome of this
litigation.
There can be no certainty as to the outcome of the existing or
any further related legal proceedings or the time frame within
which they would be concluded.
(c) Continuing matters relating to Dr Vijay Mallya and
affiliates
On 25 February 2016, Diageo and USL each announced that they had
entered into arrangements with Dr Mallya under which he had agreed
to resign from his position as a director and as chairman of USL
and from his positions in USL's subsidiaries.
Diageo's agreement with Dr Mallya (the February 2016 Agreement)
provided for a payment of $75 million (GBP62 million) to Dr Mallya
over a five-year period of which $40 million (GBP33 million) was
paid on signing of the February 2016 Agreement with the balance
being payable in equal instalments of $7 million (GBP6 million) a
year over five years (2017-2021). All payments were subject to and
conditional on Dr Mallya's compliance with the agreement. The
February 2016 Agreement also provided for the release of Dr
Mallya's personal obligations to indemnify Diageo Holdings
Netherlands B.V. (DHN) in respect of its earlier liability ($141
million (GBP117 million)) under a backstop guarantee of certain
borrowings of Watson Limited (Watson) (a company affiliated with Dr
Mallya).
On account of various breaches and other provisions of
agreements between Dr Mallya and persons connected with him and
Diageo and/or USL, Diageo did not make the five instalment payments
due during the five-year period between 2017 and 2021. In addition,
Diageo has also demanded that Dr Mallya repay the $40 million
(GBP33 million) paid by Diageo in February 2016 and sought
compensation for various losses incurred by the relevant members of
the Diageo group.
On 16 November 2017, Diageo and other relevant members of the
Diageo group commenced claims in the High Court of Justice in
England and Wales (the English High Court) against Dr Mallya in
relation to these matters. At the same time DHN also commenced
claims in the English High Court against Dr Mallya, his son
Sidhartha Mallya, Watson and Continental Administration Services
Limited (CASL) (a company affiliated with Dr Mallya and understood
to hold assets on trust for him and certain persons affiliated with
him) for in excess of $142 million (GBP117 million) (plus interest)
in relation to Watson's liability to DHN in respect of its
borrowings referred to above and the breach of associated security
documents. Dr Mallya, Sidhartha Mallya and the relevant affiliated
companies filed a defence to these claims, and Dr Mallya also filed
a counterclaim for payment of the two instalment payments that had
by that time been withheld as described above.
Diageo continues to prosecute its claims and to defend the
counterclaim. As part of these proceedings, Diageo and the other
relevant members of its group filed an application for strike out
and/or summary judgement in respect of certain aspects of the
defence filed by Dr Mallya and the other defendants, including
their defence in relation to Watson and CASL's liability to repay
DHN. The application was successful resulting in Watson being
ordered to pay approximately $135 million (GBP112 million) plus
various amounts in respect of interest to DHN, with CASL being held
liable as co-surety for 50% of any such amount unpaid by Watson.
These amounts were, contrary to the relevant orders, not paid by
the relevant deadlines and Watson and CASL's remaining defences in
the proceedings were struck out. Diageo and DHN have accordingly
sought asset disclosure and are considering further enforcement
steps against Watson and CASL, both in the United Kingdom and in
other jurisdictions where they are present or hold assets.
A trial of the remaining elements of these claims was due to
commence on 21 November 2022. However, on 26 July 2021 Dr Mallya
was declared bankrupt by the English High Court pursuant to a
bankruptcy petition presented by a consortium of Indian banks.
Diageo and the relevant members of its group have informed the
Trustee in Bankruptcy of their position as creditors in the
bankruptcy and have engaged with the Trustee regarding their claims
and the status of the current proceedings. Dr Mallya has applied
for permission to appeal the bankruptcy order and a prior order of
the English High Court related to the bankruptcy. The consortium of
Indian banks has also applied for permission to appeal a prior
order of the English High Court related to the bankruptcy. The
bankruptcy proceedings are ongoing. In light of the uncertainty
posed by the ongoing bankruptcy proceedings the trial has been
vacated to allow time for discussions between the parties regarding
the future status and management of the proceedings in light of the
bankruptcy and pending appeal to take place.
At this stage, it is not possible to assess the extent to which
the various proceedings related to these bankruptcy matters will
affect the remaining elements of the claims by Diageo and the
relevant members of its group.
Upon completion of an initial inquiry in April 2015 into past
improper transactions which identified references to certain
additional parties and matters, USL carried out an additional
inquiry into these transactions (Additional Inquiry) which was
completed in July 2016. The Additional Inquiry, prima facie,
identified transactions indicating actual and potential diversion
of funds from USL and its Indian and overseas subsidiaries to, in
most cases, entities that appeared to be affiliated or associated
with Dr Mallya. All amounts identified in the Additional Inquiry
have been provided for or expensed in the financial statements of
USL or its subsidiaries in the respective prior periods. USL has
filed recovery suits against relevant parities identified pursuant
to the Additional Inquiry.
Further, at this stage, it is not possible for the management of
USL to estimate the financial impact on USL, if any, arising out of
potential non-compliance with applicable laws in relation to such
fund diversions.
(d) Other matters in relation to USL
In respect of the Watson backstop guarantee arrangements, the
Securities and Exchange Board of India (SEBI) issued a notice to
Diageo on 16 June 2016 that if there is any net liability incurred
by Diageo (after any recovery under relevant security or other
arrangements, which matters remain pending) on account of the
Watson backstop guarantee, such liability, if any, would be
considered to be part of the price paid for the acquisition of USL
shares under the SPA which formed part of the Original USL
Transaction and that, in that case, additional equivalent payments
would be required to be made to those shareholders (representing
0.04% of the shares in USL) who tendered in the open offer made as
part of the Original USL Transaction. Diageo believes that the
Watson backstop guarantee arrangements were not part of the price
paid or agreed to be paid for any USL shares under the Original USL
Transaction and therefore that SEBI's decision was not consistent
with applicable law, and Diageo appealed against it before the
Securities Appellate Tribunal, Mumbai (SAT). On 1 November 2017,
SAT issued an order in respect of Diageo's appeal in which, amongst
other things, it observed that the relevant officer at SEBI had
neither considered Diageo's earlier reply nor provided Diageo with
an opportunity to be heard, and accordingly directed SEBI to pass a
fresh order after giving Diageo an opportunity to be heard.
Following SAT's order, Diageo made its further submissions in the
matter, including at a personal hearing before a Deputy General
Manager of SEBI. On 26 June 2019, SEBI issued an order reiterating
the directions contained in its previous notice dated 16 June 2016.
As with the previous SEBI notice, Diageo believes that SEBI's
latest order is not consistent with applicable law and has filed
another appeal before the SAT against the order. Diageo's appeal is
currently pending. Diageo is unable to assess if the notices or
enquiries referred to above will result in enforcement action or,
if this were to transpire, to quantify meaningfully the possible
range of loss, if any, to which any such action might give rise to
if determined against Diageo or USL.
(e) USL's dispute with IDBI Bank Limited
Prior to the acquisition by Diageo of a controlling interest in
USL, USL had prepaid a term loan of INR 6,280 million (GBP66
million) taken through IDBI Bank Limited (IDBI), an Indian bank,
which was secured on certain fixed assets and brands of USL, as
well as by a pledge of certain shares in USL held by the USL
Benefit Trust (of which USL is the sole beneficiary). The maturity
date of the loan was 31 March 2015. IDBI disputed the prepayment,
following which USL filed a writ petition in November 2013 before
the High Court of Karnataka (the High Court) challenging the bank's
actions .
Following the original maturity date of the loan, USL received
notices from IDBI seeking to recall the loan, demanding a further
sum of INR 459 million (GBP5 million) on account of the outstanding
principal, accrued interest and other amounts, and also threatening
to enforce the security in the event that USL did not make these
further payments. Pursuant to an application filed by USL before
the High Court in the writ proceedings, the High Court directed
that, subject to USL depositing such further amount with the bank
(which amount was duly deposited by USL), the bank should hold the
amount in a suspense account and not deal with any of the secured
assets including the shares until disposal of the original writ
petition filed by USL before the High Court.
On 27 June 2019, a single judge bench of the High Court issued
an order dismissing the writ petition filed by USL, amongst other
things, on the basis that the matter involved an issue of breach of
contract by USL and was therefore not maintainable in exercise of
the court's writ jurisdiction. USL has since filed an appeal
against this order before a division bench of the High Court, which
on 30 July 2019 has issued an interim order directing the bank to
not deal with any of the secured assets until the next date of
hearing. On 13 January 2020, the division bench of the High Court
admitted the writ appeal and extended the interim stay. This appeal
is currently pending. Based on the assessment of USL's management
supported by external legal opinions, USL continues to believe that
it has a strong case on the merits and therefore continues to
believe that the secured assets will be released to USL and the
aforesaid amount of INR 459 million (GBP5 million) remains
recoverable from IDBI.
(f) Tax
The international tax environment has seen increased scrutiny
and rapid change over recent years bringing with it greater
uncertainty for multinationals. Against this backdrop, Diageo has
been monitoring developments and continues to engage transparently
with the tax authorities in the countries where Diageo operates to
ensure that the group manages its arrangements on a sustainable
basis.
The group operates in a large number of markets with complex tax
and legislative regimes that are open to subjective interpretation.
In the context of these operations, it is possible that tax
exposures which have not yet materialised (including those which
could arise as a result of tax assessments) may result in losses to
the group. In the circumstances where tax authorities have raised
assessments, challenging interpretations which may lead to a
possible material outflow, these have been included as contingent
liabilities. Where the potential tax exposures are known to us and
have not been assessed, the group considers disclosure of such
matters taking into account their size and nature, relevant
regulatory requirements and potential prejudice of the future
resolution or assessment thereof.
Diageo has a large number of ongoing tax cases in Brazil and
India. Since assessing an accurate value of contingent liabilities
in these markets requires a high degree of judgement, contingent
liabilities are disclosed on the basis of the current known
possible exposure from tax assessment values. While not all of
these cases are individually significant, the current aggregate
known possible exposure from tax assessment values is up to
approximately GBP545 million for Brazil and up to approximately
GBP131 million for India. The group believes that the likelihood
that the tax authorities will ultimately prevail is lower than
probable but higher than remote. Due to the fiscal environment in
Brazil and in India, the possibility of further tax assessments
related to the same matters cannot be ruled out and the judicial
processes may take extended periods to conclude. Based on its
current assessment, Diageo believes that no provision is required
in respect of these issues.
Payments were made under protest in India in respect of the
periods 1 April 2006 to 31 March 2019 in relation to tax
assessments where the risk is considered to be remote or possible.
These payments have to be made in order to be able to challenge the
assessments and as such have been recognised as a receivable in the
group's balance sheet. The total amount of payments under protest
recognised as a receivable as at 30 June 2022 is GBP120 million
(corporate tax payments of GBP108 million and indirect tax payments
of GBP12 million).
In the United States, a lawsuit was filed on 15 April 2019 by
the National Association of Manufacturers (NAM) against the United
States Department of the Treasury (US Treasury) and the United
States Customs and Border Protection (CBP) on behalf of its
affected industry members, including Diageo, to invalidate
regulations published in February 2019 and to ensure that
substitution drawback is permitted in accordance with 19 USC --
1313(j)(2) as amended by the Trade Facilitation and Trade
Enforcement Act of 2015, which was enacted on 24 February 2016
(TFTEA). Substitution drawback permits the refund, including of
excise taxes, paid on imported merchandise when sufficiently
similar substitute merchandise is exported. The United States
Congress passed the TFTEA to, among other things, clarify and
broaden the standard for what constitutes substitute merchandise.
This change should entitle Diageo to obtain substitution drawback
in respect of certain eligible product categories. Despite this
change in the law, the US Treasury and CBP issued final regulations
in 2019 declaring that substitution drawback is not available for
imports when substituted with an export on which no tax was paid.
The Court of International Trade issued a judgment in favour of NAM
on 18 February 2020, denying the request by the US Treasury and CBP
for a stay of payment on 15 May 2020, and on 26 May 2020, ordered
the immediate processing of claims. The US Treasury and CBP filed
an appeal with the US Court of Appeals for the Federal Circuit in
2021. During the year ended 30 June 2022, the US Court of Appeals
dismissed the appeal, confirming the decision of the Court of
International Trade. The deadline for the US Treasury and CBP to
seek a review at the US Supreme Court level has passed and, as a
result, this matter has been resolved.
(g) Information request
Diageo has received an inquiry from the US Securities and
Exchange Commission requesting information relating to Diageo's
business operations in certain markets and to its policies,
procedures and compliance environment. Diageo is responding to this
information request but is currently unable to assess whether the
inquiry will evolve into any enforcement action or, if this were to
transpire, to quantify meaningfully the possible loss or range of
loss, if any, to which any such action might give rise.
(h) Other
The group has extensive international operations and routinely
makes judgements on a range of legal, customs and tax matters which
are incidental to the group's operations. Some of these judgements
are or may become the subject of challenges and involve
proceedings, the outcome of which cannot be foreseen. In
particular, the group is currently a defendant in various customs
proceedings that challenge the declared customs value of products
imported by certain Diageo companies. Diageo continues to defend
its position vigorously in these proceedings.
Save as disclosed above, neither Diageo, nor any member of the
Diageo group, is or has been engaged in, nor (so far as Diageo is
aware) is there pending or threatened by or against it, any legal
or arbitration proceedings which may have a significant effect on
the financial position of the Diageo group.
16. Related party transactions
The group's significant related parties are its associates,
joint ventures, key management personnel and post employment
benefit plans.
There were no transactions with these related parties during the
year ended 30 June 2022 on terms other than those that prevail in
arm's length transactions.
17. Post balance sheet events
On 14 July 2022, Diageo announced that it had agreed to sell
Guinness Cameroun S.A., its brewery in Cameroon, to Castel Group
for GBP389 million. The transaction is expected to be completed in
the first half of the year ending 30 June 2023, subject to
regulatory clearances. As per management's judgement, the criteria
to classify the business of Guinness Cameroun S.A. as held for sale
are not met, hence such classification was not applied on 30 June
2022 in respect of this business.
Additional information
Explanatory notes
Comparisons are to the year ended 30 June 2021 (2021) unless
otherwise stated. Unless otherwise stated, percentage movements
given throughout this announcement for volume, sales, net sales,
marketing spend, operating profit and operating margin are organic
movements after retranslating current period reported numbers at
prior period exchange rates and after adjusting for the effect of
exceptional operating items and acquisitions and disposals,
excluding fair value remeasurements.
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 pages 59-60 - 'Cautionary statement concerning forward-looking
statements' for more details.
This announcement includes names of Diageo's products which
constitute trademarks or trade names which Diageo owns or which
others own and license to Diageo for use.
Definitions and reconciliation of non-GAAP measures to GAAP
measures
Diageo's strategic planning process is based on certain non-GAAP
measures, including organic movements. These non-GAAP measures are
chosen for planning and reporting, and some of them are used for
incentive purposes. The group's management believes that these
measures provide valuable additional information for users of the
financial statements in understanding the group's performance.
These non-GAAP measures should be viewed as complementary to, and
not replacements for, the comparable GAAP measures and reported
movements therein.
It is not possible to reconcile the forecast tax rate before
exceptional items, forecast organic net sales growth and forecast
organic operating profit increase to the most comparable GAAP
measure as it is not possible to predict, without unreasonable
effort, with reasonable certainty, the future impact of changes in
exchange rates, acquisitions and disposals and potential
exceptional items.
Volume
Volume is a performance indicator that is measured on an
equivalent units basis to nine-litre cases of spirits. An
equivalent unit represents one nine-litre case of spirits, which is
approximately 272 servings. A serving comprises 33ml of spirits,
165ml of wine, or 330ml of ready to drink or beer. Therefore, to
convert volume of products other than spirits to equivalent units,
the following guide has been used: beer in hectolitres, divide by
0.9; wine in nine-litre cases, divide by five; ready to drink and
certain pre-mixed products that are classified as ready to drink in
nine-litre cases, divide by ten.
Organic movements
Organic information is presented using sterling amounts on a
constant currency basis excluding the impact of exceptional items,
certain fair value remeasurement, hyperinflation and acquisitions
and disposals. Organic measures enable users to focus on the
performance of the business which is common to both years and which
represents those measures that local managers are most directly
able to influence.
Calculation of organic movements
The organic movement percentage is the amount in the row titled
'Organic movement' in the tables below, expressed as a percentage
of the relevant absolute amount in the row titled '2021 adjusted'.
Organic operating margin is calculated by dividing operating profit
before exceptional items by net sales after excluding the impact of
exchange rate movements, certain fair value remeasurements,
hyperinflation and acquisitions and disposals.
(a) Exchange rates
Exchange in the organic movement calculation reflects the
adjustment to recalculate the reported results as if they had been
generated at the prior period weighted average exchange rates.
Exchange impacts in respect of the external hedging of
intergroup sales by the markets in a currency other than their
functional currency and the intergroup recharging of services are
also translated at prior period weighted average exchange rates and
are allocated to the geographical segment to which they relate.
Residual exchange impacts are reported as part of the Corporate
segment. Results from hyperinflationary economies are translated at
forward-looking rates starting from the year ending 30 June 2023.
Reported results are recalculated as if they had been generated at
those forward-looking rates.
(b) Acquisitions and disposals
For acquisitions in the current period, the post-acquisition
results are excluded from the organic movement calculations. For
acquisitions in the prior period, post-acquisition results are
included in full in the prior period but are included in the
organic movement calculation from the anniversary of the
acquisition date in the current period. The acquisition row also
eliminates the impact of transaction costs that have been charged
to operating profit in the current or prior period in respect of
acquisitions that, in management's judgement, are expected to be
completed.
Where a business, brand, brand distribution right or agency
agreement was disposed of or terminated in the reporting period,
the group, in the organic movement calculations, excludes the
results for that business from the current and prior period. In the
calculation of operating profit, the overheads included in
disposals are only those directly attributable to the businesses
disposed of, and do not result from subjective judgements of
management.
(c) Exceptional items
Exceptional items are those that in management's judgement need
to be disclosed separately. Such items are included within the
income statement caption to which they relate, and are excluded
from the organic movement calculations. It is believed that
separate disclosure of exceptional items and the classification
between operating and non-operating items further helps investors
to understand the performance of the group. Changes in estimates
and reversals in relation to items previously recognised as
exceptional are presented consistently as exceptional in the
current year.
Exceptional operating items are those that are considered to be
material and unusual or non-recurring in nature and are part of the
operating activities of the group such as impairment of intangible
assets and fixed assets, indirect tax settlements, property
disposals and changes in post employment plans.
Gains and losses on the sale or directly attributable to a
prospective sale of businesses, brands or distribution rights, step
up gains and losses that arise when an investment becomes an
associate or an associate becomes a subsidiary and other material,
unusual non-recurring items that are not in respect of the
production, marketing and distribution of premium drinks, are
disclosed as exceptional non-operating items below operating profit
in the income statement.
Exceptional current and deferred tax items comprise material and
unusual or non-recurring items that impact taxation. Examples
include direct tax provisions and settlements in respect of prior
years and the remeasurement of deferred tax assets and liabilities
following tax rate changes.
(d) Fair value remeasurement
Fair value remeasurement in the organic movement calculation
reflects an adjustment to eliminate the impact of fair value
changes in biological assets, earn-out arrangements that are
accounted for as remuneration and fair value changes relating to
contingent consideration liabilities and equity options that arose
on acquisitions recognised in the income statement.
Growth on a constant basis
Growth on a constant basis is a measure used by the group to
understand the trends of the business and its recovery towards
pre-Covid-19 performance.
The 2019 adjusted base is an appropriate comparator for fiscal
19 to fiscal 22 growth calculation on a constant basis, as the
rates used for constant currency calculations in fiscal 20 were not
materially different from those used for constant currency
calculations in fiscal 21 and fiscal 22, and there were no material
acquisition or disposal related adjustments or accounting treatment
changes in the period.
2019 to 2022 growth on a constant basis is calculated as adding
up the respective periods' organic movement in the row titled
'Organic movement' in the tables below, expressed as a percentage
of the relevant absolute amount in the row titled '2019 adjusted'.
The most comparable GAAP financial measure is '2019 to 2022
reported movement %' in the tables below which is calculated by
combining the reported movements for the respective periods,
expressed as a percentage of the 2019 reported amount.
Organic growth excluding Travel Retail and Guinness
Additional information on the performance of the business
excluding Travel Retail and Guinness was provided in prior years.
However, the recovery of the on-trade for Guinness, particularly in
Europe, and the partial recovery of Travel Retail has made this
measure redundant and therefore no additional information is
disclosed for fiscal 22.
Adjustment in respect of hyperinflation
Before 2022, organic results from hyperinflationary economies
were translated at respective years' actual rates which meant that
organic movements were broadly in line with reported movements. A
review of this methodology was completed in 2022 when Turkey became
a hyperinflationary economy.
The group's experience is that hyperinflationary conditions
result in price increases that include both normal pricing actions
reflecting changes in demand, commodity and other input costs or
considerations to drive commercial competitiveness, as well as
hyperinflationary elements and that for the calculation of organic
movements, the distortion from hyperinflationary elements should be
excluded.
Cumulative inflation over 100% (2% per month compounded) over
three years is one of the key indicators within IAS 29 to assess
whether an economy is deemed to be hyperinflationary. As a result,
the definition of 'Organic movements' has been updated to include
price growth in markets deemed to be hyperinflationary economies,
up to a maximum of 2% per month while also being on a constant
currency basis. Corresponding adjustments are made to all income
statement related lines in the organic movement calculations.
In the tables presenting the calculation of organic movements,
'hyperinflation' has been added as a reconciling item between
reported and organic movements that also includes the relevant IAS
29 adjustments. Organic movements for Argentina, Venezuela and
Lebanon have not been recalculated in line with this methodology as
their contribution is not significant.
Organic movement calculations for the year ended 30 June 2022
were as follows:
Latin
North Asia America
America Europe Pacific Africa and Caribbean Corporate Total
million million million million million million million
------------------------------ -------- -------- -------- -------- -------------- --------- --------
Volume (equivalent units)
============================== ======== ======== ======== ======== ============== ========= ========
2019 reported 49.4 45.4 95.1 33.6 22.4 - 245.9
Disposals (2.1) (0.1) - (2.7) - - (4.9)
------------------------------ -------- -------- -------- -------- -------------- --------- --------
2019 adjusted 47.3 45.3 95.1 30.9 22.4 - 241.0
Organic movement (2020) 0.1 (5.2) (14.5) (4.0) (3.4) - (27.0)
Organic movement (2021) 5.1 2.9 7.0 4.8 4.1 - 23.9
2020 and 2021 movement on
a constant basis 5.2 (2.3) (7.5) 0.8 0.7 - (3.1)
Volume (equivalent units)
============================== ======== ======== ======== ======== ============== ========= ========
2021 reported 53.2 42.7 87.6 31.8 23.1 - 238.4
============================== ======== ======== ======== ======== ============== ========= ========
Disposals(2) - (0.7) - (0.4) - - (1.1)
------------------------------ -------- -------- -------- -------- -------------- --------- --------
2021 adjusted 53.2 42.0 87.6 31.4 23.1 - 237.3
Organic movement 1 9 7 4 4 - 24.5
Acquisitions and disposals(2) 0.2 0.7 - 0.3 - - 1.2
------------------------------ -------- -------- -------- -------- -------------- --------- --------
2022 reported 54.8 51.2 94.2 35.7 27.1 - 263.0
------------------------------ -------- -------- -------- -------- -------------- --------- --------
Organic movement % 3 20 8 13 17 - 10
2019 to 2022 reported growth
% 11 13 (1) 6 21 - 7
------------------------------ -------- -------- -------- -------- -------------- --------- --------
2019 to 2022 growth on a
constant basis % 13 15 (1) 16 21 - 9
------------------------------ -------- -------- -------- -------- -------------- --------- --------
Latin
North Asia America
America Europe Pacific Africa and Caribbean Corporate Total
GBP million GBP million GBP million GBP million GBP million GBP million GBP million
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
Sales
================== ============ ============ ============ ============ ============== ============ ============
2021 reported 5,803 4,795 5,146 2,020 1,369 20 19,153
================== ============ ============ ============ ============ ============== ============ ============
Exchange 1 (1) (8) 2 3 - (3)
Disposals(2) - (21) - (30) - - (51)
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
2021 adjusted 5,804 4,773 5,138 1,992 1,372 20 19,099
Organic movement 735 1,298 525 433 541 35 3,567
Acquisitions and
disposals(2) 38 26 - 20 5 - 89
================== ============ ============ ============ ============ ============== ============ ============
Exchange 105 (885) (39) (42) 27 (1) (835)
================== ============ ============ ============ ============ ============== ============ ============
Hyperinflation - 528 - - - - 528
2022 reported 6,682 5,740 5,624 2,403 1,945 54 22,448
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
Organic movement % 13 27 10 22 39 175 19
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
Latin
North Asia America
America Europe Pacific Africa and Caribbean Corporate Total
GBP million GBP million GBP million GBP million GBP million GBP million GBP million
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
Net sales
================== ============ ============ ============ ============ ============== ============ ============
2019 reported 4,460 2,939 2,688 1,597 1,130 53 12,867
================== ============ ============ ============ ============ ============== ============ ============
Exchange (34) (19) 1 (2) 4 2 (48)
================== ============ ============ ============ ============ ============== ============ ============
Reclassification - - - - (10) - (10)
================== ============ ============ ============ ============ ============== ============ ============
Disposals (75) (1) (1) (91) (1) - (169)
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
2019 adjusted 4,351 2,919 2,688 1,504 1,123 55 12,640
Organic movement
(2020) 105 (358) (423) (200) (169) (16) (1,061)
Organic movement
(2021) 929 108 308 258 275 (18) 1,860
2020 and 2021
movement on
a constant basis 1,034 (250) (115) 58 106 (34) 799
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
Net sales
================== ============ ============ ============ ============ ============== ============ ============
2021 reported 5,209 2,558 2,488 1,412 1,046 20 12,733
================== ============ ============ ============ ============ ============== ============ ============
Exchange(1) 1 - (2) 2 1 - 2
Disposals(2) - (20) - (20) - - (40)
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
2021 adjusted 5,210 2,538 2,486 1,394 1,047 20 12,695
Organic movement 754 766 402 308 451 35 2,716
Acquisitions and
disposals(2) 34 23 - 15 3 - 75
================== ============ ============ ============ ============ ============== ============ ============
Exchange(1) 97 (304) (4) (35) 24 (1) (223)
================== ============ ============ ============ ============ ============== ============ ============
Hyperinflation - 189 - - - - 189
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
2022 reported 6,095 3,212 2,884 1,682 1,525 54 15,452
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
Organic movement % 14 30 16 22 43 175 21
2019 to 2022
reported growth
% 37 9 7 5 35 2 20
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
2019 to 2022
growth on a
constant basis % 41 18 11 24 50 2 28
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
Latin
North Asia America
America Europe Pacific Africa and Caribbean Corporate Total
GBP million GBP million GBP million GBP million GBP million GBP million GBP million
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
Marketing
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
2021 reported 936 473 418 168 161 7 2,163
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
Exchange - (1) 1 (3) - (1) (4)
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
Disposals(2) - (1) - (2) - - (3)
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
2021 adjusted 936 471 419 163 161 6 2,156
Organic movement 222 122 68 36 79 5 532
Acquisitions and
disposals(2) 24 1 - 2 1 - 28
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
Fair value
remeasurement
of contingent
considerations,
equity option and
earn out
arrangements (1) - - - - - (1)
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
Exchange 19 (34) 3 (2) 2 1 (11)
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
Hyperinflation - 17 - - - - 17
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
2022 reported 1,200 577 490 199 243 12 2,721
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
Organic movement % 24 26 16 22 49 83 25
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
Latin
North Asia America
America Europe Pacific Africa and Caribbean Corporate Total
GBP million GBP million GBP million GBP million GBP million GBP million GBP million
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
Operating profit
before exceptional
items
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
2019 reported 4,116
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
Exchange -
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
Disposal (29)
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
2019 adjusted 4,087
Organic movement
(2020) (589)
Organic movement
(2021) 627
2020 and 2021
movement on
a constant basis 38
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
Operating profit
before exceptional
items
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
2021 reported 2,237 635 608 171 303 (208) 3,746
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
Exchange(1) (14) (2) (5) 10 7 (9) (13)
Fair value
remeasurement
of contingent
considerations
and equity option 7 27 - - - - 34
Acquisitions and
disposals(2) 9 (10) - 12 - - 11
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
2021 adjusted 2,239 650 603 193 310 (217) 3,778
Organic movement 148 418 98 152 218 (39) 995
Acquisitions and
disposals(2) (28) 11 - (10) - - (27)
================== ============ ============ ============ ============ ============== ============ ============
Fair value
remeasurement
of contingent
considerations,
equity option and
earn out
arrangements 32 36 - - (3) - 65
================== ============ ============ ============ ============ ============== ============ ============
Fair value
remeasurement
of biological
assets - - - - (5) - (5)
================== ============ ============ ============ ============ ============== ============ ============
Exchange(1) 63 (108) 10 (20) 18 18 (19)
================== ============ ============ ============ ============ ============== ============ ============
Hyperinflation - 10 - - - - 10
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
2022 reported 2,454 1,017 711 315 538 (238) 4,797
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
Organic movement % 7 64 16 79 70 (18) 26
Organic operating
margin
% (3)
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
2022 40.0 32.3 24.3 20.3 35.2 n/a 31.0
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
2021 43.0 25.6 24.3 13.8 29.6 n/a 29.8
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
Margin movement
(bps) (295) 671 2 643 564 n/a 121
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
2019 to 2022
reported growth
% 17
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
2019 to 2022
growth on a
constant basis % 25
------------------ ------------ ------------ ------------ ------------ -------------- ------------ ------------
(i)For the reconciliation of sales to net sales, see page
22.
(ii)Percentages and margin movement are calculated on rounded
figures.
Notes: Information in respect of the organic movement
calculations
(1)The impact of movements in exchange rates on reported figures
for net sales and operating profit was principally in respect of
the translation exchange impact of the strengthening of sterling
against the euro and Turkish lira, partially offset by weakening of
sterling against the US dollar
(2)Acquisitions and disposals that had an effect on volume,
sales, net sales, marketing and operating profit in the year ended
30 June 2022, are detailed on page 53.
(3)Operating margin calculated by dividing Operating profit
before exceptional items by net sales.
In the year ended 30 June 2022, the acquisitions and disposals
that affected volume, sales, net sales, marketing and operating
profit were as follows, as per footnote (2) on the previous page
:
Operating
Volume Sales Net sales Marketing profit
equ. units GBP million GBP million GBP million GBP million
million
-------------------------------- ---------- ----------- ----------- ----------- -----------
Year ended 30 June 2021
Acquisitions
================================ ========== =========== =========== =========== ===========
Aviation Gin and Davos Brands - - - - 9
================================ ========== =========== =========== =========== ===========
Chase Distillery - - - - 2
================================ ========== =========== =========== =========== ===========
Lone River Ranch Water - - - - -
================================ ========== =========== =========== =========== ===========
Loyal 9 Cocktails - - - - -
-------------------------------- ---------- ----------- ----------- ----------- -----------
- - - - 11
-------------------------------- ---------- ----------- ----------- ----------- -----------
Disposals
================================ ========== =========== =========== =========== ===========
South African ready to drink - (8) (4) - -
================================ ========== =========== =========== =========== ===========
Meta Abo Brewery (0.4) (22) (16) (2) 12
================================ ========== =========== =========== =========== ===========
Picon (0.7) (21) (20) (1) (12)
-------------------------------- ---------- ----------- ----------- ----------- -----------
(1.1) (51) (40) (3) -
-------------------------------- ---------- ----------- ----------- ----------- -----------
Acquisitions and disposals (1.1) (51) (40) (3) 11
Year ended 30 June 2022
================================ ========== =========== =========== =========== ===========
Acquisitions
================================ ========== =========== =========== =========== ===========
Aviation Gin and Davos Brands - 6 5 (4) (11)
================================ ========== =========== =========== =========== ===========
Chase Distillery - 5 3 (1) (2)
================================ ========== =========== =========== =========== ===========
Lone River Ranch Water 0.1 14 13 (13) (13)
================================ ========== =========== =========== =========== ===========
Loyal 9 Cocktails - 14 11 (5) (2)
================================ ========== =========== =========== =========== ===========
Mezcal Unión 0.1 6 5 (1) 1
================================ ========== =========== =========== =========== ===========
21Seeds - 3 3 (2) (2)
-------------------------------- ---------- ----------- ----------- ----------- -----------
0.2 48 40 (26) (29)
-------------------------------- ---------- ----------- ----------- ----------- -----------
Disposals
================================ ========== =========== =========== =========== ===========
Meta Abo Brewery 0.3 20 15 (2) (10)
================================ ========== =========== =========== =========== ===========
Picon 0.7 21 20 - 12
-------------------------------- ---------- ----------- ----------- ----------- -----------
1.0 41 35 (2) 2
-------------------------------- ---------- ----------- ----------- ----------- -----------
Acquisitions and disposals 1.2 89 75 (28) (27)
-------------------------------- ---------- ----------- ----------- ----------- -----------
Earnings per share before exceptional items
Earnings per share before exceptional items is calculated by
dividing profit attributable to equity shareholders of the parent
company before exceptional items by the weighted average number of
shares in issue.
Earnings per share before exceptional items for the year ended
30 June 2022 and 30 June 2021 are set out in the table below:
2022 2021
GBP million GBP million
Profit attributable to equity shareholders of the parent
company 3,249 2,660
============================================================ =========== ===========
Exceptional operating and non-operating items 405 1
============================================================ =========== ===========
Exceptional tax charges - 88
============================================================ =========== ===========
Tax in respect of exceptional operating and non-operating
items (31) (4)
Exceptional items attributable to non-controlling interests (103) 1
------------------------------------------------------------ ----------- -----------
3,520 2,746
------------------------------------------------------------ ----------- -----------
Weighted average number of shares million million
------------------------------------------------------------ ----------- -----------
Shares in issue excluding own shares 2,318 2,337
============================================================ =========== ===========
Dilutive potential ordinary shares 7 8
------------------------------------------------------------ ----------- -----------
2,325 2,345
------------------------------------------------------------ ----------- -----------
pence pence
------------------------------------------------------------ ----------- -----------
Basic earnings per share before exceptional items 151.9 117.5
============================================================ =========== ===========
Diluted earnings per share before exceptional items 151.4 117.1
------------------------------------------------------------ ----------- -----------
Free cash flow
Free cash flow comprises the net cash flow from operating
activities aggregated with the net cash received/paid for working
capital loans receivable, cash paid or received for investments and
the net cash expenditure paid for property, plant and equipment and
computer software that are included in net cash flow from investing
activities.
The remaining components of net cash flow from investing
activities that do not form part of free cash flow, as defined by
the group's management, are in respect of the acquisition and sale
of businesses and non-working capital loans to and from
associates.
The group's management regards the purchase and disposal of
property, plant and equipment and computer software as ultimately
non-discretionary since ongoing investment in plant, machinery and
technology is required to support the day-to-day operations,
whereas acquisition and sale of businesses are discretionary.
Where appropriate, separate explanations are given for the
impacts of acquisition and sale of businesses, dividends paid and
the purchase of own shares, each of which arises from decisions
that are independent from the running of the ongoing underlying
business.
Free cash flow reconciliations for the year ended 30 June 2022
and 30 June 2021 are set out in the table below:
2022 2021
GBP million GBP million
Net cash inflow from operating activities 3,935 3,654
======================================================= =========== ===========
Disposal of property, plant and equipment and computer
software 17 13
======================================================= =========== ===========
Purchase of property, plant and equipment and computer
software (1,097) (626)
======================================================= =========== ===========
Movements in loans and other investments (72) (4)
------------------------------------------------------- ----------- -----------
Free cash flow 2,783 3,037
------------------------------------------------------- ----------- -----------
Operating cash conversion
Operating cash conversion is calculated by dividing cash
generated from operations excluding cash inflows and outflows in
respect of exceptional items, dividends received from associates,
maturing inventories, provisions, other items and post employment
payments in excess of the amount charged to operating profit by
operating profit before depreciation, amortisation, impairment and
exceptional operating items.
The measure is excluding any hyperinflation adjustment above the
organic treatment of hyperinflationary economies. The ratio is
stated at the budgeted exchange rates for the respective year and
is expressed as a percentage.
Operating cash conversion for the year ended 30 June 2022 and 30
June 2021 were as follows:
2022 2021
GBP million GBP million
------------------------------------------------------------ ----------- -----------
Profit for the year 3,338 2,799
============================================================ =========== ===========
Taxation 1,049 907
============================================================ =========== ===========
Share of after tax results of associates and joint ventures (417) (334)
============================================================ =========== ===========
Net finance charges 422 373
============================================================ =========== ===========
Non-operating items 17 (14)
------------------------------------------------------------ ----------- -----------
Operating profit 4,409 3,731
------------------------------------------------------------ ----------- -----------
Exceptional operating items 388 15
============================================================ =========== ===========
Fair value remeasurement (60) 36
============================================================ =========== ===========
Depreciation, amortisation and impairment(1) 489 447
============================================================ =========== ===========
Hyperinflation adjustment (10) -
============================================================ =========== ===========
Retranslation to budgeted exchange rates 27 375
------------------------------------------------------------ ----------- -----------
5,243 4,604
------------------------------------------------------------ ----------- -----------
Cash generated from operations 5,212 4,857
============================================================ =========== ===========
Net exceptional cash paid/(received)(2) 15 (49)
============================================================ =========== ===========
Post employment payments less amounts included in operating
profit(1) 89 35
============================================================ =========== ===========
Net movement in maturing inventories(3) 360 174
============================================================ =========== ===========
Provision movement 58 60
============================================================ =========== ===========
Dividends received from associates (190) (290)
============================================================ =========== ===========
Other items(1) (53) (88)
============================================================ =========== ===========
Hyperinflation adjustment (22) -
============================================================ =========== ===========
Retranslation to budgeted exchange rates 42 387
------------------------------------------------------------ ----------- -----------
5,511 5,086
------------------------------------------------------------ ----------- -----------
Operating cash conversion 105.1% 110.5%
------------------------------------------------------------ ----------- -----------
(1)Excluding exceptional items.
(2)Exceptional cash payments for other donations was GBP2
million (2021- GBP1 million) and for winding down Russian
operations was GBP13 million (2021 - GBPnil). For the year ended 30
June 2021, exceptional cash received for substitution drawback was
GBP60 million and exceptional cash payments for tax payments were
GBP10 million.
(3)Excluding non-cash movements such as exchange and the impact
of acquisitions and disposals.
Return on average invested capital
Return on average invested capital is used by management to
assess the return obtained from the group's asset base and is
calculated to aid evaluation of the performance of the
business.
The profit used in assessing the return on average invested
capital reflects operating profit before exceptional items
attributable to equity shareholders of the parent company plus
share of after tax results of associates and joint ventures after
applying the tax rate before exceptional items for the fiscal year.
Average invested capital is calculated using the average derived
from the consolidated balance sheets at the beginning, middle and
end of the year. Average capital employed comprises average net
assets attributable to equity shareholders of the parent company
for the year, excluding net post employment benefit
assets/liabilities (net of deferred tax) and average net
borrowings. This average capital employed is then aggregated with
the average restructuring and integration costs net of tax, and
goodwill written off to reserves at 1 July 2004, the date of
transition to IFRS, to obtain the average total invested
capital.
Calculations for the return on average invested capital for the
year ended 30 June 2022 and 30 June 2021 are set out in the table
below:
2022 2021
GBP million GBP million
------------------------------------------------------------ ----------- -----------
Operating profit 4,409 3,731
============================================================ =========== ===========
Exceptional operating items 388 15
============================================================ =========== ===========
Profit before exceptional operating items attributable
to non-controlling interests (192) (138)
============================================================ =========== ===========
Share of after tax results of associates and joint ventures 417 334
============================================================ =========== ===========
Tax at the tax rate before exceptional items of 22.5%
(2021 - 22.2%) (1,173) (906)
------------------------------------------------------------ ----------- -----------
3,849 3,036
------------------------------------------------------------ ----------- -----------
Average net assets (excluding net post employment benefit
assets/liabilities) 8,428 8,146
============================================================ =========== ===========
Average non-controlling interests (1,641) (1,587)
============================================================ =========== ===========
Average net borrowings 12,859 12,672
============================================================ =========== ===========
Average integration and restructuring costs (net of tax) 1,639 1,639
============================================================ =========== ===========
Goodwill at 1 July 2004 1,562 1,562
------------------------------------------------------------ ----------- -----------
Average invested capital 22,847 22,432
------------------------------------------------------------ ----------- -----------
Return on average invested capital 16.8% 13.5%
------------------------------------------------------------ ----------- -----------
Adjusted net borrowings to adjusted EBITDA
Diageo manages its capital structure with the aim of achieving
capital efficiency, providing flexibility to invest through the
economic cycle and giving efficient access to debt markets at
attractive cost levels. The group regularly assesses its debt and
equity capital levels to enhance its capital structure by reviewing
the ratio of adjusted net borrowings to adjusted EBITDA (earnings
before exceptional operating items, interest, tax, depreciation,
amortisation and impairment).
Calculations for the ratio of adjusted net borrowings to
adjusted EBITDA at 30 June 2022 and 30 June 2021 are set out in the
table below:
2022 2021
GBP million GBP million
Borrowings due within one year 1,522 1,862
======================================================== =========== ===========
Borrowings due after one year 14,498 12,865
======================================================== =========== ===========
Fair value of foreign currency derivatives and interest
rate hedging instruments (73) (232)
======================================================== =========== ===========
Lease liabilities 475 363
======================================================== =========== ===========
Less: Cash and cash equivalents (2,285) (2,749)
-------------------------------------------------------- ----------- -----------
Net borrowings 14,137 12,109
======================================================== =========== ===========
Post employment benefit liabilities before tax 402 574
-------------------------------------------------------- ----------- -----------
Adjusted net borrowings 14,539 12,683
-------------------------------------------------------- ----------- -----------
Profit for the year 3,338 2,799
======================================================== =========== ===========
Taxation 1,049 907
======================================================== =========== ===========
Net finance charges 422 373
======================================================== =========== ===========
Depreciation, amortisation and impairment (excluding
exceptional intangible impairment) 492 447
======================================================== =========== ===========
Exceptional intangible impairment 336 -
-------------------------------------------------------- ----------- -----------
EBITDA 5,637 4,526
-------------------------------------------------------- ----------- -----------
Exceptional operating items (excluding impairment) 49 15
======================================================== =========== ===========
Non-operating items 17 (14)
-------------------------------------------------------- ----------- -----------
Adjusted EBITDA 5,703 4,527
-------------------------------------------------------- ----------- -----------
Adjusted net borrowings to adjusted EBITDA 2.5 2.8
-------------------------------------------------------- ----------- -----------
.
Tax rate before exceptional items
Tax rate before exceptional items is calculated by dividing the
total tax charge before tax charges and credits in respect of
exceptional items, by profit before taxation adjusted to exclude
the impact of exceptional operating and non-operating items,
expressed as a percentage. The measure is used by management to
assess the rate of tax applied to the group's operations before tax
on exceptional items.
The tax rates from operations before exceptional and after
exceptional items for the year ended 30 June 2022 and year ended 30
June 2021 are set out in the table below:
2022 2021
GBP million GBP million
Tax before exceptional items (a) 1,080 823
================================================= =========== ===========
Tax in respect of exceptional items (31) (4)
================================================= =========== ===========
Exceptional tax charge - 88
------------------------------------------------- ----------- -----------
Taxation on profit (b) 1,049 907
------------------------------------------------- ----------- -----------
Profit before taxation and exceptional items (c) 4,792 3,707
================================================= =========== ===========
Non-operating items (17) 14
Exceptional operating items (388) (15)
Profit before taxation (d) 4,387 3,706
------------------------------------------------- ----------- -----------
Tax rate before exceptional items (a/c) 22.5% 22.2%
================================================= =========== ===========
Tax rate after exceptional items (b/d) 23.9% 24.5%
------------------------------------------------- ----------- -----------
Other definitions
Volume share is a brand's retail volume expressed as a
percentage of the retail volume of all brands in its segment. Value
share is a brand's retail sales value expressed as a percentage of
the retail sales value of all brands in its segment. Unless
otherwise stated, share refers to value share.
Net sales are sales less excise duties. Diageo incurs excise
duties throughout the world. In the majority of countries, excise
duties are effectively a production tax which becomes payable when
the product is removed from bonded premises and is not directly
related to the value of sales. It is generally not included as a
separate item on external invoices; increases in excise duties are
not always passed on to the customer and where a customer fails to
pay for a product received, the group cannot reclaim the excise
duty. The group therefore recognises excise duty as a cost to the
group.
Price/mix is the number of percentage points difference between
the organic movement in net sales and the organic movement in
volume. The difference arises because of changes in the composition
of sales between higher and lower priced variants/markets or as
price changes are implemented.
Shipments comprise the volume of products sold to Diageo's
immediate (first tier) customers. Depletions are the estimated
volume of the onward sales made by Diageo's immediate customers.
Both shipments and depletions are measured on an equivalent units
basis.
References to emerging markets include Poland, Eastern Europe,
Turkey, Africa, Latin America and Caribbean, and Asia Pacific
(excluding Australia, Korea and Japan).
References to reserve brands include, but are not limited to,
Johnnie Walker Blue Label, Johnnie Walker Green Label, Johnnie
Walker Gold Label Reserve, Johnnie Walker Aged 18 Years, John
Walker & Sons Collection and other Johnnie Walker super premium
brands; The Singleton, Cardhu, Talisker, Lagavulin, Oban and other
malt brands; Buchanan's Special Reserve, Buchanan's Red Seal; Haig
Club whisky; Copper Dog whisky; Roe & Co; Bulleit Bourbon,
Bulleit Rye; Orphan Barrel whiskey; Tanqueray No. TEN, Tanqueray
ready to drink, Tanqueray Malacca Gin; Aviation, Chase, Jinzu and
Villa Ascenti gin; Cîroc, Ketel One vodka, Ketel One Botanical; Don
Julio, Casamigos and DeLeón tequila; Zacapa, Bundaberg Master
Distillers' Collection and Pampero Aniversario rum; Shui Jing Fang,
Seedlip, Belsazar and Pierde Almas.
References to global giants include the following brand
families: Johnnie Walker, Smirnoff, Captain Morgan, Baileys,
Tanqueray and Guinness. Local stars include Buchanan's, Bundaberg,
Crown Royal, J B, McDowell's, Old Parr, Yenì Raki, Black &
White, Shui Jing Fang, Windsor and Ypióca. Global giants and local
stars exclude ready to drink, non-alcoholic variants and beer
except Guinness. References to Shui Jing Fang represent total
Chinese white spirits of which Shui Jing Fang is the predominant
brand.
References to ready to drink also include ready to serve
products, such as pre-mixed cans in some markets.
References to beer include cider, flavoured malt beverages and
some non-alcoholic products such as Malta Guinness.
The results of Hop House 13 Lager are included in the Guinness
figures.
There is no industry-agreed definition for price tiers and for
data providers such as IWSR, definitions can vary by market. Diageo
bases internal price tier definitions on a segmentation most
consistent with IWSR as the IWSR taxonomy is widely accepted and
provides the industry with a common point of reference.
References to the group include Diageo plc and its consolidated
subsidiaries.
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 and may generally, but not
always, be identified by the use of words such as "'will",
"anticipates", "should", "could", "would", "targets", "aims",
"may", "expects", "intends" or similar expressions statements. In
this document, such statements include those that express
forecasts, expectations, plans, outlook, objectives and projections
with respect to future matters, including information related to
Diageo's fiscal 23 outlook, Diageo's medium-term guidance for
fiscal 23 to fiscal 25, Diageo's supply chain agility programme,
future Total Beverage Alcohol market share ambitions and any other
statements relating to Diageo's performance for the year ending 30
June 2023 or thereafter.
Forward-looking statements involve risk and uncertainty because
they relate to events and depend on circumstances that will occur
in the future. There is 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, which include (but are not
limited to): (i) economic, political, social or other developments
in countries and markets in which Diageo operates (including as a
result of the Covid-19 pandemic, geopolitical instability and/or
inflationary pressures), which may contribute to a reduction in
demand for Diageo's products, adverse impacts on Diageo's customer,
supplier and/or financial counterparties, or the imposition of
import, investment or currency restrictions (including the
potential impact of any global, regional or local trade wars or any
tariffs, duties or other restrictions or barriers imposed on the
import or export of goods between territories as well as the United
Kingdom's departure from the European Union); (ii) the impact of
the Covid-19 pandemic, or any other global or regional public
health threats, on Diageo's business, financial condition, cash
flows and results of operation; (iii) the elevated geopolitical
instability as a result of Russia's invasion of Ukraine; (iv) the
effects of climate change, or legal, regulatory or market measures
intended to address climate change, on Diageo's business or
operations, including on the cost and supply of water; (v) changes
in consumer preferences and tastes, including as a result of
inflationary pressures, disruptive market forces, changes in
demographics, evolving social trends, changes in travel, holiday or
leisure activity patterns, weather conditions, health concerns,
pandemics and/or a downturn in economic conditions; (vi) changes in
the domestic and international tax environment, leading to
uncertainty around the application of existing and new tax laws and
unexpected tax exposures; (vii) changes in the cost of production,
including as a result of increases in the cost of commodities and
due to supply chain disruptions, labour and/or energy or as a
result of inflationary pressures; (viii) any litigation or other
similar proceedings (including with tax, customs, competition,
environmental, anti-corruption or other regulatory authorities),
including litigation directed at the beverage alcohol industry
generally or at Diageo in particular; (ix) legal and regulatory
developments, including changes in regulations relating to
production, distribution, importation, marketing, advertising,
sales, pricing, labelling, packaging, product liability, antitrust,
labour, compliance and control systems, environmental issues and/or
data privacy; (x) the consequences of any failure of internal
controls, including those affecting compliance with existing or new
accounting and/or disclosure requirements; (xi) the consequences of
any failure by Diageo or its associates to comply with
anti-corruption, sanctions, trade restrictions or similar laws and
regulations, or any failure of Diageo's related internal policies
and procedures to comply with applicable law or regulation; (xii)
cyber-attacks or any other disruptions to core business operations
including manufacturing and supply, business service centres and/or
information systems; (xiii) contamination, counterfeiting or other
circumstances which could harm the level of customer support for
Diageo's brands and adversely impact its sales; (xiv) Diageo's
ability to maintain its brand image and corporate reputation or to
adapt to a changing media environment; (xv) increased competitive
product and pricing pressures, including as a result of actions by
increasingly consolidated competitors or increased competition from
regional and local companies, that could negatively impact Diageo's
market share, distribution network, costs and/or pricing; (xvi)
increased costs for, or shortages of, talent, as well as labour
strikes or disputes; (xvii) Diageo's ability to derive the expected
benefits from its business strategies, including in relation to
expansion in emerging markets, acquisitions and/or disposals, cost
savings and productivity initiatives or inventory forecasting;
(xviii) fluctuations in exchange rates and/or interest rates, which
may impact the value of transactions and assets denominated in
other currencies, increase Diageo's financing costs or otherwise
adversely affect Diageo's financial results; (xix) a tightening of
global financial conditions, including an extended period of
constraint in the capital markets which Diageo may access; (xx)
movements in the value of the assets and liabilities related to
Diageo's pension plans; (xxi) Diageo's ability to renew supply,
distribution, manufacturing or licence agreements (or related
rights) and licences on favourable terms, or at all, when they
expire; or (xxii) any failure by Diageo to protect its intellectual
property rights.
All oral and written forward-looking statements made on or after
the date of this document and attributable to Diageo are expressly
qualified in their entirety by the cautionary statements contained
or referred to in this section. Further details of potential risks
and uncertainties affecting Diageo are described in our filings
with the London Stock Exchange and the US Securities and Exchange
Commission (SEC), including in our Annual Report for the year ended
30 June 2021 and in our Annual Report on Form 20-F for the year
ended 30 June 2021.
Any forward-looking statements made by or on behalf of Diageo
speak only as of the date they are made. Diageo expressly disclaims
any obligation or undertaking to publicly update or revise these
forward-looking statements other than as required by applicable
law. The reader should, however, consult any additional disclosures
that Diageo may make in any documents which it publishes and/or
files with the SEC.
All readers, wherever located, should take note of these
disclosures. This document includes names of Diageo's products,
which constitute trademarks or trade names which Diageo owns, or
which others own and license to Diageo for use. All rights
reserved. (c) Diageo plc 2022.
The information in this document does not constitute an offer to
sell or an invitation to buy shares in Diageo plc or an invitation
or inducement to engage in any other investment activities.
This document may include information about Diageo's target debt
rating. A security rating is not a recommendation to buy, sell or
hold securities and may be subject to revision or withdrawal at any
time by the assigning rating organisation. Each rating should be
evaluated independently of any other rating.
Past performance cannot be relied upon as a guide to future
performance.
Statement of directors' responsibilities
The responsibility statement set out below has been prepared in
connection with (and will be set out in) the Annual Report and
consolidated financial statements for the year ended 30 June 2022,
which will be published on 4 August 2022 (and which can be found
thereafter at www.diageo.com ).
The Directors consider that the Annual Report and consolidated
financial statements, taken as a whole, is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the group's and parent company's position
and performance, business model and strategy.
Each of the Directors of Diageo plc confirms that, to the best
of his or her knowledge:
- the consolidated financial statements contained in the Annual
Report for the year ended 30 June 2022, which have been prepared in
accordance with the requirements of (i) the Companies Act 2006,
(ii) the UK-adopted international accounting standards, (iii) IFRSs
adopted by the IASB and (iv) the IFRSs adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union,
give a true and fair view of the assets, liabilities, financial
position and profit and loss of the group; and
- the Strategic Report contained in the annual report and
accounts for the year ended 30 June 2022 includes a fair review of
the development and performance of the business and the position of
the group and parent company, together with a description of the
principal risks and uncertainties that they face.
The Directors of Diageo plc are as follows: Javier Ferrán
(Chairman), Ivan Menezes (Chief Executive), Lavanya Chandrashekar
(Chief Financial Officer), Susan Kilsby (Senior Independent
Director and Chairman of the Remuneration Committee), Alan Stewart
(Non-Executive Director and Chairman of the Audit Committee) and
Non-Executive Directors: Melissa Bethell, Karen Blackett, Valérie
Chapoulaud-Floquet, Sir John Manzoni, Lady Mendelsohn and Ireena
Vittal.
Webcast, presentation slides and transcript
At 07:15 (UK time) on Thursday 28 July 2022, Ivan Menezes, Chief
Executive and Lavanya Chandrashekar, Chief Financial Officer will
present Diageo's preliminary results as a webcast. This will be
available to view at www.diageo.com. The presentation slides and
script will also be available to download at this time.
Live Q&A conference call and replay
Ivan Menezes and Lavanya Chandrashekar will be hosting a Q&A
conference call on Thursday 28 July at 09:30 (UK time). If you
would like to listen to the call or ask a question, please use the
dial in details below.
From the UK: +44 (0) 330 165 4012
From the UK (free
call): 0800 279 6877
From the USA: +1 323 701 0160
From the USA (free
call): 800 289 0720
The conference call is for analysts and investors only. To join
the call please use the conference ID code already sent to you or
email investor.relations@diageo.com.
To hear a replay of the call, please use the telephone numbers
below:
From the UK: +44 (0) 20 3859 5407
From the UK (free
call): 0808 101 1153
From the USA: +1 719 457 0820
From the USA (free
call): 888 203 1112
Investor enquiries
to: Durga Doraisamy +44 (0) 7902 126906
Lucinda Baker +44 (0) 7974 375550
Belinda Brown +44 (0) 7590 810246
Andy Ryan +44 (0) 7803 854842
investor.relations@diageo.com
Media enquiries
to: Jessica Rouleau +44 (0) 7925 642561
Dominic Redfearn +44 (0) 7971 977759
Gina Bell +44 (0) 7731 988857
press@diageo.com
Diageo plc LEI: 213800ZVIELEA55JMJ32
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END
FR EAEXXAEPAEAA
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