RNS No 5466u
DIAGEO PLC
16 September 1999
PART 1
PRELIMINARY STATEMENT OF RESULTS
FOR THE YEAR ENDED 30 JUNE 1999
Diageo, the international food and drinks company, today announced its
results for the year ended 30 June 1999.
Sir Anthony Greener, Chairman, commented:
"Now that the integration is complete Diageo is starting to demonstrate the
growth potential of the merger. These results show 15% growth in the second
half of the year resulting in an organic operating profit increase of 8% in
the year to #1,903 million. The recovery we anticipated in Packaged Food
has produced a 22% increase in second half operating profits which more than
offsets the weaker first half performance. Operating profit in the second
half increased by 19% in Beer and by 9% in Quick Service Restaurants. In
Spirits and Wine, new programmes have been implemented as a result of the
planning and analysis we did during the merger. In this first phase they
were focused towards the global priority brands which led to a 6% volume
growth in these brands in the second half of the year.
Diageo is now delivering top line growth and we are confident that we can
deliver enhanced operating profit growth in addition to that generated by
the merger synergy."
HIGHLIGHTS
for the year ended 30 June 1999
Diageo
* Profit before goodwill amortisation, exceptional items and tax
#1,767 million
* Sales up 1% in the full year and up 6% in the second half
* Operating profit growth 8% to #1,903 million
* 15% operating profit growth in North America and Europe
* Operating margin up 1 percentage point
* Merger cost savings of #142 million in line with expectations of
which #127 million was achieved in the year
* #95 million underlying improvement in economic profit
* Basic EPS excluding goodwill amortisation and exceptional items was
up 5% to 34.5 pence
* Full year dividend 19.5 pence per share, up 8%
* Free cash flow #373 million after merger integration costs of #246
million
OPERATIONAL HIGHLIGHTS
for the year ended 30 June 1999
Percentage movements for sales, operating profit and marketing expenditure
are organic movements (at level exchange and after adjusting for
acquisitions and disposals) include merger synergy achieved in the year and
are before goodwill amortisation and exceptional items. Comparisons are
with the equivalent period last year.
Spirits and Wine
* Sales up 7% in the second half; sales down 1% in the year mainly
due to trading weakness in Asia Pacific and Latin America
* Full year volumes of top five brand market units up 6% and top
ten up 5%
* Operating profit growth 7% to #967 million, Europe up 20% and
North America up 17%, Asia Pacific down 6%, Latin America down
16% and Rest of World down 27%
* Operating margin up 1.6 percentage points to 19.6%
* Marketing expenditure up 17% in the second half; down 3% for the
full year
* Marketing expenditure increased 6% on the nine global priority
brands in the year
* Incremental merger cost savings of #110 million achieved in the
year
Packaged Food
* Sales up 2%
* Volumes up 1%
* Operating profit growth 7% to #478 million
* Operating margin up 0.5 percentage points to 12.7%
* Marketing expenditure remains at 19.7% of sales
Beer
* Sales up 4%
* Volumes up 3%, with Guinness volumes up 6%
* Operating profit growth 16% to #273 million
* Operating margin up 1.1 percentage points to 12.2%
* Marketing expenditure up 10%
Quick Service Restaurants
* Dollar system sales up 5%
* Total restaurants worldwide up 7% in the year to 10,526 units
* Worldwide comparable restaurant sales flat
* Operating profit growth 4% to #185 million
* Operating margin up 0.4 percentage points to 21.1%
CHIEF EXECUTIVE OFFICER'S COMMENTS
John McGrath, Chief Executive Officer of Diageo, commenting on the year
ended 30 June 1999 said:
"This is Diageo's first full year of operations and these results show that
the group is now delivering underlying top line growth.
Each business has contributed to the overall improvement in performance in
the second half:
* In Spirits and Wine, through the improving trading
performance of our global priority brands and top ten brand
market units;
* In Packaged Food, through improving sales in difficult
categories such as Desserts and Baking Mixes, and through the
continuation of strong performance in priority brands such as
Progresso and Toaster Pastry;
* In Beer, where Guinness volumes have continued to increase
worldwide; and
* In Quick Service Restaurants, where the profitable
international expansion has continued.
Further progress in trading performance together with the new capabilities
and new ways of working which have been developed in the year will be the
key to the achievement of Diageo's future growth aspirations.
In North America and Europe, where we earn over 80% of our operating
profits, Diageo continues to generate good levels of organic growth.
Comparable operating profit from these regions rose by nearly #200 million
in the year. This represents 15% organic growth of which 6 percentage points
are attributable to merger synergy and 9 percentage points are from improved
trading performance.
We are committed to developing our business in the areas outside North
America and Europe. While difficult economic conditions, mainly in Asia and
Latin America, have reduced the profits earned from these areas by about #60
million year on year, we have seen some recovery in the second half.
We have identified the key drivers of improved performance within our
portfolio of brands. We have disposed of, or announced the disposal process
for, a number of brands which do not fit our portfolio. We are focusing on
the opportunities within our rationalised portfolio in a defined order,
aggressively testing new approaches and analysing the results to ensure that
best practice is progressively applied to all brands.
Diageo is highly cash generative. Our portfolio of brands generated #1,966
million of operating cash flow. We continue to look for value creating add-
on acquisitions, but our tough return criteria means that we do not envisage
a substantial increase in such expenditure. We have also continued to
explore ways of creating top line growth which leverage the strength of our
brands but which do not require the investment of additional capital, for
example, the joint venture recently announced between Haagen-Dazs and Nestle
in the United States.
We have continued to manage our capital structure actively and we
repurchased a further #1.2 billion of shares during the year."
Commenting on the trading situation since 1 July 1999, John McGrath said:
"The trends we saw in the second half of the year and which resulted in a 6%
organic growth in operating profit excluding merger synergy have continued
into the current fiscal year. In Spirits and Wine in North America and
Europe, the momentum built behind the global priority brands has delivered
volume growth. Latin America has steadied in the last two months but there
are still political and economic uncertainties in some countries. In Asia
Pacific, we continue to benefit from recovery in the spirits market. In
Packaged Food, volume growth has been achieved in Pillsbury North America
and in Bakeries and Foodservice. In International volumes are slightly
down. In Beer, volume growth in Europe slowed at the beginning of the
current year but it is expected to recover. In Quick Service Restaurants,
comparable restaurant sales in North America were down in July and August.
This was expected as in these months in 1998 comparable restaurant sales
growth of over 8% was achieved. In company managed restaurants,
profitability has improved further and we continue to achieve comparable
restaurant sales growth. There has been further expansion of our Quick
Service Restaurants business in Europe and Latin America based on new
restaurants and comparable restaurant sales growth.
We have demonstrated the impact that focus on the key profit drivers can
have on driving growth. Marketing expenditure on Diageo's priority brands
has driven volume growth this year. We are confident that further
investment behind a wider range of brands in the portfolio will produce
similar results and we intend to increase marketing expenditure,
particularly in the first half of the coming year, to deliver volume growth
in the future. Profitable top line growth will be a key contributor to our
objective to deliver superior shareholder returns."
The detailed interim statement follows.
DIAGEO PLC
TRADING AND FINANCIAL REVIEW
for the year ended 30 June 1999
Spirits and Wine
Sales for Spirits and Wine were #4,929 million (1998 - #5,327 million) and
operating profit was #967 million (1998 - #1,070 million). The decrease on
prior year was largely due to the impact of disposals.
Operating profit was up 7% on an organic basis. In the second half,
operating profit increased 12% on an organic basis. Sales for the year were
down 1% on an organic basis. In the second half sales grew 7% on an organic
basis. Sales per case increased by 6% due to mix improvement and overall
price increases of 2%.
Total volume was 113 million cases, an organic decline of 7%. This was due
to declines in local brands, disposal brands and wines. Volume of the nine
global priority brands declined by 2% in the year as a result of the impact
in the first half of the crisis in Asia and Latin America. In the second
half of the year, these brands delivered an overall 6% increase in volume as
the effect of incremental marketing investment drove improved volume
performance in key markets and as Asia started to recover.
The nine global priority brands performed as follows:
* Johnnie Walker Black and Johnnie Walker super deluxe volumes
increased by over 20% in the second half. In the full year
volumes were down by 4% worldwide due to declines in Johnnie
Walker Black Label in Thailand down 33%, and Japan down 10%.
* Johnnie Walker Red volumes were down by 12% in the full year
due to declines in Japan down 20%, Thailand down 42% and
France down 18%. Again, the second half performance improved
and volumes were broadly level with the same period last
year.
* Smirnoff volumes were up 2% due to strong performance in all
major markets. In addition, price increases in the United
States, United Kingdom and Spain over the last 18 months led
to an increase in net revenue per case and contribution after
marketing expenditure was therefore up over 10%.
* J&B volumes declined 4% due to continued weakness in the
United States and South Africa and despite further strong
performance in Spain where volumes increased by 6%.
* Baileys volumes were up 2% due to improved performance in the
second half when volumes were up 8%.
* Gordon's volumes declined by 8% for the full year. This was
mainly due to a managed reduction in trade stock levels in
the United Kingdom in the first half of the year. In the
second half, total volumes increased 4% against the
comparable period.
* Cuervo volumes were up 9% as a result of double digit
increases in many markets and a 7% increase in the United
States.
* Tanqueray continued to perform strongly throughout the world
with a 6% increase in volume. Contribution increased despite
an 8% increase in marketing investment as a result of the
price increase taken in the United States last year.
* Malibu volumes increased by 5% mainly due to a 10% increase
in volumes in the United States.
The top five brand market units (BMUs) - J&B in Spain, Smirnoff in US,
Cuervo in US, Smirnoff in UK and Baileys in US - increased volumes by 6% on
the prior year improving on the 3% increase achieved in the first half of
the year. Similarly, in total the top ten BMUs, which further include
Tanqueray, Johnnie Walker Black and Red and J&B in the United States and
Baileys in the United Kingdom, increased volume by 5% following a 2%
increase in the first half. Net sales increased by 7% for both the top five
and the top ten BMUs due to price increases in either the current or prior
year.
Marketing expenditure has been focused on the global priority brands.
Marketing expenditure in Baileys, J&B and Cuervo increased substantially
during the year. Marketing expenditure on the nine global priority brands
now represents 60% of total spend, up 7 percentage points against the prior
year. This marketing expenditure focus relates to both brands and key
markets with spend on the top five BMUs up more than 15%. Total marketing
investment declined by 3% on a comparable basis, despite a 17% or #43
million increase over prior year in the second half. As a percentage of
sales, marketing expenditure was broadly level at 12.8% of sales.
In North America, operating profit increased by 17% on an organic basis to
#318 million (1998 - #345 million). Organic growth, excluding incremental
synergy benefits of #21 million, was 10%. Volume fell 3% due to a 12%
decline in wine volumes. In spirits, there were strong performances from
Smirnoff up 6%, Cuervo up 7%, Tanqueray up 8% and Johnnie Walker Black up
7%. Improved performance in these global priority brands enhanced margins
which improved by 1.7 percentage points excluding synergy. Smirnoff
increased market share for the third year in succession, increasing by a
further 3 percentage points year on year to 24%. Baileys similarly
increased market share by 3 percentage points to 53%. Johnnie Walker Black,
Johnnie Walker Red and J&B all maintained their market share. Tanqueray
continues to lead the imported premium gin category with over 50% market
share, though share fell slightly in the year.
Price increases were taken on Smirnoff, Cuervo and Baileys in the second
half of the year. Johnnie Walker Black and Red, J&B and Tanqueray continued
to benefit from price increases taken last year.
In Europe, operating profit was up 20% on an organic basis to #384 million
(1998 - #370 million). Excluding incremental synergy benefits of #52
million, operating profit grew by 4% and margins improved by 0.6 percentage
points. Marketing as a percentage of sales fell slightly year on year from
13.2% to 12.9%. However, in the second half it rose on a comparable basis
from 12.3% to 13.9%. The effectiveness of marketing investment has also
improved. For example, in the United Kingdom, as a result of changes in
media buying, spend on the global priority brands has increased by 4% while
media impressions have increased by over 20%. In the United Kingdom,
volumes increased in Smirnoff by 7% and in Baileys by 5%. Volumes of Bells
and Gordon's declined over 10% in the year, due to a planned reduction in
trade stock levels. In the second half, volumes were up significantly year
on year. In Spain, while overall volume was flat, sales increased by 6% due
to mix improvements and price increases. As a result of the significant
increase in marketing investment, there was strong volume performance in J&B
and Cardhu, and price increases were taken across the portfolio. J&B,
Baileys, Cardhu and Smirnoff Red all increased market share.
In Asia Pacific, operating profit fell from #119 million to #100 million.
This represents a 6% organic decline primarily due to comparative economic
weakness in Asia in the first half. Operating profit for Asia Pacific
increased 19% on an organic basis in the second half. Incremental merger
synergy benefits of #16 million were achieved in the year. Operating margins
for Asia Pacific were broadly flat as the benefit of merger synergy was
offset by deterioration in mix. Overall volumes in Asia Pacific declined by
3% with recovery in the second half when volumes increased by 3%. In Japan,
operating profits were below last year due to continuing economic weakness.
Similarly economic weakness adversely affected sales and profits in India
and the duty free business. In Australia, operating profits increased due
to continued strong performance from all local priority brands.
In Latin America, operating profit declined from #167 million to #118
million, an organic decline of 16%, due to the difficult economic conditions
in many countries in the region. Incremental merger synergy benefits of #17
million were achieved. Against this background, individual brands such as
Johnnie Walker Black and Red performed well, and Johnnie Walker Black
increased market share in Brazil and Columbia. In the second half, organic
operating profit in Latin America was down 5% against a 21% decline in the
first half.
In the Rest of World, operating profit declined from #69 million to #47
million, an organic decline of 27%. Incremental merger synergy benefits
were #4 million. Many markets such as Russia and parts of Africa faced
difficult economic conditions. Operating profit in Russia was also affected
by costs associated with the transfer to third party distribution. For Rest
of World, the trading situation did however improve in the second half.
North American non-core brands were disposed of in April 1999, including
Black Velvet Canadian whisky and Christian Brothers brandy. The
contribution after marketing expenditure from these brands in the year up to
this disposal was #33 million.
Packaged Food
Packaged Food operating profit was #478 million (1998 - #447 million) up 7%
on an organic basis. As anticipated at the time of the interim announcement
in March 1999 operating profit growth improved during the year. In the
second half, operating profit was up 22% on an organic basis, as a result of
the actions taken to improve the trading performance in Desserts and Baking
Mixes and Canned Vegetables and as a result of continued growth in the
higher value added categories of Refrigerated Baked Goods, Progresso and
Breakfast. Organic volumes were up 1% for the full year following a second
half increase of 5%. Sales increased by 2% in the full year on an organic
basis and again improved in the second half, up 7% against the comparable
period. Organic operating margins improved from 12.2% to 12.7%.
In Pillsbury North America, volume for the year was flat. However, the
organic volume trend improved in each quarter and organic volume growth was
5% in the second half. Organic sales growth was 1% for the year as the
trend towards higher margin products continued. Marketing investment as a
percentage of sales, was broadly in line with the prior year as a 7% decline
in spend in the first half was offset by a 11% increase in the second half.
In Refrigerated Baked Goods, sales and consumer take away were up 2%. In
Breakfast, sales were up 6% and consumer take away up 7%, with consumer take
away of toaster pastry up 19% following the increase in production capacity.
In Desserts and Baking Mixes, sales were down 6% and consumer take away was
down 5%. Sales in the second half were up 7%. In Green Giant, volume and
sales were up 4% and 6% respectively and in the second half sales were up
17%. Advertising on this brand increased during the year and therefore
operating profit margin was reduced. In Progresso, sales of ready-to-serve
soup increased 11% and consumer take away was up 10%. Margin improved due
to lower costs. In Pizza, operating profit improved as a result of higher
volumes and lower costs. Mexican sales in North America continued to
decline and were 6% less than the prior year. Internationally the Old El
Paso brand continues to perform well with, for example, sales in Europe up
35%. Volume in the Haagen-Dazs core pints product continued to grow
strongly. This was offset by volume declines in the novelty range and total
volume was down 3%. Improved top line growth for the brand is expected to
result from the recently announced joint venture with Nestle in the United
States.
In Bakeries and Foodservice, a 5% organic increase in volume was achieved.
Volume increased 29% including the acquisitions of the Heinz bakery products
unit in October 1998 and of the Hazelwood Farms Bakeries business in May
1999. Sales increased 17% to #585 million.
A number of add-on acquisitions were made in the International business but
the weaker economic conditions in Japan, Brazil and Argentina have depressed
results. Volume on a comparable basis was in line with last year, but sales
were up 4% due to price increases and mix improvements. Continued higher
marketing investment reduced operating profit.
A number of non-core businesses were disposed of during the year. These
included the Foodservice de-hydrated potato business and six regional
brands. The contribution of these brands in the year up to their disposal
amounted to #16 million.
Beer
Operating profit was #273 million (1998 - #247 million) up 16% on an organic
basis. This increase was again driven by the growth of Guinness worldwide.
Guinness volume grew 6%. Volumes of other brands were flat and therefore
total volume was up 3% year on year. Excluding Cruzcampo, total volumes grew
4% and organic operating profit growth was 10%.
In Ireland, total volumes were up 2% driven by sales of Budweiser. Guinness
volumes were in line with prior year but contribution increased as a result
of a price increase in April 1999.
In Great Britain, Guinness volumes grew by 5% driven by the launch of
Guinness Extra Cold and strong focus on advertising with marketing
investment up 15%. Profit contribution increased due to mix improvement and
overhead cost savings. The business has continued to focus on the Guinness
brand and during the year capital invested in production assets relating to
other brands was reduced. The Harp brand was licensed and production
transferred to a third party during the year and it is planned to withdraw
Kilkenny Draught in October 1999.
In Spain, total volumes fell 1%. The profitability of the Cruzcampo
operation improved year on year as management continued to focus on
achieving margin improvement. This improved performance was reflected in
the price agreed when the disposal of the business was announced in June
1999. This disposal is part of the strategic focus on the Guinness brand
globally.
The United States continued to show strong volume growth with Guinness
volume up 16% driven by extensive media coverage and promotions. Market
share of the import sector increased to 4%.
In Asia Pacific, full year volume declined by 10% although second half
volumes were down by only 3%. In Malaysia, market share increased although
volumes were down 8%. In Indonesia, Guinness declined by 6% as premium
products recovered at a much slower rate than the overall beer market.
Africa performed strongly, mainly driven by Nigeria where volumes were up
over 40%. Market share increased as a result of quality improvements and
the introduction of innovative consumer promotions in a total beer market up
16%.
Quick Service Restaurants
Operating profit for Quick Service Restaurants was #185 million (1998 - #179
million) up 4% on an organic basis. System sales grew 5% to $10.9 billion.
At 30 June 1999, the Burger King system comprised 10,526 restaurants
worldwide. 876 new restaurants were opened in the year and 185 closed of
which 32 were company managed restaurants closed as part of the portfolio
review project in North America. Worldwide comparable restaurant sales were
level year on year against 1% growth in the prior year due to a 5% decrease
in comparable restaurant sales in the United States in the second half.
A number of new initiatives have been developed during the year. A new
logo, new packaging, and new uniforms are being introduced as part of a new
brand identity. Changes have been proposed to the drive-through system
which have produced strong sales growth in the test locations. In addition,
changes in kitchen design aimed at improving the range of products offered
and ensuring excellence in product quality are being tested. This is all
building on Burger King's strong marketing position with the consumer as the
"Best place for burgers".
Organic operating profit in North America decreased by 4% to #162 million.
System sales increased by 3% driven by 489 new restaurants. Comparable
restaurant sales were in line with last year, though down 5% in the second
half. Company managed restaurants continued to generate improved performance
as comparable sales in these restaurants grew 1% and operating margins
continued to improve. A number of new products are currently being tested
which will improve the level of introductions for the coming year.
Marketing programmes have been reviewed and will be a key driver of future
comparable restaurant sales growth. The new initiatives being implemented
on a systemwide basis will in due course benefit performance in North
America. The portfolio review project is now substantially complete and 32
restaurants have been closed and 60 refranchised. Costs of #11 million
relating to this programme were charged to operating profit and, as
previously announced, were broadly offset by other one-off gains within the
worldwide Quick Service Restaurant business.
Outside North America, profitability has increased by over 100% and
represents 12% of total operating profits. The improved performance is
based on new restaurants, comparable restaurant sales growth and improved
operating margins in company managed restaurants. In Europe, the system has
increased to 1,304 restaurants with the addition of over 20% more
restaurants in the year. Comparable restaurant sales increased by 3% in the
year and the increase over the last two years is over 10%. In Latin
America, over 15% more restaurants were added in the year. Comparable
restaurant sales were up 7%, giving a 14% increase for the last two years.
In Asia Pacific, restaurant additions totalled about 9%. Comparable
restaurant sales in the region were down 1% in the year despite 2%
comparable restaurant sales growth in the key market of Australia.
Associates
Income from associates before exceptional items was #188 million for the
year compared with #210 million last year. The disposal of shareholdings in
associates, including Cantrell & Cochrane and Laurent Perrier, reduced
income by #42 million. The group's share of Moet Hennessy's operating profit
before exceptionals was #132 million, up from #114 million.
Exchange rates
Exchange rate movements during the year adversely impacted profit before
exceptional items and tax by #47 million. The adverse impact of exchange
rate movements on the translation of overseas operating profit was #8
million and on transactions in the period was #39 million, giving a total
impact on operating profit of #47 million. Share of profits of associates
benefited by #2 million and the interest charge was adversely impacted by #2
million
The major part of the group's expected transaction exposure is hedged
forward on an 18-month forward rolling basis for the currencies in which
there is an active market. Non-sterling net assets are hedged by currency
borrowings and currency swaps as follows: US dollar 75%; Euro 90%; and
others 50%.
Based on current exchange rates, it is estimated that the adverse impact of
exchange rate movements on profit before exceptionals and tax for the year
ended 30 June 2000 will be approximately #15 million.
Goodwill
Goodwill amortisation in the year was #4 million, being all in respect of
Packaged Food acquisitions made during the year.
Exceptional items
Exceptional operating cost charges in year amounted to #382 million before
taxation, comprising merger integration, share purchases for the sharesave
scheme, and plant closure and integration in Packaged Food.
#262 million costs were incurred to integrate the businesses - #249 million
for Spirits and Wine and the balance for the corporate offices.
Approximately #113 million costs were employee related, principally
redundancy, and #25 million were asset write downs. The balance included
costs in respect of contract terminations, consultancy and systems costs.
Incremental merger synergy achieved in the period was #127 million, in
addition to the #15 million achieved last year.
In the past, the company has issued new shares to satisfy the company's
obligation under employee savings-related schemes (SAYE schemes). This is
not consistent with Diageo's managing for value approach. It was,
therefore, decided that Diageo's obligation in respect of existing grants to
employees under such schemes should be met through the purchase of Diageo
shares and the group funded a trust to acquire 14.6 million shares. An
exceptional charge of #43 million reflects the amount by which the cost of
the shares acquired exceeds the option price payable by employees upon
exercise. The options will become exerciseable between 1999 and 2003. It
is expected that future grants under SAYE schemes will be hedged and the
cost will be amortised over the lives of the options.
Plant closure costs of #40 million were incurred in respect of the Haagen-
Dazs plant in Woodbridge, New Jersey. Costs of integrating the Heinz bakery
products unit and Hazelwood Farms Bakeries amounted to #37 million in the
year.
Exceptional items in respect of the disposal of fixed assets include losses
of #10 million relating to the North American portfolio review in Quick
Service Restaurants and losses of #11 million in respect of Harp lager
brewery assets sold as part of the production rationalisation in Beer in the
United Kingdom.
The disposals of the shareholdings in associates, including Cantrell &
Cochrane and Laurent Perrier, gave rise to an exceptional profit before
taxation of #113 million. The sales of other businesses, including twenty
North American food and drinks brands, resulted in a net loss of #9 million.
Interest
The interest charge in the year increased to #324 million from #302 million,
before the exceptional charge, in the comparable period. Funding the
capital repayments and repurchases in 1998 and 1999 accounted for a #129
million increase. This was partly offset by a #98 million benefit in
respect of the disposal of businesses, principally the Dewar's and Bombay
brands. The average interest rate for the year was 6.3% and, based on
current interest rates, it is anticipated that the rate will be slightly
above that level for the year to 30 June 2000. The interest rate policy is
to maintain a 50/50 split between fixed and floating rates, with floating
rates partly hedged by collars. The group's funding strategy is to maintain
the proportion of gross borrowings maturing within one year to below 60%.
Taxation
The effective rate of taxation on profit for the year before exceptional
items and goodwill amortisation was 26.2%, compared with 27.2%. It is
anticipated that the tax charge will remain at this level for some time.
Dividend
The directors recommend a final dividend of 11.7 pence per share payable on
15 November 1999 to holders of the ordinary shares. Payment to US ADR
holders will be made on 19 November 1999. The record date for this dividend
will be 8 October 1999 and the shares will be traded ex-dividend from 4
October 1999. A dividend reinvestment plan is available in respect of this
dividend and the plan notice date will be 25 October 1999.
Dividends for the year will total 19.5 pence, an increase of 8% on last
year's normal dividends. The 1998 interim dividend included an additional
payment of 5.3 pence, a one-off amount to reflect the change in year end and
consequent change in dividend payment patterns.
Cash flow
Cash inflow from operating activities was #1,966 million compared with
#1,866 million. This inflow was after #246 million of merger integration
costs. Interest payments were #432 million (including the #71 million cost
of closing out certain long dated financial instruments which was provided
for in prior years) compared with #258 million. Purchases of tangible fixed
assets in the period amounted to #534 million, an increase of #61 million
and the group spent #175 million on the purchase of shares for employee
schemes. Tax payments were slightly lower than the comparable period at
#566 million. Free cash flow generated was #373 million, compared with #735
million last year.
The group repurchased and cancelled 172 million ordinary shares and 3
million B shares in the year at a total cost of #1,211 million.
Balance sheet
At 30 June 1999, total shareholders' funds were #4,026 million compared with
#4,629 million at 30 June 1998. The decrease reflects the share
repurchases, partly offset by #268 million retained income for the period
and #78 million from exchange adjustments.
Net borrowings were #6,056 million, an increase of #1,548 million from 30
June 1998. This increase reflects dividends paid of #668 million and the
share repurchases, partly offset by the free cash inflow noted above.
Annual report and AGM
Diageo's annual report will be sent to all shareholders on 8 October 1999.
The Annual General Meeting will be held at The Queen Elizabeth II Conference
Centre, Broad Sanctuary, Westminster, London SW1P 3EE at 2.30pm on 9
November 1999.
Copies of the group's results presentation to be made to analysts and
investors are available upon request. The announcement and the presentation
are also available on the Diageo web site www.Diageo.com from 9.30am on 16
September 1999.
Enquiries to:
Catherine James Investor enquiries 0171 927 5272
investor.rel@diageo.com
Kathryn Partridge Media enquiries 0171 927 5225
kathryn.partridge@diageo.com
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