TIDMDGE
RNS Number : 8139H
Diageo PLC
01 August 2023
Diageo delivers strong performance while investing in
sustainable long-term growth
Delivered strong net sales and operating profit growth within
medium-term guidance
- Reported net sales of GBP17.1 billion, increased 10.7%,
primarily reflecting strong organic net sales growth, and
favourable impacts from foreign exchange.
- Organic net sales grew 6.5%. Price/mix of 7.3 percentage
points reflects a high single-digit contribution from price and
premiumisation.
- Reported volume declined by 7.4%, and organic volume declined by 0.8%.
- Growth reflects our advantaged portfolio of strong brands,
diversified footprint, and premiumisation.
Resilient operating margin despite increased cost inflation
- Reported operating profit grew 5.1% to GBP4.6 billion.
Reported operating margin declined by 147bps, with organic margin
expansion more than offset by exceptional operating items and
foreign exchange.
- Organic operating profit grew 7.0% and organic operating
margin expanded by 15bps, driven by disciplined cost management.
Price increases more than offset the absolute cost inflation impact
on gross margin.
Advantaged portfolio and premiumisation drove market share
growth
- Growth in organic net sales was delivered across most
categories, particularly in our three largest categories: scotch,
tequila and beer.
- Premium-plus brands comprised 63% of reported net sales, a 7
percentage point increase from fiscal 19.
- Total trade market share grew or held in over 70%(1) of total
net sales value in measured markets.
Optimisation of portfolio through acquisitions and disposals
- Acquired Mr Black, a leading Australian premium coffee
liqueur, Balcones Distilling, a Texas craft distiller and one of
the leading producers of American single malt whiskey and Don Papa
Rum, a super-premium, dark rum from the Philippines.
- Completed the sale of Guinness Cameroun S.A., disposed of
Archers and completed the disposal and franchising of a portfolio
of brands in India.
Invested to sustain long-term growth
- Increased organic marketing investment by 5.6%, reflecting
strong, consistent investment in our brands.
- Invested GBP1.2 billion of capital expenditure (capex) in
supply capacity, sustainability, digital capabilities and consumer
experiences.
Continued cash flow generation and strong balance sheet
- Net cash flow from operating activities declined GBP0.9 billion to GBP3.0 billion.
- Free cash flow of GBP1.8 billion, declined GBP1.0 billion as
strong growth in operating profit and favourable foreign exchange
impacts were more than offset by higher year-on-year working
capital outflows, tax and interest payments, and capital
investment. Increased working capital reflects normalisation of
creditors relative to fiscal 22 as our growth rate moderated in
fiscal 23.
- Strong balance sheet, with leverage ratio(2) of 2.6x as at 30
June 2023, at the lower end of our target range, as a result of
strong operating profit performance.
Continued progress in delivering Society 2030: Spirit of
Progress ESG goals and doing business the right way
- Continued to reduce our absolute Scope 1 and 2 greenhouse gas
emissions, achieving a further 5.4% reduction versus fiscal 22 and
a cumulative 14.7% improvement from our 2020 baseline.
- SMASHED programme now live in 38 countries, and educated over
1.9 million young people, parents and teachers on the impact of
underage drinking in fiscal 23, bringing the total to more than 3.7
million to date.
Continued creation of long-term shareholder value
- Increased basic eps by 17.6% to 164.9 pence and pre-exceptional eps by 7.6% to 163.5 pence.
- Increased recommended final dividend by 5% to 49.17 pence per share.
- Annualised total shareholder return was -2%, mainly driven by
lower year-on-year share price. Total shareholder return, for the
5-year and 10-year periods of 7% and 9% respectively, remains
strong.
- Completed a total of GBP1.4 billion return of capital in
fiscal 23, which included GBP0.9 billion related to the completion
of our GBP4.5 billion multi-year programme, and returned an
additional GBP0.5 billion during the second half. Today we
announced a new return of capital programme of up to $1
billion.
- Starting in fiscal 24, in line with reporting requirements the
functional currency of Diageo plc has changed from sterling to the
US dollar. Diageo has also changed its presentation currency to US
dollar.(3)
See page 48 for explanation and reconciliation of non-GAAP
measures, including organic net sales, organic marketing
investment, organic operating profit, free cash flow, eps before
exceptionals, ROIC, adjusted net debt, adjusted EBITDA and tax rate
before exceptional items.
(1)Internal estimates incorporating Nielsen, Association of
Canadian Distillers, Dichter & Neira, Frontline, INTAGE, IRI,
ISCAM, NABCA, Scentia, State Monopolies, TRAC, IPSOS and other
third-party providers. All analysis of data has been applied with a
tolerance of +/- 3 bps. Percentages represent percent of markets by
total Diageo net sales contribution that have held or gained total
trade share fiscal year to date. Measured markets indicate a market
where we have purchased any market share data. Market share data
may include beer, wine, spirits or other elements. Measured market
net sales value sums to 87% of total Diageo net sales value in
fiscal 23. Effective fiscal 23, market share now reflects total on
and off trade.
(2)Ratio of adjusted net borrowings to adjusted EBITDA. For
further details see page 57.
(3)For further details, please see pages 7-8 and 47.
Debra Crew, Chief Executive, said:
We have delivered strong fiscal 23 full-year results, with
organic net sales growth of 6% and organic operating profit growth
of 7%, both within our medium-term guidance. We expanded organic
operating margin by 15 basis points in a challenging cost
environment while continuing to invest in the business. These
results demonstrate Diageo's ability to consistently deliver
resilient performance, even in challenging macro environments. I
want to thank my colleagues, nearly 30,000 globally, for their
dedication, creativity and agility in delivering these results. I
am also proud of how our Diageo family has come together in recent
weeks following the loss of our much loved and respected former
CEO, Sir Ivan Menezes.
In fiscal 23, we drove double-digit organic net sales growth in
scotch, tequila, and Guinness, with our premium-plus brands
contributing 57% of overall organic net sales growth. We delivered
strong growth in four of our five regions, with Europe and Asia
Pacific growing double-digit. North America delivered stable
performance as the US spirits industry continued to normalise
post-pandemic, and we lapped strong comparators, particularly in
the second half of fiscal 23. Globally, we gained or held share in
over 70%(1) of total net sales value in our measured markets in
fiscal 23.
Our culture of everyday efficiency and strong pipeline of
productivity initiatives drove GBP450 million of savings in fiscal
23, fuelling sustained investment in brand building. Our revenue
growth management capabilities, deep consumer insights, and smart
reinvestment enabled us to take strategic pricing actions with
precision and effectiveness. Through free cash flow delivery, we
increased our capital expenditure, acquired a number of brands to
strengthen our exposure to attractive categories and bolstered our
investment in maturing stock in fiscal 23, positioning us well for
sustainable, long-term growth.
Looking ahead to fiscal 24, I expect operating environment
challenges to persist, with continued cost pressure and ongoing
geopolitical and macroeconomic uncertainty. This requires us to
move with greater speed and agility. My near term opportunities to
drive the business focus on bolder and faster innovation, stepping
up operational excellence to meet consumers' evolving tastes and
preferences while driving scotch, tequila and Guinness.
Fiscal 24 marks the start of Diageo's next stage of evolution,
and it is an incredible privilege to be leading the company through
it. I believe total beverage alcohol (TBA) is an attractive sector
underpinned by strong consumer fundamentals, including population
growth, increased spirits penetration, and resilience in
premiumisation globally. I see a long runway of future growth
opportunities for Diageo to go after with our winning strategy.
And, I firmly believe we have an advantaged portfolio to capitalise
on, to drive sustainable long-term growth and generate value for
shareholders. I am excited to work with our teams around the world
to capture the opportunities ahead.
Financial performance
Volume (equivalent units) Operating profit Earnings per share (eps)
EU243.4m GBP4,632m 164.9p
(F22: EU 263.0m) (F22: GBP4,409m) (F22: 140.2p)
Reported movement (7)% iReported movement 5% hReported movement 18% h
Eps before exceptional
Organic movement(2) (1)% iOrganic movement(2) 7% h items(2) 8% h
--------------------- ---- --------------------- ---------------------- ---
Net sales Net cash from operating Total recommended dividend
activities per share(3)
GBP17,113m GBP3,024m 80.00p
(F22: GBP15,452m) (F22: GBP3,935m) (F22: 76.18p)
F23 free cash flow(2)
Reported movement 11% h GBP1,800m Increase 5% h
Organic movement(2) 6% hF22 free cash flow(2)
GBP2,783m
--------------------- ---- --------------------- ---------------------- ---
(1)Internal estimates incorporating Nielsen, Association of
Canadian Distillers, Dichter & Neira, Frontline, INTAGE, IRI,
ISCAM, NABCA, Scentia, State Monopolies, TRAC, IPSOS and other
third-party providers. All analysis of data has been applied with a
tolerance of +/- 3 bps. Percentages represent percent of markets by
total Diageo net sales contribution that have held or gained total
trade (on and off trade) share fiscal year to date. Measured
markets indicate a market where we have purchased any market share
data. Market share data may include beer, wine, spirits or other
elements. Measured market net sales value sums to 87% of total
Diageo net sales value in fiscal 23. Effective fiscal 23, market
share now reflects total on and off trade.
(2)See page 48 for explanation and reconciliation of non-GAAP
measures.
(3)Includes recommended final dividend of 49.17p.
Key financial information
For the year ended 30 June 2023
Summary financial information
Organic Reported
growth growth
2023 2022 % %
---------------------------------------- ----------- ------ ------ ------- --------
Volume EUm 243.4 263.0 (1) (7)
======================================== =========== ====== ====== ======= ========
Net sales GBP million 17,113 15,452 6 11
======================================== =========== ====== ====== ======= ========
Marketing GBP million 3,051 2,721 6 12
======================================== =========== ====== ====== ======= ========
Operating profit before exceptional
items GBP million 5,254 4,797 7 10
======================================== =========== ====== ====== ======= ========
Exceptional operating items(1) GBP million (622) (388)
======================================== =========== ====== ====== ======= ========
Operating profit GBP million 4,632 4,409 5
======================================== =========== ====== ====== ======= ========
Share of associate and joint venture
profit after tax GBP million 370 417 (11)
======================================== =========== ====== ====== ======= ========
Non-operating exceptional items(1) GBP million 328 (17)
======================================== =========== ====== ====== ======= ========
Net finance charges GBP million (594) (422)
======================================== =========== ====== ====== ======= ========
Exceptional taxation credit(1) GBP million 186 31
======================================== =========== ====== ====== ======= ========
Tax rate including exceptional
items % 20.5 23.9 (14)
======================================== =========== ====== ====== ======= ========
Tax rate before exceptional items % 23.0 22.5 2
Profit attributable to parent company's
shareholders GBP million 3,734 3,249 15
======================================== =========== ====== ====== ======= ========
Basic earnings per share pence 164.9 140.2 18
======================================== =========== ====== ====== ======= ========
Basic earnings per share before
exceptional items pence 163.5 151.9 8
======================================== =========== ====== ====== ======= ========
Recommended full year dividend pence 80.00 76.18 5
---------------------------------------- ----------- ------ ------ ------- --------
(1)For further details on exceptional items see pages 22 and
34-35.
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 (4) (2.4) 11 663 13 160 10 235 6 139
================== ==== ====== ======== === ======== ===== ========= ==== ========
Europe - 0.1 11 357 10 58 9 88 26 226
================== ==== ====== ======== === ======== ===== ========= ==== ========
Asia Pacific (14) (13.4) 11 316 11 56 27 194 (8) (38)
================== ==== ====== ======== === ======== ===== ========= ==== ========
Latin America and
Caribbean (3) (0.9) 18 274 22 53 23 123 23 123
================== ==== ====== ======== === ======== ===== ========= ==== ========
Africa (8) (3.0) 1 17 (2) (4) (30) (95) (44) (139)
Corporate - - 63 34 58 7 (37) (88) (37) (88)
------------------ ---- ------ -------- --- -------- ----- --------- ---- --------
Diageo (7) (19.6) 11 1,661 12 330 10 457 5 223
------------------ ---- ------ -------- --- -------- ----- --------- ---- --------
Organic growth by region
Operating
profit before
exceptional
Volume Net sales Marketing items
---------- --------------- --------------- ----------------
% EUm % GBP million % GBP million % GBP million
---------------------------- --- ----- ----------- ----------- --- -----------
North America (5) (2.5) - 11 2 22 (2) (57)
============================ === ===== =========== =========== === ===========
Europe - 0.1 11 347 7 42 11 103
============================ === ===== =========== =========== === ===========
Asia Pacific 5 3.9 13 353 9 46 29 200
============================ === ===== =========== =========== === ===========
Latin America and Caribbean (3) (0.9) 9 142 14 34 12 62
============================ === ===== =========== =========== === ===========
Africa (7) (2.4) 5 83 2 4 12 37
Corporate - - 61 33 36 4 (9) (24)
---------------------------- --- ----- ----------- ----------- --- -----------
Diageo (1) (1.8) 6 969 6 152 7 321
---------------------------- --- ----- ----------- ----------- --- -----------
Fiscal 19 to fiscal 23 growth
------------------------------------------------------------------------------------
Net sales
Reported growth on Organic net
net sales a constant Organic volume sales CAGR
growth %(1) basis %(1) CAGR %(2) %(2)
---------------------------- ------------ ----------- -------------- -----------
North America 52 41 2 9
============================ ============ =========== ============== ===========
Europe 21 30 3 7
============================ ============ =========== ============== ===========
Asia Pacific 19 24 1 6
============================ ============ =========== ============== ===========
Latin America and Caribbean 59 62 4 15
============================ ============ =========== ============== ===========
Africa 6 30 2 8
============================ ============ =========== ============== ===========
Corporate 66 62 - 14
---------------------------- ------------ ----------- -------------- -----------
Diageo 33 35 2 8
---------------------------- ------------ ----------- -------------- -----------
See page 48 for explanation and reconciliation of non-GAAP
measures
(1)For further details on fiscal 19 to fiscal 23 growth on a
constant basis see pages 49-52.
(2)Fiscal 19 to fiscal 23 CAGR indicative. Calculated by
applying each year's individual organic growth rates.
Net sales (GBP million)
Reported net sales grew 10.7%
Organic net sales grew 6.5%
Reported net sales grew 10.7%, driven by strong organic growth
and favourable foreign exchange impacts.
Organic net sales growth of 6.5% reflects 7.3 percentage points
of positive price/mix and a decline in organic volume of 0.8%. Four
out of five regions delivered growth, despite lapping strong
double-digit growth at the group level in fiscal 22. Price/mix was
driven by price increases and premiumisation.
Net sales GBP million
-------------------------- -----------
2022 15,452
========================== ===========
Exchange(1) 702
========================== ===========
Acquisitions and disposals (114)
========================== ===========
Hyperinflation(2) 104
========================== ===========
Volume (114)
========================== ===========
Price/mix 1,083
-------------------------- -----------
2023 17,113
-------------------------- -----------
(1)Exchange rate movements reflect the adjustment to recalculate
the reported results as if they had been generated at the prior
period weighted average exchange rates.
(2)See pages 36 and 49-52 for details of hyperinflation
adjustment.
Operating profit (GBP million)
Reported operating profit grew 5.1%, mainly driven by growth in
organic operating profit and positive impacts from exchange rate
movements. These favourable items were largely offset by the
negative impact of exceptional operating items, primarily non-cash
impairments related to India and the supply chain agility
programme.
Organic operating profit grew 7.0%, ahead of organic net sales
growth, driven by growth across all regions except North
America.
Operating profit GBP million
------------------------------ -----------
2022 4,409
============================== ===========
Exceptional operating items(1) (234)
============================== ===========
Exchange 122
============================== ===========
Acquisitions and disposals (61)
============================== ===========
FVR(2) 53
============================== ===========
Hyperinflation(3) 22
============================== ===========
Organic movement 321
------------------------------ -----------
2023 4,632
------------------------------ -----------
(1)For further details on exceptional operating items see pages
22 and 34-35.
(2)Fair value remeasurements. For further details see page
22.
(3)See pages 36 and 49-52 for details of hyperinflation
adjustment.
Operating margin (%)
Reported operating margin declined by 147bps
Organic operating margin expanded by 15bps
Reported operating margin declined by 147bps, with organic
operating margin expansion more than offset by exceptional
operating items, negative impact of foreign exchange, acquisitions,
disposals and other items.
Organic operating margin expanded by 15bps, reflecting
disciplined cost management despite inflation. Strong operating
margin expansion in Asia Pacific, Africa and Latin America and
Caribbean was partially offset by declines in North America and
Europe.
Organic gross margin declined by 97bps, primarily driven by cost
pressures. Price increases more than offset the absolute impact of
cost inflation.
Operating margin ppt
============================== ======
2022(1) 28.5
============================== ======
Exceptional operating items(2) (1.12)
============================== ======
Exchange (0.58)
============================== ======
Acquisitions and disposals (0.15)
============================== ======
Other(3) 0.23
============================== ======
Gross margin (0.97)
============================== ======
Marketing 0.14
============================== ======
Other operating items 0.98
------------------------------ ------
2023(1) 27.1
------------------------------ ------
(1)Operating margin in waterfall is rounded to nearest decimal
place.
(2)For further details on exceptional operating items see pages
22 and 34-35.
(3)Fair value remeasurements and hyperinflation adjustment. For
further details on fair value remeasurements see page 22. See pages
36 and 49-52 for details of hyperinflation adjustment.
Basic earnings per share (pence)
Basic eps increased 17.6% from 140.2 pence to 164.9 pence
Basic eps before exceptional items(1) increased 7.6% from 151.9
pence to 163.5 pence
Basic eps increased 24.7 pence, mainly driven by organic
operating profit growth and exceptional items, partially offset by
increased finance charges and higher tax.
Basic eps before exceptional items increased 11.6 pence.
(
Basic earnings per share pence
==================================== =====
2022 140.2
==================================== =====
Exceptional items after tax(2) 13.1
==================================== =====
Exchange on operating profit 5.3
==================================== =====
Acquisitions and disposals(3) (1.7)
==================================== =====
Organic operating profit 13.8
==================================== =====
Associates and joint ventures (2.0)
==================================== =====
Finance charges(4) (5.5)
==================================== =====
Tax(5) (4.3)
==================================== =====
Share buyback(3) 2.0
==================================== =====
Non-controlling interests 0.8
==================================== =====
FVR(6) 2.3
==================================== =====
Hyperinflation (operating profit)(7) 0.9
------------------------------------ -----
2023 164.9
------------------------------------ -----
(1)See page 48 for explanation of the calculation and use of
non-GAAP measures.
(2)For further details on exceptional items see pages 22 and
34-35.
(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.
(5)Excludes tax related to acquisitions, disposals and share
buybacks.
(6)Fair value remeasurements. For further details see page
22.
(7)Operating profit hyperinflation adjustment movement was GBP12
million compared to fiscal 22 (F23 - GBP22 million; F22 - GBP10
million).
Net cash from operating activities and free cash flow (GBP
million)
Generated GBP3,024 million net cash from operating activities(1)
and GBP1,800 million free cash flow
Net cash from operating activities was GBP3,024 million, a
decrease of GBP911 million compared to fiscal 22. Free cash flow
declined by GBP983 million to GBP1,800 million.
Free cash flow declined as strong growth in operating profit and
favourable foreign exchange impacts were more than offset by higher
year-on-year working capital outflows, tax payments, interest paid
and capital investment.
The higher year-on-year working capital outflow was primarily
driven by normalisation of creditors relative to fiscal 22 as our
growth rate moderated in fiscal 23.
The additional tax payments were the result of increased profit
impacting tax instalments and higher balancing payments. The
increase in interest paid reflects the higher interest rate
environment globally
Free cash flow GBP million
------------------------------------------------------- -----------
F22 Net cash from operating activities 3,935
======================================================= ===========
F22 Capex and movements in loans and other investments (1,152)
======================================================= ===========
F22 Free cash flow 2,783
======================================================= ===========
Exchange(2) 122
======================================================= ===========
Operating profit(3) 384
======================================================= ===========
Working capital(4) (996)
======================================================= ===========
Capex (87)
======================================================= ===========
Tax (252)
======================================================= ===========
Interest (226)
======================================================= ===========
Other(5) 72
======================================================= ===========
F23 Free cash flow 1,800
======================================================= ===========
F23 Capex and movements in loans and other investments 1,224
------------------------------------------------------- -----------
F23 Net cash from operating activities 3,024
------------------------------------------------------- -----------
(1)Net cash from operating activities excludes net capex (2023 -
GBP(1,167) million; 2022 - GBP(1,080) 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 GBP36 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 decreased 50bps
ROIC decreased 50bps, mainly driven by increased capex, maturing
stock investment and continued portfolio optimisation through
acquisitions and disposals. The decline was partially offset by
higher organic operating profit growth, net of higher tax.
Return on average invested capital ppt
---------------------------------- ------
2022 16.8
================================== ======
Exchange 0.01
================================== ======
Acquisitions and disposals (0.39)
================================== ======
Organic operating profit 1.32
================================== ======
Associates and joint ventures (0.33)
================================== ======
Tax (0.46)
================================== ======
Other (0.65)
---------------------------------- ------
2023 16.3
---------------------------------- ------
(1)ROIC calculation excludes exceptional operating items from
operating profit. For further details on ROIC see page 56.
Fiscal 23 to fiscal 25 medium-term guidance
Organic net sales and organic operating profit
We believe in the fundamental strength of our business and
expect our advantaged portfolio to benefit from international
spirits continuing to gain share of TBA, premiumisation, and
continued investment in marketing and innovation. Our portfolio is
well-positioned across categories, geographies and price points. We
will use our deep understanding of consumers to quickly adapt to
changes in trends and behaviours while investing in marketing and
innovation and leveraging our revenue growth management
capabilities, including strategic pricing actions.
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%.
Fiscal 24 outlook
Organic net sales growth
In fiscal 23, strong net sales growth in the first half was
followed by moderation in the second half. In the first half of
fiscal 24, despite a tougher comparator, we expect gradual
improvement from the second half of fiscal 23. We expect our
organic net sales growth to accelerate in the second half of fiscal
24, given the softer comparator.
Organic operating profit growth
In a challenging, albeit moderating, 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. In line with organic net sales growth, we expect organic
operating profit growth in fiscal 24 to improve from the second
half of fiscal 23 and accelerate gradually through fiscal 24.
Taxation
We expect the tax rate before exceptional items to be in the
region of 24% in fiscal 24.
Effective interest rate
We expect the effective interest rate to be just above 4% in
fiscal 24.
Supply Chain Agility Programme
In July 2022, we announced our five-year programme to build a
more agile and sustainable business by strengthening our end-to-end
supply chain and making it fit for the future while driving
productivity savings. The total implementation cost is expected to
be up to $650 million (GBP500 million) which will comprise non-cash
items and one-off expenses, the majority of which are expected to
be recognised as exceptional operating items. The programme
commenced in fiscal 23, and an exceptional charge was accounted for
primarily relating to accelerated depreciation of assets and
impairment of property, plant, and equipment directly attributable
to the programme in North America and in India. Please see page 34
for details.
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 $1.5 billion (GBP1.2
billion) in the period from fiscal 22 to fiscal 24). The programme
is expected to have a five-year payback period, with most savings
delivered in fiscal 25 and beyond.
Capital expenditure and free cash flow
In fiscal 24, we continue to expect capital expenditure for the
full year to be in the range of $1.3-1.5 billion (GBP1.0-1.2
billion). We expect these levels of spend to continue in the coming
years, but then decline again to historic levels as a percentage of
net sales starting in fiscal 27. We expect cash flow to grow
organically in fiscal 24 while we continue to invest in maturing
stock to support long-term sustainable growth.
Functional/presentation currency
Starting 1 July 2023, in line with reporting requirements the
functional currency of Diageo plc has changed from sterling to US
dollar which is applied prospectively. This is because the group's
share of net sales and expenses in the United States and other
countries whose currencies correlate closely with the US dollar has
been increasing over the years, and that trend is expected to
continue in line with the group's strategic focus. Diageo has also
decided to change its presentation currency to US dollar with
effect from 1 July 2023, applied retrospectively, as it believes
that this change will provide better alignment of the reporting of
performance with its business exposures.
Commencing with the interim dividend to be declared in January
2024 (subject to approval of changes to the Articles of Association
to be proposed at the 2023 Annual General Meeting), Diageo's future
dividends will be declared in US dollar and remain in line with the
group's existing progressive dividend policy. Holders of ordinary
shares will continue to receive their dividends in sterling but
will have the option to elect to receive their dividends in US
dollar instead. Holders of American Depositary Receipts (ADR) will
continue to receive dividends in US dollar.
Selected historical financial information included in the
consolidated financial statements of Diageo for the years ended 30
June 2023, 30 June 2022 and 30 June 2021, and for the six months
ended 31 December 2022 and 31 December 2021 (collectively the
'Re-presented Financial Information') will be re-presented in US
dollar and made available on Diageo's Investor Relations website in
advance of the company's first half fiscal 24 results
announcement.
Notes to the business and financial review
Unless otherwise stated:
- movements in results are for the year ended 30 June 2023
compared to the year ended 30 June 2022;
- commentary below refers to organic movements unless stated as reported;
- volume is in millions of equivalent units (EUm);
- net sales are sales after deducting excise duties;
- percentage movements are organic movements unless stated as reported;
- growth is organic net sales movement unless states otherwise; and
- share refers to value share, except for India which is volume share.
See page 48 for explanation of the calculation and use of
non-GAAP measures.
Business review
North America
-- Reported net sales grew 11%, primarily driven by a favourable foreign exchange impact from the strengthening US dollar.
-- Organic net sales were flat as growth in Canada and Diageo
Beer Company USA (DBC USA) were offset by a decline in US
Spirits.
-- Strong price/mix growth was offset by a decline in volume, while the region held share of TBA.
-- US Spirits net sales declined 1%, lapping strong double-digit
growth impacted by distributor stock replenishment and increased
inventories of imported products in fiscal 22. Depletion growth was
approximately two percentage points ahead of shipment growth in
fiscal 23, with some variation across brands. Overall inventory
levels at distributors at the end of fiscal 23 were in line with
historical levels.
-- DBC USA net sales grew 1% reflecting strong growth in
Guinness, partially offset by a decline in Smirnoff flavoured malt
beverages.
-- Organic operating margin declined by 101bps, primarily driven
by cost inflation and an adverse category mix. Strategic price
increases and productivity savings more than offset the absolute
impact of cost inflation.
-- Marketing investment grew 2% as we continue to invest and
support growth across key categories.
Market highlights - US Spirits:
-- Tequila net sales grew 15%, and drove significant share gains
in both the spirits industry and tequila category. Casamigos net
sales grew 14% driven by strong price/mix and volume growth, and
the launch of Casamigos Cristalino. Don Julio net sales grew 13%,
primarily driven by aged variants and the launch of ultra-premium
Don Julio Rosado Reposado. Both Casamigos and Don Julio shipments
grew ahead of depletions as supply availability enabled
distributors to increase inventory to more optimal levels.
-- Crown Royal whisky net sales declined 10%, lapping inventory
replenishment in fiscal 22 when the brand recovered from supply
constraints. Crown Royal gained double-digit share of the Canadian
whisky category, and depletions grew ahead of shipments in fiscal
23.
-- Vodka net sales declined 7%, primarily due to Cîroc,
partially offset by growth in Smirnoff. Smirnoff growth of 4% was
driven by core and flavoured variants. Ketel One net sales were
flat, reflecting growth in the core variant offset by a decline in
Ketel One Botanicals. Cîroc net sales declined 32% as consumers
shifted into other spirits categories.
-- Johnnie Walker net sales declined 13%. Johnnie Walker gained
share of the scotch category driven by Johnnie Walker Black Label
and Johnnie Walker Blue Label, and depletions grew ahead of
shipments.
-- Rum net sales declined 1%, primarily due to Captain Morgan,
which declined 2%. Zacapa grew 13% driven by super-premium and
luxury variants.
-- Bulleit whiskey net sales declined 6%, lapping inventory
replenishment in fiscal 22 when the brand recovered from supply
constraints. Bulleit whiskey gained both spirits industry and US
whiskey category share, and depletions grew double-digit.
-- Buchanan's net sales grew 10%, primarily driven by the launch
of Buchanan's Pineapple, an innovation that gained spirits industry
share. Buchanan's scotch declined 4%, but gained both spirits
industry and scotch category share, and depletions grew ahead of
shipments.
-- Single Malts net sales grew 25%, primarily driven by
ultra-premium Lagavulin 16YO and luxury innovation Lagavulin 11YO
Charred Oak Cask.
-- Spirit-based ready to drink (RTD) net sales declined 44%
primarily due to lapping the launch of Crown Royal RTD in fiscal 22
and Loyal 9 underperformance in certain US states.
Key financials (GBP million):
----------------------------------------------------------------------------------------------
Acquisitions Reported
and Organic movement
2022 Exchange disposals movement Other(1) 2023 %
------------------------ ----- -------- ------------ --------- -------- ----- ---------
Net sales 6,095 632 20 11 - 6,758 11
======================== ===== ======== ============ ========= ======== ===== =========
Marketing 1,200 122 15 22 1 1,360 13
======================== ===== ======== ============ ========= ======== ===== =========
Operating profit before
exceptional items 2,454 249 (12) (57) 55 2,689 10
======================== ===== ======== ============ ========= ======== ===== =========
Exceptional operating
items(2) (1) (97)
======================== ===== ======== ============ ========= ======== ===== =========
Operating profit 2,453 2,592 6
------------------------ ----- -------- ------------ --------- -------- ----- ---------
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) (5) (4) - 11 Crown Royal (12) (10) -
================ ========= ========= ========== ========== ============== ============ ========== ==========
Don Julio 8 13 25
================ ========= ========= ========== ========== ============== ============ ========== ==========
US Spirits(3) (6) (6) (1) 10 Casamigos(7) 6 13 26
================ ========= ========= ========== ========== ============== ============ ========== ==========
DBC USA(4) (3) (3) 1 12 Johnnie Walker (5) (10) (1)
================ ========= ========= ========== ========== ============== ============ ========== ==========
Canada (2) (2) 4 8 Smirnoff (1) 4 14
================ ========= ========= ========== ========== ============== ============ ========== ==========
Captain Morgan (5) (1) 9
================ ========= ========= ========== ========== ============== ============ ========== ==========
Spirits(3) (5) (4) - 11 Ketel One (3) - 11
================ ========= ========= ========== ========== ============== ============ ========== ==========
Beer (2) (2) 2 12 Guinness 4 9 20
================ ========= ========= ========== ========== ============== ============ ========== ==========
Ready to
drink (11) (11) (16) (10) Baileys (4) 1 11
---------------- --------- --------- ---------- ---------- ============== ============ ========== ==========
Bulleit
whiskey(8) (8) (6) 4
============== ============ ========== ==========
Buchanan's - 9 21
-------------- ------------ ---------- ----------
North America organic net sales were
North America contributed flat in fiscal 23
39% of Diageo reported net sales
in fiscal 23
(1)Fair value remeasurements. For further details see page
22.
(2)For further details on exceptional operating items see pages
22 and 34-35.
(3)Reported volume movement has been impacted by acquisitions
and/or disposals. For further details see pages 50-53.
(4)Certain spirits-based ready to drink products in certain
states are distributed through DBC USA and those net sales are
captured within DBC USA.
(5)Spirits brands excluding ready to drink and non-alcoholic
variants.
(6)Organic equals reported volume movement.
(7)Casamigos trademark includes both tequila and mezcal.
(8)Bulleit whiskey excludes Bulleit Crafted Cocktails.
Europe
-- Reported net sales grew 11%, driven by organic growth and the
hyperinflation adjustment(1) related to Turkey, partially offset by
an unfavourable impact from foreign exchange.
-- Organic net sales grew 11%, driven by double-digit growth
across most markets. Growth was mainly driven by price/mix, while
holding volume.
-- Price/mix was primarily driven by strong price increases
across all markets, and supported by positive mix in beer and
scotch.
-- Spirits net sales grew 10%, driven by growth in scotch,
vodka, tequila. Johnnie Walker grew 29% driven by Northern Europe,
Southern Europe and Travel Retail.
-- Beer net sales grew 18%, driven by price increases and volume
growth. Guinness net sales grew 20% and gained share in the
on-trade in Great Britain and Ireland.
-- Organic operating margin declined by 13bps, primarily driven
by cost inflation, partially offset by price increases, improved
category mix and productivity savings.
-- Marketing investment grew 7%, with focused investment in
Tanqueray, Johnnie Walker, Baileys and Guinness.
Market highlights:
-- Great Britain net sales grew 7%, mostly driven by strong
performance in Guinness with strong market share gains. Spirits net
sales growth was driven by tequila, vodka and RTDs, partially
offset by gin.
-- Northern Europe net sales grew 11%. Growth was primarily
driven by scotch with strong double-digit growth in Johnnie Walker,
and strong growth in vodka and tequila. Spirits gained market
share.
-- Southern Europe net sales grew 12%, led by strong performance
in scotch, in addition to tequila and gin. Growth reflected
continued recovery in the on-trade and increased tourism, alongside
market share gains in spirits.
-- Ireland net sales grew 16%, primarily driven by growth in
Guinness reflecting share gains in a recovering on- trade.
-- Eastern Europe net sales declined 3%, due to the suspension
of exports to and sales in Russia as announced in March 2022 and
the winding down of its operations announced in June 2022. In the
rest of the market, spirits grew double-digit and gained market
share primarily driven by Johnnie Walker.
-- Turkey net sales grew 38%, with volume growth of 9%. Growth
was driven by price increases in response to inflation and higher
excise duties. Growth was broad-based, led by scotch, vodka and
raki.
Key financials (GBP million):
-----------------------------------------------------------------------------------------------------------------
Acquisitions Reported
and Organic movement
2022 Exchange disposals movement Other(2) Hyperinflation(1) 2023 %
------------------------ ----- -------- ------------ --------- -------- ----------------- ----- ---------
Net sales 3,212 (85) (9) 347 - 104 3,569 11
======================== ===== ======== ============ ========= ======== ================= ===== =========
Marketing 577 3 2 42 - 11 635 10
======================== ===== ======== ============ ========= ======== ================= ===== =========
Operating profit before
exceptional items 1,017 5 (31) 103 (11) 22 1,105 9
======================== ===== ======== ============ ========= ======== ================= ===== =========
Exceptional operating
items(3) (146) (8)
======================== ----- ======== ============ ========= ======== ================= ===== =========
Operating profit 871 1,097 26
------------------------ ----- -------- ------------ --------- -------- ----------------- ----- ---------
(1)See pages 36 and 49-52 for details of hyperinflation
adjustment.
(2)Fair value remeasurements. For further details see page
22.
(3)Exceptional items are in respect of Diageo's decision,
announced on 28 June 2022, to wind down its operations in Russia.
For further details on exceptional operating items see pages 22 and
34-35.
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
% % % % % % %
------------------- ========= ========= ========== ========== --------- ------------ ---------- ----------
Europe(1) - - 11 11 Guinness 6 20 21
=================== ========= ========= ========== ========== ========= ============ ========== ==========
Johnnie
Walker 18 29 25
=================== ========= ========= ========== ========== ========= ============ ========== ==========
Great Britain(1) (8) (8) 7 6 Baileys (3) (1) 1
=================== ========= ========= ========== ========== ========= ============ ========== ==========
Southern Europe(1) 4 5 12 13 Smirnoff (1) 14 16
=================== ========= ========= ========== ========== ========= ============ ========== ==========
Captain
Northern Europe(1) 8 6 11 12 Morgan - 9 10
=================== ========= ========= ========== ========== ========= ============ ========== ==========
Ireland(1) 3 3 16 18 Tanqueray - 6 7
=================== ========= ========= ========== ========== ========= ============ ========== ==========
Eastern Europe(1) (15) (15) (3) - J B (7) (1) 2
=================== ========= ========= ========== ========== ========= ============ ========== ==========
Yenì
Turkey(1) 9 9 38 10 Raki - 7 (10)
=================== ========= ========= ========== ========== --------- ------------ ---------- ----------
Spirits(1) - - 10 10
=================== ========= ========= ========== ==========
Beer 5 5 18 20
=================== ========= ========= ========== ==========
Ready to drink(1) (2) (2) 10 12
------------------- --------- --------- ---------- ----------
Europe contributed Europe organic net sales grew
21% of Diageo reported net sales
in fiscal 23 11% in fiscal 23
(1)Reported volume movement has been impacted by acquisitions
and/or disposals. For further details see pages 48, 50, and 53.
(2)Spirits brands excluding ready to drink and non-alcoholic
variants.
(3)Organic equals reported volume movement, except for Tanqueray
and J B, which had reported volume movement of 1% and (6)%
respectively.
Asia Pacific
-- Reported net sales grew 11%, primarily reflecting strong
organic growth and a favourable impact from foreign exchange.
-- Organic net sales grew 13%. All markets grew, except Greater
China, with strong double-digit growth in India, South East Asia,
Travel Retail Asia and Middle East and North Asia.
-- Price/mix of 7% was led by strong price increases across all
markets. Positive mix was driven by strength in premium-plus scotch
in most markets. Volume grew 8% in premium-plus price tiers.
-- Spirits net sales grew 14%, primarily driven by double-digit
growth in scotch, the region's largest category. IMFL whisky(1)
also contributed to growth, partially offset by a decline in
Chinese white spirits.
-- Organic operating margin expanded by 363bps as the benefits
from the continued recovery of Travel Retail, price increases and
operational efficiencies more than offset the impact of cost
inflation.
-- Marketing investment grew 9%, with focused investment in
scotch in South East Asia, India, and Greater China.
Market highlights:
-- India net sales grew 17%, driven by strong consumer demand
and continued premiumisation. IMFL whisky and scotch delivered
double-digit growth. Scotch growth was driven by Black Dog, Johnnie
Walker Black Label and Black & White.
-- Greater China net sales declined 4%. Strong performance in
scotch was more than offset by a decline in Chinese white spirits
which continued to be impacted by Covid-19 restrictions, especially
in the on-trade. Scotch grew 13%, driven primarily by Taiwan, with
strong performance in the super-premium-plus segment led by Johnnie
Walker and The Singleton.
-- Australia net sales grew 2%, primarily driven by price
increases. Growth was led by rum, tequila and beer.
-- South East Asia net sales grew 33%, benefitting from a strong
recovery following the easing of Covid-19 restrictions and strong
growth in the super-premium-plus segment. Scotch grew 31%, mostly
driven by Johnnie Walker premium variants, and single malts,
primarily The Singleton and Mortlach.
-- North Asia (Korea and Japan) net sales grew 15%, benefitting
from the recovery of the on-trade. Growth was primarily driven by
double-digit growth in Windsor and Johnnie Walker premium-plus
variants led by Johnnie Walker Blue Label and Johnnie Walker Black
Label.
-- Travel Retail Asia and Middle East net sales grew 67%
primarily driven by Johnnie Walker premium-plus variants, led by
Johnnie Walker Blue Label and Johnnie Walker Black Label.
Key financials (GBP million):
-------------------------------------------------------------------------------------------
Acquisitions Reported
and Organic movement
2022 Exchange disposals movement 2023 %
------------------------------- ----- -------- ------------ --------- ----- ---------
Net sales 2,884 65 (102) 353 3,200 11
=============================== ===== ======== ============ ========= ===== =========
Marketing 490 10 - 46 546 11
=============================== ===== ======== ============ ========= ===== =========
Operating profit before
exceptional items 711 15 (21) 200 905 27
=============================== ===== ======== ============ ========= ===== =========
Exceptional operating items(2) (241) (473)
=============================== ===== ======== ============ ========= ===== =========
Operating profit 470 432 (8)
------------------------------- ----- -------- ------------ --------- ----- ---------
(1)Indian-Made Foreign Liquor (IMFL) whisky.
(2)For further details on exceptional operating items see pages
22 and 34-35.
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
% % % % % % %
----------------- --------- --------- ---------- ---------- ------------- ------------ ---------- ----------
Johnnie
Asia Pacific(1) 5 (14) 13 11 Walker 13 29 30
================= ========= ========= ========== ========== ============= ============ ========== ==========
Shui Jing
Fang(4) (15) (14) (12)
================= ========= ========= ========== ========== ============= ============ ========== ==========
India(1) 6 (18) 17 7 McDowell's (1) 4 7
================= ========= ========= ========== ========== ============= ============ ========== ==========
Greater China (2) (2) (4) (1) Guinness 4 10 13
================= ========= ========= ========== ========== ============= ============ ========== ==========
Australia (10) (10) 2 5 The Singleton 26 26 31
================= ========= ========= ========== ========== ============= ============ ========== ==========
South East
Asia(1) 20 20 33 36 Smirnoff 8 15 19
================= ========= ========= ========== ========== ============= ============ ========== ==========
North Asia 6 6 15 14 Windsor 29 41 42
================= ========= ========= ========== ========== ============= ============ ========== ==========
Travel Retail
Asia and Middle Black &
East 38 38 67 65 White 28 36 39
================= ========= ========= ========== ========== ------------- ------------ ---------- ----------
Spirits(1)(2) 6 (15) 14 11
================= ========= ========= ========== ==========
Beer 5 5 10 12
================= ========= ========= ========== ==========
Ready to drink (8) (8) 1 4
----------------- --------- --------- ---------- ----------
Asia Pacific contributed Asia Pacific organic net sales grew
19% of Diageo reported net sales
in fiscal 23 13% in fiscal 23
(1)Reported volume movement has been impacted by acquisitions
and/or disposals. For further details see pages 50-53.
(2)Spirits brands excluding ready to drink and non-alcoholic
variants.
(3)Organic equals reported volume movement.
(4)Growth figures represent total Chinese white spirits of which
Shui Jing Fang is the principal brand.
Latin America and Caribbean
-- Reported net sales grew 18%, reflecting organic growth and a
favourable impact from foreign exchange, mainly due to a
strengthening of the Mexican peso and Brazilian real.
-- Organic net sales grew 9%, with most markets delivering
growth, despite lapping strong double-digit growth in fiscal 22.
Growth was broad-based across price tiers, except for value, which
declined as a result of our premiumisation strategy. Strong
price/mix was partially offset by a 3% decline in volume, primarily
in the value price tier. Double-digit sales growth in the first
half of fiscal 23 was followed by inventory normalisation in the
second half.
-- Price/mix was driven by strong price increases across all
markets, and positive mix supported by the strength in premium-plus
scotch in most markets.
-- Spirits net sales grew 11%, primarily led by double-digit
growth in scotch, particularly Johnnie Walker Black Label, Johnnie
Walker Red Label and Old Parr. Growth was also driven by strong
double-digit growth in Don Julio and Smirnoff.
-- Organic operating margin expanded by 72bps. The positive
impact of price increases, premiumisation, leverage on operating
costs and one-off tax benefits more than offset the increases in
marketing investment and cost inflation.
-- Marketing investment grew 14%, ahead of organic net sales
growth, with increased investment in most markets.
Market highlights:
-- Brazil net sales grew 8%, led by double-digit growth in
Johnnie Walker and Old Parr. Growth was driven by price increases
and higher marketing investment, leading to market share
growth.
-- Mexico net sales grew 9%, primarily driven by scotch and
tequila. Scotch growth was led by Johnnie Walker Red Label and
Johnnie Walker Black Label, driven by price increases. Tequila
growth was driven by price increases, the lapping of aged liquid
supply constraints in fiscal 22 and increased marketing
investment.
-- Central America and Caribbean (CCA) net sales grew 14%,
mainly driven by scotch and tequila. Growth was driven by price
increases, premiumisation and continuing momentum in the on-trade.
Scotch growth was mostly driven by Johnnie Walker Black Label and
Buchanan's, supported by increased marketing investment. Tequila
growth was driven by Don Julio 1942.
-- South LAC (Argentina, Bolivia, Chile, Ecuador, Paraguay, Peru
and Uruguay) net sales grew 21%, primarily driven by scotch, vodka
and gin. Growth was driven by price increases and premiumisation,
partially offset by a decline in volume.
-- Andean (Colombia and Venezuela) net sales declined 7%, due to
an adverse macroeconomic environment in Colombia. Strong price
increases and premiumisation were more than offset by a decline in
volume.
Key financials (GBP million):
------------------------------------------------------------------------------------
Acquisitions Reported
and Organic Other movement
2022 Exchange disposals movement (1) 2023 %
----------------- ----- -------- ------------ --------- ----- ----- ---------
Net sales 1,525 129 3 142 - 1,799 18
================= ===== ======== ============ ========= ===== ===== =========
Marketing 243 18 1 34 - 296 22
================= ===== ======== ============ ========= ===== ===== =========
Operating profit 538 52 - 62 9 661 23
----------------- ----- -------- ------------ --------- ----- ----- ---------
(1)Fair value remeasurements. For further details see page
22.
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
% % % % % % %
---------------- --------- --------- ---------- ---------- -------------- ------------ ---------- ----------
Latin America
and
Caribbean(1) Johnnie Walker 4 16 23
================ ============== ============ ========== ==========
(3) (3) 9 18 Buchanan's (5) 6 11
================ ========= ========= ========== ========== ============== ============ ========== ==========
Don Julio 6 22 40
================ ========= ========= ========== ========== ============== ============ ========== ==========
Brazil(2) (1) 3 8 29 Old Parr 10 20 26
================ ========= ========= ========== ========== ============== ============ ========== ==========
Mexico(1) (4) (3) 9 30 Smirnoff 3 18 24
================ ========= ========= ========== ========== ============== ============ ========== ==========
CCA 1 1 14 21 Black & White (7) 13 26
================ ========= ========= ========== ========== ============== ============ ========== ==========
South LAC(2) (3) (11) 21 - Tanqueray - - 5
================ ========= ========= ========== ========== ============== ============ ========== ==========
Andean(1) (24) (24) (7) (13) Baileys (18) (5) 1
---------------- --------- --------- ---------- ---------- -------------- ------------ ---------- ----------
Spirits(1) (3) (3) 11 19
================ ========= ========= ========== ==========
Beer 9 9 16 25
================ ========= ========= ========== ==========
Ready to
drink (13) (13) (7) -
---------------- --------- --------- ---------- ----------
Latin America and Caribbean organic
Latin America and Caribbean contributed net sales grew
11% of Diageo reported net sales
in fiscal 23 9% in fiscal 23
(1)Reported volume movement has been impacted by acquisitions
and/or disposals. For further details see pages 50-53.
(2)From 1 July 2022 Uruguay and Paraguay domestic channels moved
on a management basis from PUB (Paraguay, Uruguay and Brazil) to
PEBAC (Peru, Ecuador, Bolivia, Argentina and Chile) and the new
cluster has been called South LAC. This reflects how management
reviews performance.
(3)Spirits brands excluding ready to drink and non-alcoholic
variants.
(4)Organic equals reported volume movement.
Africa
-- Reported net sales grew 1%, primarily driven by organic
growth and disposals, mostly offset by an unfavourable impact from
foreign exchange.
-- Organic net sales grew 5%, with growth across all markets,
except East Africa. Growth was driven by price increases, partially
offset by a decline in volume.
-- Price/mix of 12% was driven by price increases across all
markets and positive mix. Volume declines were primarily in the
value and standard price tiers.
-- Spirits net sales grew 8%, driven by growth in international
spirits particularly Johnnie Walker Black Label, and Orijin.
-- Beer net sales grew 3%, with strong growth in Africa Regional
Markets and Nigeria, partially offset by a decline in East Africa.
Growth was primarily driven by Malta Guinness and Guinness, which
grew 22% and 7% respectively.
-- Organic operating margin expanded by 126bps, primarily driven
by price increases, productivity savings, positive category mix and
lapping prior year one-off costs. These impacts were partially
offset by cost inflation.
-- Marketing investment grew 2%, focused on supporting spirits premiumisation and Guinness.
Market highlights:
-- East Africa net sales declined 2%. Growth in spirits was more
than offset by a volume decline in beer following price and duty
increases. Spirits growth was primarily driven by scotch,
particularly Johnnie Walker.
-- Africa Regional Markets net sales grew 22% led by growth in
beer, primarily driven by Malta Guinness supported by price
increases. Spirits growth was primarily driven by Johnnie Walker
Black Label.
-- Nigeria net sales grew 11%. Growth was led by Guinness and Orijin.
-- South Africa net sales grew 1%, primarily driven by growth in
tequila and rum, which offset declines in vodka and gin.
Super-premium-plus brands grew strongly at 38%.
Key financials (GBP million):
------------------------------------------------------------------------------------------------
Acquisitions Reported
and Organic movement
2022 Exchange disposals movement 2023 %
------------------------------------ ----- -------- ------------ --------- ----- ---------
Net sales 1,682 (40) (26) 83 1,699 1
==================================== ===== ======== ============ ========= ===== =========
Marketing 199 (3) (5) 4 195 (2)
==================================== ===== ======== ============ ========= ===== =========
Operating profit before exceptional
items 315 (141) 9 37 220 (30)
==================================== ===== ======== ============ ========= ===== =========
Exceptional operating items(1) - (44)
==================================== ===== ======== ============ ========= ===== =========
Operating profit 315 176 (44)
------------------------------------ ----- -------- ------------ --------- ----- ---------
(1)For further details on exceptional operating items see pages
22 and 34-35.
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) (7) (8) 5 1 Guinness (8) 7 1
================ ========= ========= ========== ========== ============== ============ ========== ==========
Johnnie
Walker 5 11 8
================ ========= ========= ========== ========== ============== ============ ========== ==========
East Africa (7) (7) (2) - Smirnoff (23) (6) (9)
================ ========= ========= ========== ========== -------------- ------------ ---------- ----------
Nigeria (4) (4) 11 12
================ ========= ========= ========== ==========
Africa Regional
Markets(1) (1) (9) 22 (5) Other beer:
================ ========= ========= ========== ==========
South Africa (18) (18) 1 (3)
================ ========= ========= ========== ========== -------------- ------------ ---------- ----------
Malta Guinness (7) 22 2
================ ========= ========= ========== ========== ============== ============ ========== ==========
Spirits(1) (2) (2) 8 7 Senator (17) (4) (4)
================ ========= ========= ========== ========== ============== ============ ========== ==========
Beer(1) (13) (14) 3 (3) Tusker (8) (5) (4)
================ ========= ========= ========== ========== ============== ============ ========== ==========
Ready to
drink(1) - (4) 11 5 Serengeti (7) (1) 8
---------------- --------- --------- ---------- ---------- -------------- ------------ ---------- ----------
Africa contributed Africa organic net sales grew
10% of Diageo reported net sales
in fiscal 23 5% in fiscal 23
(1)Reported volume movement has been impacted by acquisitions
and/or disposals. For further details see pages 50-53.
(2)Spirits brands excluding ready to drink and non-alcoholic
variants.
(3)Organic equals reported volume movement, except for Guinness
and Malta Guinness, which had reported volume movement of (9)% and
(9)% respectively.
Category and brand review
-- Spirits net sales grew 6%, with flat volume. Growth was
across most categories, including double-digit performance in
scotch, tequila and IMFL whisky.
-- Scotch net sales grew 12%, with 2% volume growth. Growth was
led by Johnnie Walker, with strong growth of 15%, and scotch malts
also grew strongly at 16%.
Johnnie Walker Black Label grew 16%, with particularly strong
growth in Asia Pacific, where it grew 30%.
Johnnie Walker Blue Label grew 3%, supported by the return of
Travel Retail.
Johnnie Walker Red Label grew 16%, with double-digit growth in
all regions except Africa.
Scotch malts grew 16%, primarily driven by strong double-digit
growth in Asia Pacific and North America.
-- Tequila net sales grew 19%, reflecting strong performance of
Don Julio and Casamigos which grew 20% and 16% respectively, driven
by North America.
-- Vodka net sales grew 1% with a volume decline of 3%. Declines
in North America and Africa were offset by double-digit growth
across all other regions.
-- Rum net sales grew 2% driven by Captain Morgan growth across
all regions except North America. Rum volume declined 7%.
-- Liqueurs net sales declined 1%, driven by Godiva.
-- Beer net sales grew 9%, with growth in all regions driven by
strong performance from Guinness in Great Britain, Ireland, North
America and Africa.
-- Ready to drink net sales were flat, with growth in Europe and
Africa offset by a decline in North America.
Key categories
Organic Organic Reported Reported
volume net sales net sales net sales
movement(1) movement movement by category
% % % %
------------------------- ------------- ----------- ----------- -------------
Spirits(2) - 6 12 79
========================= ============= =========== =========== =============
Scotch 2 12 16 25
========================= ============= =========== =========== =============
Tequila 10 19 32 12
========================= ============= =========== =========== =============
Vodka(3)(4) (3) 1 7 9
========================= ============= =========== =========== =============
Canadian whisky(5) (10) (9) - 6
========================= ============= =========== =========== =============
Rum(4) (7) 2 9 5
========================= ============= =========== =========== =============
Liqueurs (4) (1) 3 5
========================= ============= =========== =========== =============
Gin(4) - 5 8 5
========================= ============= =========== =========== =============
IMFL whisky(5) 8 15 - 4
========================= ============= =========== =========== =============
Chinese white spirits(5) (15) (14) (12) 3
========================= ============= =========== =========== =============
US whiskey(5) (8) (4) 7 2
========================= ============= =========== =========== =============
Beer (7) 9 9 15
------------------------- ------------- ----------- ----------- -------------
Ready to drink (6) - 3 4
------------------------- ------------- ----------- ----------- -------------
(1)Organic equals reported volume movement except for spirits
(7)%, tequila 11%, vodka (4)%, gin (1)%, IMFL whisky (20)%, US
whiskey (7)%, beer (8)% and ready to drink (7)%.
(2)Spirits brands excluding ready to drink and non-alcoholic
variants.
(3)Vodka includes Ketel One Botanical.
(4)Vodka, rum and gin include IMFL variants.
(5)See pages 9-10 for details of Canadian whisky, US whiskey and
pages 13-14 for details of IMFL whisky and Chinese white
spirits.
Global giants, local stars and reserve(1) :
Organic Organic Reported
volume net sales net sales
movement(2) movement movement
% % %
------------------- ------------- ---------- ----------
Global giants
=================== ============= ========== ==========
Johnnie Walker 9 15 19
=================== ============= ========== ==========
Guinness 1 16 17
=================== ============= ========== ==========
Smirnoff (2) 8 14
=================== ============= ========== ==========
Baileys (5) - 5
=================== ============= ========== ==========
Captain Morgan (2) 5 11
=================== ============= ========== ==========
Tanqueray (4) 1 6
------------------- ------------- ---------- ----------
Local stars
=================== ============= ========== ==========
Crown Royal (12) (10) -
=================== ============= ========== ==========
Buchanan's (3) 7 15
=================== ============= ========== ==========
McDowell's (1) 4 6
=================== ============= ========== ==========
Shui Jing Fang(3) (15) (14) (12)
=================== ============= ========== ==========
Old Parr 9 18 24
=================== ============= ========== ==========
Black & White 2 20 28
=================== ============= ========== ==========
J B (9) (3) -
=================== ============= ========== ==========
Yenì Raki - 8 (10)
=================== ============= ========== ==========
Windsor 29 41 42
=================== ============= ========== ==========
Bundaberg - 18 21
=================== ============= ========== ==========
Ypióca (9) 7 21
------------------- ------------- ---------- ----------
Reserve
=================== ============= ========== ==========
Don Julio 11 20 32
=================== ============= ========== ==========
Casamigos(4) 7 15 27
=================== ============= ========== ==========
Scotch malts 3 16 19
=================== ============= ========== ==========
Ketel One(5) (3) 1 11
=================== ============= ========== ==========
Bulleit whiskey(6) (9) (6) 4
=================== ============= ========== ==========
Cîroc vodka (23) (23) (17)
------------------- ------------- ---------- ----------
(1)Brands excluding ready to drink, non-alcoholic variants and
beer except Guinness.
(2)Organic equals reported volume movement except for Guinness
0% and McDowell's (2)%.
(3)Growth figures represent total Chinese white spirits of which
Shui Jing Fang is the principal brand.
(4)Casamigos trademark includes both tequila and mezcal.
(5)Ketel One includes Ketel One vodka and Ketel One
Botanical.
(6)Bulleit whiskey excludes Bulleit Crafted Cocktails.
Global giants
39% of Diageo's reported net sales and grew 10%.
Local stars
18% of Diageo's reported net sales and declined 2%.
Reserve
29% of Diageo's reported net sales and grew 7%.
Additional financial information
Year ended 30 June 2023
Summary income statement
Acquisitions Fair value
Exchange and disposals Organic remeasurement
2022 (a) (b) movement(1) (d) Hyperinflation(1) 2023
GBP million GBP million GBP million GBP million GBP million GBP million GBP million
-------------- ----------- ----------- -------------- ------------ -------------- ----------------- -----------
Sales 22,448 588 (683) 1,091 - 71 23,515
============== =========== =========== ============== ============ ============== ================= ===========
Excise duties (6,996) 114 569 (122) - 33 (6,402)
-------------- ----------- ----------- -------------- ------------ -------------- ----------------- -----------
Net sales 15,452 702 (114) 969 - 104 17,113
============== =========== =========== ============== ============ ============== ================= ===========
Cost of sales (5,973) (363) 84 (522) 5 (63) (6,832)
-------------- ----------- ----------- -------------- ------------ -------------- ----------------- -----------
Gross profit 9,479 339 (30) 447 5 41 10,281
============== =========== =========== ============== ============ ============== ================= ===========
Marketing (2,721) (151) (15) (152) (1) (11) (3,051)
============== =========== =========== ============== ============ ============== ================= ===========
Other
operating
items (1,961) (66) (16) 26 49 (8) (1,976)
-------------- ----------- ----------- -------------- ------------ -------------- ----------------- -----------
Operating
profit
before
exceptional
items 4,797 122 (61) 321 53 22 5,254
============== =========== =========== ============== ============ ============== ================= ===========
Exceptional
operating
items (c) (388) (622)
-------------- ----------- ----------- -------------- ------------ -------------- ----------------- -----------
Operating
profit 4,409 4,632
============== =========== =========== ============== ============ ============== ================= ===========
Non-operating
items
(c) (17) 328
============== =========== =========== ============== ============ ============== ================= ===========
Net finance
charges (422) (594)
============== =========== =========== ============== ============ ============== ================= ===========
Share of after
tax
results of
associates
and joint
ventures 417 370
-------------- ----------- ----------- -------------- ------------ -------------- ----------------- -----------
Profit before
taxation 4,387 4,736
============== =========== =========== ============== ============ ============== ================= ===========
Taxation (e) (1,049) (970)
Profit for the
year 3,338 3,766
-------------- ----------- ----------- -------------- ------------ -------------- ----------------- -----------
(1) For the definition of organic movement and hyperinflation
see page s 48-49.
(a) Exchange
The impact of movements in exchange rates on reported figures
for operating profit was principally in respect of the favourable
exchange impact of the strengthening of the US dollar and Mexican
peso against the sterling, partially offset by the weakening of the
Nigerian naira, Ghanaian cedi and the Turkish lira.
The effect of movements in exchange rates and other movements on
profit before exceptional items and taxation for the year ended 30
June 2023 is set out in the table below.
Gains/(losses)
GBP million
--------------------------------------------- --------------
Translation impact 246
============================================= ==============
Transaction impact (124)
--------------------------------------------- --------------
Operating profit before exceptional items 122
============================================= ==============
Net finance charges - translation impact (32)
============================================= ==============
Net finance charges - transaction impact 6
--------------------------------------------- --------------
Net finance charges (26)
--------------------------------------------- --------------
Associates - translation impact 8
--------------------------------------------- --------------
Profit before exceptional items and taxation 104
--------------------------------------------- --------------
Year Year
ended ended
30 June 30 June
2023 2022
--------------------- -------- --------
Exchange rates
===================== ======== ========
Translation GBP1 = $1.20 $1.33
===================== ======== ========
Transaction GBP1 = $1.30 $1.29
===================== ======== ========
Translation GBP1 = EUR1.15 EUR1.18
===================== ======== ========
Transaction GBP1 = EUR1.16 EUR1.15
--------------------- -------- --------
(b) Acquisitions and disposals
The acquisitions and disposals movement in the year ended 30
June 2023 was primarily attributable to the disposal of the United
Spirits Limited (USL) Popular brands and Guinness Cameroun S.A.
See pages 23, 41, 43 and 48-53 for further details.
(c) Exceptional items
In the year ended 30 June 2023, exceptional operating items were
a loss of GBP622 million (2022 - a loss of GBP388 million), mainly
due to charges related to brand impairment (GBP498 million) and the
supply chain agility programme (GBP100 million).
In the year ended 30 June 2023, exceptional non-operating items
were a gain of GBP328 million (2022 - a loss of GBP17 million ),
mainly driven by the gain in relation to the sale of Guinness
Cameroun S.A. (GBP310 million).
See pages 34-35 for further details .
(d) Fair value remeasurement
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 GBP113 million gain for the year ended 30 June 2023
and GBP65 million gain for the year ended 30 June 2022.
(e) Taxation
The reported tax rate for the year ended 30 June 2023 was 20.5%
compared with 23.9% for the year ended 30 June 2022.
Included in the tax charge of GBP970 million in the year ended
30 June 2023 is a net exceptional tax credit of GBP186 million,
including an exceptional tax credit of GBP124 million in respect of
brand impairments, mainly the McDowell's brand, a tax credit of
GBP57 million in respect of the deductibility of fees paid to
Diageo plc for guaranteeing externally issued debt of its US group
entities, a tax credit of GBP23 million in respect of the supply
chain agility programme, partly offset by a tax charge of GBP42
million in respect of the sale of Guinness Cameroun S.A.
The reported tax charge for the year ended 30 June 2022 included
an exceptional tax credit of GBP31 million, comprising exceptional
tax credits of GBP35 million and GBP20 million on the impairment of
the McDowell's and Bell's brands respectively, partly offset by an
exceptional tax charge of GBP23 million in respect of the gain on
the sale of the Picon brand and a further tax charge of GBP3
million in respect of winding down operations in Russia.
The tax rate before exceptional items for the year ended 30 June
2023 was 23.0% compared with 22.5% for the year ended 30 June
2022.
We expect the tax rate before exceptional items for the year
ending 30 June 2024 to be in the region of 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 2023 , dividend cover is
2.0 times. The recommended final dividend for the year ended 30
June 2023, to be put to the shareholders for approval at the Annual
General Meeting is 49.17 pence, an increase of 5% on the prior year
final dividend. This would bring the full year dividend to 80.00
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 2024 to ensure Diageo's
capital is allocated in the best way to maximize value for the
business and its stakeholders.
Subject to approval by shareholders, the final dividend will be
paid to holders of ordinary shares and US ADRs on the register as
of 25 August 2023. The ex-dividend date both for the holders of the
ordinary shares and for US ADR holders is 24 August 2023. The final
dividend, once approved by shareholders, will be paid to
shareholders on 12 October 2023 and payment to US ADR holders will
be made on 17 October 2023. A dividend reinvestment plan is
available to holders of ordinary shares in respect of the final
dividend and the plan notice date is 22 September 2023.
(g) Return of capital
Diageo completed a total of GBP1.4 billion return of capital for
the year ended 30 June 2023, which included GBP0.9 billion related
to the successful completion of Diageo's previous share buyback
programme in which GBP4.5 billion of capital was returned to
shareholders, and returned an additional GBP0.5 billion of capital
to shareholders which was announced as a new share buyback
programme on 16 February 2023 and completed on 2 June 2023.
In the year ended 30 June 2023, the company purchased 37.8
million ordinary shares (2022 - 61.2 million) at a cost of GBP1,381
million (including transaction costs of GBP13 million) (2022 -
GBP2,284 million including transaction costs of GBP16 million). All
shares purchased under the share buyback programme were
cancelled.
Movements in net borrowings and equity
Movements in net borrowings
2023 2022
GBP million GBP million
------------------------------------------------------- ----------- -----------
Net borrowings at the beginning of the year (14,137) (12,109)
======================================================= =========== ===========
Free cash flow (1) 1,800 2,783
======================================================= =========== ===========
Acquisitions (2) (342) (206)
======================================================= =========== ===========
Investment in associates (2) (93) (65)
======================================================= =========== ===========
Sale of businesses and brands (3) 462 82
======================================================= =========== ===========
Share buyback programme (4) (1,381) (2,284)
Net sale of own shares for share schemes (5) 29 18
======================================================= =========== ===========
Purchase of treasury shares in respect of subsidiaries - (15)
======================================================= =========== ===========
Dividends paid to non-controlling interests (97) (81)
Net movements in bonds (6) 889 742
======================================================= =========== ===========
Purchase of shares of non-controlling interests (7) (146) -
======================================================= =========== ===========
Net movements in other borrowings (8) 59 79
======================================================= =========== ===========
Equity dividend paid (1,761) (1,718)
------------------------------------------------------- ----------- -----------
Net decrease in cash and cash equivalents (581) (665)
======================================================= =========== ===========
Net increase in bonds and other borrowings (950) (825)
======================================================= =========== ===========
Exchange differences (9) 159 (334)
======================================================= =========== ===========
Other non-cash items (10) (32) (204)
Net borrowings at the end of the year (15,541) (14,137)
------------------------------------------------------- ----------- -----------
(1) See page 54 for the analysis of free cash flow.
(2) In the year ended 30 June 2023, acquisitions included
upfront payments of EUR246 million (GBP218 million) for Kanlaon
Limited and Chat Noir Co. Inc. (the owner of Don Papa Rum) and $102
million (GBP89 million) for Balcones Distilling.
In the year ended 30 June 2022, acquisitions included the final
earn-out payment in respect of the Casamigos acquisition amounting
to $113 million (GBP83 million) and upfront payment of GBP62
million for 21Seeds.
In the years ended 30 June 2023 and 2022, investment in
associates included additional investments in a number of Distill
Ventures associates.
(3) In the year ended 30 June 2023, sale of businesses and
brands included the disposal of Guinness Cameroun S.A. beer
business for a net cash consideration, net of disposal costs, of
GBP354 million and the disposal of the Popular brands of Diageo's
USL business, for a cash consideration, net of disposal costs, of
GBP83 million.
In the year ended 30 June 2022, sale of businesses and brands
included the cash received on the disposal of Picon brand, net of
transaction costs .
(4) See page 22 for details of Diageo's return of capital
programmes.
(5) Net sale of own shares comprised receipts from employees on
the exercise of share options of GBP51 million (2022 - GBP32
million) less purchase of own shares for the future settlement of
obligations under the employee share option schemes of GBP22
million (2022 - GBP14 million).
(6) In the year ended 30 June 2023, the group issued bonds of
$2,000 million (GBP1,788 million - net of discount and fee) and
EUR500 million (GBP441 million - net of discount and fee), and
repaid bonds of $1,650 million (GBP1,340 million). 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 $1,000 million (GBP752
million).
(7) On 24 March 2023, Diageo completed the purchase of an
additional 14.97% of the share capital of East African Breweries
PLC (EABL). This increased Diageo's controlling shareholding
position in EABL from 50.03% to 65.00%.
(8) In the year ended 30 June 2023, the net movements in other
borrowings principally arose from the increase in commercial paper,
collateral and bank loan balances offset by cash outflows of
foreign currency swaps and forwards and repayment of lease
liabilities. In the year ended 30 June 2022, the net movements in
other borrowings principally arose from cash movements of foreign
currency swaps and forwards partially offset by the repayment of
lease liabilities.
(9) In the year ended 30 June 2023, exchange gains arising on
net borrowings of GBP159 million were primarily driven by
favourable exchange movements on US dollar and euro denominated
borrowings and unfavourable exchange movements on cash and cash
equivalents, foreign currency swaps and forwards. 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.
(10) In the year ended 30 June 2023, other non-cash items were
principally in respect of additional leases entered into during the
year partially offset by fair value movements of interest rate
hedging instruments. In the year ended 30 June 2022, other non-cash
items were principally in respect of additional leases entered into
during the year.
Movements in equity
2023 2022
GBP million GBP million
--------------------------------------------------------------- ----------- -----------
Equity at the beginning of the year 9,514 8,431
=============================================================== =========== ===========
Adjustment to 2021 closing equity in respect of hyperinflation
in Turkey (1) - 251
--------------------------------------------------------------- ----------- -----------
Adjusted equity at the beginning of the year 9,514 8,682
Profit for the year 3,766 3,338
=============================================================== =========== ===========
Exchange adjustments (2) (686) 799
=============================================================== =========== ===========
Remeasurement of post employment benefit plans net of
taxation (469) 497
=============================================================== =========== ===========
Purchase of shares of non-controlling interests (3) (146) -
=============================================================== =========== ===========
Hyperinflation adjustments net of taxation (1) 143 291
Associates' transactions with non-controlling interests (7) -
=============================================================== =========== ===========
Dividend to non-controlling interests (97) (72)
=============================================================== =========== ===========
Equity dividend paid (1,762) (1,718)
=============================================================== =========== ===========
Share buyback programme (4) (1,273) (2,310)
=============================================================== =========== ===========
Other reserve movements 309 7
--------------------------------------------------------------- ----------- -----------
Equity at the end of the year 9,292 9,514
--------------------------------------------------------------- ----------- -----------
(1) See page 36-37 for details of hyperinflation
adjustments.
(2) Exchange movements in the year ended 30 June 2023 primarily
arose from exchange loss driven by the Turkish lira, the Indian
rupee and the Chinese yuan, partially offset by gains in Mexican
peso and US dollar. 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 Turkish lira.
(3) On 24 March 2023, Diageo completed the purchase of an
additional 14.97% of the share capital of East African Breweries
PLC (EABL). This increased Diageo's controlling shareholding
position in EABL from 50.03% to 65.00%.
(4) See page 22 for details of Diageo's return of capital
programmes.
Post employment benefit plans
The net surplus of the group's post employment benefit plans
decreased by GBP564 million from GBP1,151 million at 30 June 2022
to GBP587 million at 30 June 2023. The decrease in net surplus was
predominantly attributable to the unfavourable change in the market
value of assets held by the post employment benefit plans in the UK
which was partially offset by the favourable change in the discount
rate assumptions in the UK due to the increase in returns from 'AA'
rated corporate bonds used to calculate the discount rates on the
liabilities of the post employment benefit plans (from 3.8% to
5.2%). The net operating profit charge before exceptional items
increased by GBP36 million from GBP39 million for the year ended 30
June 2022 to GBP75 million for the year ended 30 June 2023.
During the year ended 30 June 2023, following a remeasurement of
the Diageo Lifestyle Plan, Diageo made a GBP16 million one-off
deficit contribution to satisfy minimum funding requirement.
Total cash contributions by the group to all post employment
benefit plans in the year ending 30 June 2024 are estimated to be
approximately GBP75 million ($95 million).
Condensed consolidated income statement
Year Year
ended ended
30 June 30 June
2023 2022
Notes GBP million GBP million
Sales 2 23,515 22,448
=================================================== ===== ============== ================
Excise duties (6,402) (6,996)
--------------------------------------------------- ----- -------------- ----------------
Net sales 2 17,113 15,452
=================================================== ===== ============== ================
Cost of sales (6,899) (5,973)
--------------------------------------------------- ----- -------------- ----------------
Gross profit 10,214 9,479
=================================================== ===== ============== ================
Marketing (3,051) (2,721)
=================================================== ===== ============== ================
Other operating items (2,531) (2,349)
--------------------------------------------------- ----- -------------- ----------------
Operating profit 2 4,632 4,409
=================================================== ===== ============== ================
Non-operating items 3 328 (17)
=================================================== ===== ============== ================
Finance income 4 340 497
=================================================== ===== ============== ================
Finance charges 4 (934) (919)
=================================================== ===== ============== ================
Share of after tax results of associates and joint
ventures 370 417
--------------------------------------------------- ----- -------------- ----------------
Profit before taxation 4,736 4,387
=================================================== ===== ============== ================
Taxation 5 (970) (1,049)
Profit for the year 3,766 3,338
--------------------------------------------------- ----- -------------- ----------------
Attributable to:
=================================================== ===== ============== ================
Equity shareholders of the parent company 3,734 3,249
Non-controlling interests 32 89
--------------------------------------------------- ----- -------------- ----------------
3,766 3,338
--------------------------------------------------- ----- -------------- ----------------
Weighted average number of shares million million
--------------------------------------------------- ----- -------------- ----------------
Shares in issue excluding own shares 2,264 2,318
=================================================== ===== ============== ================
Dilutive potential ordinary shares 7 7
--------------------------------------------------- ----- -------------- ----------------
2,271 2,325
--------------------------------------------------- ----- -------------- ----------------
pence pence
--------------------------------------------------- ----- -------------- ----------------
Basic earnings per share 164.9 140.2
Diluted earnings per share 164.4 139.7
Condensed consolidated statement of comprehensive income
Year ended Year ended
30 June 30 June
2023 2022
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 (643) 616
============================================================== =========== ===========
Associates and joint ventures 13 5
============================================================== =========== ===========
Non-controlling interests - (1)
============================================================== =========== ===========
Tax on post employment benefit plans 161 (123)
============================================================== =========== ===========
Changes in the fair value of equity investments at fair
value through other comprehensive income (4) (12)
-------------------------------------------------------------- ----------- -----------
(473) 485
============================================================== =========== ===========
Items that may be recycled subsequently to the income
statement
============================================================== =========== ===========
Exchange differences on translation of foreign operations
============================================================== =========== ===========
Group (876) 1,128
============================================================== =========== ===========
Associates and joint ventures (59) 60
============================================================== =========== ===========
Non-controlling interests (148) 171
============================================================== =========== ===========
Net investment hedges 416 (623)
============================================================== =========== ===========
Exchange (gain)/loss recycled to the income statement
============================================================== =========== ===========
On disposal of foreign operations (18) 63
============================================================== =========== ===========
On step acquisitions (1) -
============================================================== =========== ===========
Tax on exchange differences - group (2) (6)
Effective portion of changes in fair value of cash flow
hedges
============================================================== =========== ===========
Hedge of foreign currency debt of the group 6 233
============================================================== =========== ===========
Transaction exposure hedging of the group 273 (172)
============================================================== =========== ===========
Hedges by associates and joint ventures 24 (15)
============================================================== =========== ===========
Commodity price risk hedging of the group (56) 78
============================================================== =========== ===========
Recycled to income statement - hedge of foreign currency
debt of the group 54 (239)
============================================================== =========== ===========
Recycled to income statement - transaction exposure hedging
of the group (13) 42
============================================================== =========== ===========
Recycled to income statement - commodity price risk hedging
of the group (33) (46)
============================================================== =========== ===========
Tax on effective portion of changes in fair value of
cash flow hedges (39) 32
============================================================== =========== ===========
Hyperinflation adjustments 182 365
============================================================== =========== ===========
Tax on hyperinflation adjustments (39) (74)
-------------------------------------------------------------- ----------- -----------
(329) 997
-------------------------------------------------------------- ----------- -----------
Other comprehensive (loss)/income, net of tax, for the
year (802) 1,482
============================================================== =========== ===========
Profit for the year 3,766 3,338
-------------------------------------------------------------- ----------- -----------
Total comprehensive income for the year 2,964 4,820
-------------------------------------------------------------- ----------- -----------
Attributable to:
============================================================== =========== ===========
Equity shareholders of the parent company 3,080 4,561
Non-controlling interests (116) 259
-------------------------------------------------------------- ----------- -----------
Total comprehensive income for the year 2,964 4,820
-------------------------------------------------------------- ----------- -----------
Condensed consolidated balance sheet
30 June 2023 30 June 2022
------------------------ ------------------------
Notes GBP million GBP million GBP million GBP million
------------------------------------------- ----- ----------- ----------- ----------- -----------
Non-current assets
------------------------------------------- ----- ----------- ----------- ----------- -----------
Intangible assets 12 11,512 11,902
------------------------------------------- ----- ----------- ----------- ----------- -----------
Property, plant and equipment 6,142 5,848
------------------------------------------- ----- ----------- ----------- ----------- -----------
Biological assets 156 94
------------------------------------------- ----- ----------- ----------- ----------- -----------
Investments in associates and joint
ventures 3,829 3,652
------------------------------------------- ----- ----------- ----------- ----------- -----------
Other investments 57 37
------------------------------------------- ----- ----------- ----------- ----------- -----------
Other receivables 31 37
------------------------------------------- ----- ----------- ----------- ----------- -----------
Other financial assets 394 345
------------------------------------------- ----- ----------- ----------- ----------- -----------
Deferred tax assets 141 114
------------------------------------------- ----- ----------- ----------- ----------- -----------
Post employment benefit assets 960 1,553
------------------------------------------- ----- ----------- ----------- ----------- -----------
23,222 23,582
------------------------------------------- ----- ----------- ----------- ----------- -----------
Current assets
------------------------------------------- ----- ----------- ----------- ----------- -----------
Inventories 6 7,661 7,094
------------------------------------------- ----- ----------- ----------- ----------- -----------
Trade and other receivables 2,720 2,933
------------------------------------------- ----- ----------- ----------- ----------- -----------
Assets held for sale 14 - 222
------------------------------------------- ----- ----------- ----------- ----------- -----------
Corporate tax receivables 5 232 149
------------------------------------------- ----- ----------- ----------- ----------- -----------
Other financial assets 347 251
------------------------------------------- ----- ----------- ----------- ----------- -----------
Cash and cash equivalents 7 1,439 2,285
------------------------------------------- ----- ----------- ----------- ----------- -----------
12,399 12,934
------------------------------------------- ----- ----------- ----------- ----------- -----------
Total assets 35,621 36,516
------------------------------------------- ----- ----------- ----------- ----------- -----------
Current liabilities
------------------------------------------- ----- ----------- ----------- ----------- -----------
Borrowings and bank overdrafts 7 (1,701) (1,522)
------------------------------------------- ----- ----------- ----------- ----------- -----------
Other financial liabilities (359) (444)
------------------------------------------- ----- ----------- ----------- ----------- -----------
Share buyback liability - (117)
------------------------------------------- ----- ----------- ----------- ----------- -----------
Trade and other payables (5,300) (5,887)
------------------------------------------- ----- ----------- ----------- ----------- -----------
Liabilities held for sale 14 - (61)
------------------------------------------- ----- ----------- ----------- ----------- -----------
Corporate tax payables 5 (135) (252)
------------------------------------------- ----- ----------- ----------- ----------- -----------
Provisions (119) (159)
------------------------------------------- ----- ----------- ----------- ----------- -----------
(7,614) (8,442)
------------------------------------------- ----- ----------- ----------- ----------- -----------
Non-current liabilities
------------------------------------------- ----- ----------- ----------- ----------- -----------
Borrowings 7 (14,801) (14,498)
------------------------------------------- ----- ----------- ----------- ----------- -----------
Other financial liabilities (747) (703)
------------------------------------------- ----- ----------- ----------- ----------- -----------
Other payables (368) (380)
------------------------------------------- ----- ----------- ----------- ----------- -----------
Provisions (243) (258)
------------------------------------------- ----- ----------- ----------- ----------- -----------
Deferred tax liabilities (2,183) (2,319)
------------------------------------------- ----- ----------- ----------- ----------- -----------
Post employment benefit liabilities (373) (402)
------------------------------------------- ----- ----------- ----------- ----------- -----------
(18,715) (18,560)
------------------------------------------- ----- ----------- ----------- ----------- -----------
Total liabilities (26,329) (27,002)
------------------------------------------- ----- ----------- ----------- ----------- -----------
Net assets 9,292 9,514
------------------------------------------- ----- ----------- ----------- ----------- -----------
Equity
------------------------------------------- ----- ----------- ----------- ----------- -----------
Share capital 712 723
------------------------------------------- ----- ----------- ----------- ----------- -----------
Share premium 1,351 1,351
------------------------------------------- ----- ----------- ----------- ----------- -----------
Other reserves 1,861 2,174
------------------------------------------- ----- ----------- ----------- ----------- -----------
Retained earnings 3,898 3,550
------------------------------------------- ----- ----------- ----------- ----------- -----------
Equity attributable to equity shareholders
of the parent company 7,822 7,798
------------------------------------------- ----- ----------- ----------- ----------- -----------
Non-controlling interests 1,470 1,716
------------------------------------------- ----- ----------- ----------- ----------- -----------
Total equity 9,292 9,514
------------------------------------------- ----- ----------- ----------- ----------- -----------
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 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
Profit for the
year - - - - 3,734 3,734 3,734 32 3,766
================ ======== ======== ======== ========= ======== ======== ============ =============== ========
Other
comprehensive
loss - - (324) - (330) (330) (654) (148) (802)
================ ======== ======== ======== ========= ======== ======== ============ =============== ========
Total
comprehensive
income
for the year - - (324) - 3,404 3,404 3,080 (116) 2,964
Employee share
schemes - - - 24 24 48 48 - 48
================ ======== ======== ======== ========= ======== ======== ============ =============== ========
Share-based
incentive plans - - - - 49 49 49 - 49
================ ======== ======== ======== ========= ======== ======== ============ =============== ========
Share-based
incentive plans
in respect of
associates - - - - 6 6 6 - 6
================ ======== ======== ======== ========= ======== ======== ============ =============== ========
Tax on
share-based
incentive
plans - - - - 6 6 6 - 6
================ ======== ======== ======== ========= ======== ======== ============ =============== ========
Share based
payments and
purchase of own
shares in
respect of
subsidiaries - - - - 3 3 3 2 5
Purchase of
non-controlling
interests - - - - (111) (111) (111) (35) (146)
================ ======== ======== ======== ========= ======== ======== ============ =============== ========
Associates'
transactions
with
non-controlling
interests - - - - (7) (7) (7) - (7)
Unclaimed
dividend - - - - 1 1 1 - 1
================ ======== ======== ======== ========= ======== ======== ============ =============== ========
Change in fair
value of
put option - - - - (16) (16) (16) - (16)
================ ======== ======== ======== ========= ======== ======== ============ =============== ========
Share buyback
programme (11) - 11 - (1,273) (1,273) (1,273) - (1,273)
================ ======== ======== ======== ========= ======== ======== ============ =============== ========
Dividend
declared for
the
year - - - - (1,762) (1,762) (1,762) (97) (1,859)
---------------- -------- -------- -------- --------- -------- -------- ------------ --------------- --------
At 30 June 2023 712 1,351 1,861 (1,814) 5,712 3,898 7,822 1,470 9,292
---------------- -------- -------- -------- --------- -------- -------- ------------ --------------- --------
Condensed consolidated statement of cash flows
Year ended Year ended
30 June 2023 30 June 2022
------------------------- --------------------------
GBP million GBP million GBP million GBP million
--------------------------------------------------- ------------ ----------- ------------ ------------
Cash flows from operating activities
=================================================== ============ =========== ============ ============
Profit for the year 3,766 3,338
Taxation 970 1,049
=================================================== ============ =========== ============ ============
Share of after tax results of associates
and joint ventures (370) (417)
=================================================== ============ =========== ============ ============
Net finance charges 594 422
=================================================== ============ =========== ============ ============
Non-operating items (328) 17
--------------------------------------------------- ------------ ----------- ------------ ------------
Operating profit 4,632 4,409
=================================================== ============ =========== ============ ============
Increase in inventories (675) (740)
=================================================== ============ =========== ============ ============
Decrease/(increase) in trade and other receivables 121 (378)
=================================================== ============ =========== ============ ============
(Decrease)/increase in trade and other payables
and provisions (621) 939
--------------------------------------------------- ------------ ----------- ------------ ------------
Net increase in working capital (1,175) (179)
=================================================== ============ =========== ============ ============
Depreciation, amortisation and impairment 1,066 828
=================================================== ============ =========== ============ ============
Dividends received 219 190
=================================================== ============ =========== ============ ============
Post employment payments less amounts included
in operating profit (25) (89)
=================================================== ============ =========== ============ ============
Other items 62 53
--------------------------------------------------- ------------ ----------- ------------ ------------
1,322 982
--------------------------------------------------- ------------ ----------- ------------ ------------
Cash generated from operations 4,779 5,212
=================================================== ============ =========== ============ ============
Interest received 131 110
=================================================== ============ =========== ============ ============
Interest paid (685) (438)
=================================================== ============ =========== ============ ============
Taxation paid (1,201) (949)
--------------------------------------------------- ------------ ----------- ------------ ------------
(1,755) (1,277)
--------------------------------------------------- ------------ ----------- ------------ ------------
Net cash inflow from operating activities 3,024 3,935
=================================================== ============ =========== ============ ============
Cash flows from investing activities
=================================================== ============ =========== ============ ============
Disposal of property, plant and equipment
and computer software 13 17
=================================================== ============ =========== ============ ============
Purchase of property, plant and equipment
and computer software (1,180) (1,097)
=================================================== ============ =========== ============ ============
Movements in loans and other investments (57) (72)
=================================================== ============ =========== ============ ============
Sale of businesses and brands 462 82
=================================================== ============ =========== ============ ============
Acquisition of subsidiaries(1) (342) (206)
=================================================== ============ =========== ============ ============
Investment in associates and joint ventures(1) (93) (65)
--------------------------------------------------- ------------ ----------- ------------ ------------
Net cash outflow from investing activities (1,197) (1,341)
=================================================== ============ =========== ============ ============
Cash flows from financing activities
=================================================== ============ =========== ============ ============
Share buyback programme (1,381) (2,284)
Net sale of own shares for share schemes 29 18
=================================================== ============ =========== ============ ============
Purchase of treasury shares in respect of
subsidiaries - (15)
=================================================== ============ =========== ============ ============
Dividends paid to non-controlling interests (97) (81)
Proceeds from bonds 2,229 2,263
=================================================== ============ =========== ============ ============
Repayment of bonds (1,340) (1,521)
=================================================== ============ =========== ============ ============
Purchase of shares of non-controlling interests (146) -
=================================================== ============ =========== ============ ============
Cash inflow from other borrowings 433 503
=================================================== ============ =========== ============ ============
Cash outflow from other borrowings (374) (424)
=================================================== ============ =========== ============ ============
Equity dividend paid (1,761) (1,718)
--------------------------------------------------- ------------ ----------- ------------ ------------
Net cash outflow from financing activities (2,408) (3,259)
--------------------------------------------------- ------------ ----------- ------------ ------------
Net decrease in net cash and cash equivalents (581) (665)
=================================================== ============ =========== ============ ============
Exchange differences (227) 239
Net cash and cash equivalents at beginning
of the year 2,211 2,637
--------------------------------------------------- ------------ ----------- ------------ ------------
Net cash and cash equivalents at end of
the year 1,403 2,211
--------------------------------------------------- ------------ ----------- ------------ ------------
Net cash and cash equivalents consist of:
=================================================== ============ =========== ============ ============
Cash and cash equivalents 1,439 2,285
=================================================== ============ =========== ============ ============
Bank overdrafts (36) (74)
--------------------------------------------------- ------------ ----------- ------------ ------------
1,403 2,211
--------------------------------------------------- ------------ ----------- ------------ ------------
(1)For the year ended 30 June 2022, the previously reported line
item of "Acquisition of businesses" has been replaced with
"Acquisition of subsidiaries" and "Investment in associates and
joint ventures" to show separately the amounts which had previously
been shown combined.
Notes
1. Basis of preparation
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 (IFRSs) adopted by the UK and IFRSs, as issued
by the IASB, including interpretations issued by the IFRS
Interpretations Committee. IFRS as adopted by the UK 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 in respect of exceptional items,
taxation, brands, goodwill, other intangibles, contingent
considerations, post employment benefits, contingent liabilities
and legal proceedings.
The comparative figures for the financial year ended 30 June
2022 are not the company's statutory accounts (within the meaning
of section 434 of the Companies Act 2006) for that financial year.
Those statutory accounts have been reported on by the company's
auditor, PricewaterhouseCoopers LLP, and delivered to the Registrar
of Companies. The report of the auditor (i) was unqualified, (ii)
did not include a reference to any matters to which the auditor
drew attention by way of emphasis without qualifying their report
and (iii) did not contain a statement under section 498 (2) or (3)
of the Companies Act 2006.
The financial information for the year ended 30 June 2023 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.
Going concern
Management prepared cash flow forecasts which were also
sensitised to reflect severe but plausible downside scenarios
taking into consideration the group's principal risks. In the base
case scenario, management included assumptions for mid-single digit
net sales growth, operating margin improvement and global TBA
market share growth. In light of the ongoing geopolitical
volatility, the base case outlook and severe but plausible downside
scenarios incorporated considerations for a prolonged global
recession, supply chain disruptions, higher inflation and further
geopolitical deterioration. Even under these scenarios, the group's
liquidity is still expected to remain strong, as it was protected
by issuing EUR500 million of fixed rate euro and $2 billion of
fixed rate dollar-denominated bonds in the year ended 30 June 2023.
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
consolidated financial statements.
Exchange rates
Weighted average exchange rates used in the translation of
income statements were US dollar - GBP1 = $1.2 (2022 - GBP1 =
$1.33) and euro - GBP1 = EUR1.15 (2022 - GBP1 = EUR1.18). Exchange
rates used to translate assets and liabilities at the balance sheet
date were US dollar - GBP1 = $1.26 (30 June 2022 - GBP1 = $1.21)
and euro - GBP1 = EUR1.17 (30 June 2022 - GBP1 = EUR1.16). The
group uses foreign exchange transaction hedges to mitigate the
effect of exchange rate movements.
New accounting standards and interpretations
The following amendments to the accounting standards, issued by
the IASB and endorsed by the UK, were adopted by the group from 1
July 2022 with no impact on the group's consolidated results,
financial position or disclosures:
- Amendments to IFRS 3 Updating a Reference to the Conceptual Framework
- Amendments to IAS 16 Property, Plant and Equipment - Proceeds before Intended Use
- Amendments to IAS 37 Onerous Contracts - Cost of Fulfilling a Contract
- Amendments to Annual improvements 2018-2020 - IFRS 9 - Fees in
the '10 per cent' Test, IFRS 16 - Lease incentive, IAS 41 -
Taxation in Fair Value Measurements
- Amendments to IAS 12 International Tax Reform - Pillar Two Model Rules
The following standard and amendments issued by the IASB have
been endorsed by the UK and have 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.
- Amendments to IAS 12 - Income taxes (effective from the year
ending 30 June 2024) requires an entity to recognise deferred tax
on initial recognition of particular transactions to the extent
that the transaction gives rise to equal amounts of deferred tax
assets and liabilities. The proposed amendments would apply to
transactions such as leases and decommissioning obligations for
which an entity recognises both an asset and a liability. The group
believes that the adoption of these amendments will not have a
significant impact on its consolidated results and financial
position.
There are a number of other amendments and clarifications to
IFRSs, effective in future years, which are not expected to
significantly impact the group's consolidated results or financial
position.
2. Segmental information
The segmental information presented is consistent with
management reporting provided to the Executive Committee (the chief
operating decision maker).
The Executive Committee considers the business principally from
a geographical perspective based on the location of third-party
sales and the business analysis is presented by geographical
segment. In addition to these geographical selling segments, a
further segment reviewed by the Executive Committee is the Supply
Chain and Procurement (SC&P) segment, which manufactures
products for other group companies and includes production sites in
the United Kingdom, Ireland, Italy, Guatemala and Mexico, and
comprises the global procurement function.
The group's operations also include the Corporate segment.
Corporate costs are in respect of central costs, including finance,
marketing, corporate relations, human resources and legal, as well
as certain information systems, facilities and employee costs that
are not allocable to the geographical segments or to the
SC&P.
Diageo uses shared services operations to deliver transaction
processing activities for markets and operational entities. These
centres are located in India, Hungary, Colombia and the
Philippines. These captive business service centres also perform
certain central finance activities, including elements of financial
planning and reporting, treasury and HR services. The costs of
shared services operations are recharged to the regions.
For planning and management reporting purposes, Diageo uses
budgeted exchange rates that are set at the prior year's weighted
average exchange rate. In order to ensure a consistent basis on
which performance is measured through the year, prior period
results are also restated to the budgeted exchange rate. Segmental
information for net sales and operating profit before exceptional
items are reported on a consistent basis with management reporting.
The adjustments required to retranslate the segmental information
to actual exchange rates and to reconcile it to the group's
reported results are shown in the tables below. The comparative
segmental information, prior to retranslation, has not been
restated at the current year's budgeted exchange rates but is
presented at the budgeted rates for the respective year.
In addition, for management reporting purposes, Diageo presents
the result of acquisitions and disposals completed in the current
and prior year separately from the results of the geographical
segments. The impact of acquisitions and disposals on net sales and
operating profit is disclosed under the appropriate geographical
segments in the tables below at budgeted exchange rates.
(a) Segmental information for the consolidated income
statement
Latin Eliminate
America inter- Total Corporate
North Asia and segment operating and
America Europe Pacific Caribbean Africa SC&P sales segments other Total
Year ended 30 GBP GBP GBP GBP GBP GBP GBP GBP GBP GBP
June 2023 million million million million million million million million million million
--------------- ------- -------- -------- --------- -------- -------- --------- --------- --------- --------
Sales 7,382 5,996 5,403 2,260 2,386 3,073 (3,073) 23,427 88 23,515
--------------- ------- -------- -------- --------- -------- -------- --------- --------- --------- --------
Net sales
=============== ======= ======== ======== ========= ======== ======== ========= ========= ========= ========
At budgeted
exchange
rates(1) 6,052 3,377 3,084 1,642 1,631 2,942 (2,876) 15,852 87 15,939
=============== ======= ======== ======== ========= ======== ======== ========= ========= ========= ========
Acquisitions
and disposals 20 20 35 3 104 - - 182 - 182
=============== ======= ======== ======== ========= ======== ======== ========= ========= ========= ========
SC&P allocation 8 38 8 9 3 (66) - - - -
=============== ======= ======== ======== ========= ======== ======== ========= ========= ========= ========
Retranslation
to actual
exchange rates 678 (41) 73 145 (39) 197 (197) 816 1 817
=============== ======= ======== ======== ========= ======== ======== ========= ========= ========= ========
Hyperinflation - 175 - - - - - 175 - 175
--------------- ------- -------- -------- --------- -------- -------- --------- --------- --------- --------
Net sales 6,758 3,569 3,200 1,799 1,699 3,073 (3,073) 17,025 88 17,113
--------------- ------- -------- -------- --------- -------- -------- --------- --------- --------- --------
Operating
profit/(loss)
=============== ======= ======== ======== ========= ======== ======== ========= ========= ========= ========
At budgeted
exchange
rates(1) 2,337 1,076 886 597 347 (32) - 5,211 (292) 4,919
=============== ======= ======== ======== ========= ======== ======== ========= ========= ========= ========
Acquisitions
and disposals (18) (13) 5 - 27 - - 1 (6) (5)
=============== ======= ======== ======== ========= ======== ======== ========= ========= ========= ========
SC&P allocation 3 (24) (6) (3) (2) 32 - - - -
=============== ======= ======== ======== ========= ======== ======== ========= ========= ========= ========
Fair value
remeasurements 87 25 - 1 - - - 113 - 113
Retranslation
to actual
exchange rates 280 18 20 66 (152) - - 232 (28) 204
=============== ======= ======== ======== ========= ======== ======== ========= ========= ========= ========
Hyperinflation - 23 - - - - - 23 - 23
--------------- ------- -------- -------- --------- -------- -------- --------- --------- --------- --------
Operating
profit/(loss)
before
exceptional
items 2,689 1,105 905 661 220 - - 5,580 (326) 5,254
=============== ======= ======== ======== ========= ======== ======== ========= ========= ========= ========
Exceptional
operating
items (97) (8) (473) - (44) - - (622) - (622)
--------------- ------- -------- -------- --------- -------- -------- --------- --------- --------- --------
Operating
profit/(loss) 2,592 1,097 432 661 176 - - 4,958 (326) 4,632
--------------- ------- -------- -------- --------- -------- -------- --------- --------- --------- --------
Non-operating
items 328
=============== ======= ======== ======== ========= ======== ======== ========= ========= ========= ========
Net finance
charges (594)
=============== ======= ======== ======== ========= ======== ======== ========= ========= ========= ========
Share of after
tax results
of associates
and joint
ventures 370
--------------- ------- -------- -------- --------- -------- -------- --------- --------- --------- --------
Profit before
taxation 4,736
--------------- ------- -------- -------- --------- -------- -------- --------- --------- --------- --------
Latin Eliminate
America inter- Total Corporate
North Asia and segment operating and
America Europe Pacific Caribbean Africa 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 1,945 2,403 2,010 (2,010) 22,394 54 22,448
--------------- ------- -------- -------- --------- -------- -------- --------- --------- --------- --------
Net sales
=============== ======= ======== ======== ========= ======== ======== ========= ========= ========= ========
At budgeted
exchange
rates(1) 5,955 3,258 2,879 1,486 1,699 2,095 (2,016) 15,356 55 15,411
=============== ======= ======== ======== ========= ======== ======== ========= ========= ========= ========
Acquisitions
and disposals 34 23 - 3 15 - - 75 - 75
=============== ======= ======== ======== ========= ======== ======== ========= ========= ========= ========
SC&P allocation 9 46 9 12 3 (79) - - - -
=============== ======= ======== ======== ========= ======== ======== ========= ========= ========= ========
Retranslation
to actual
exchange rates 97 (304) (4) 24 (35) (6) 6 (222) (1) (223)
--------------- ------- -------- -------- --------- -------- -------- --------- --------- --------- --------
Hyperinflation - 189 - - - - - 189 - 189
--------------- ------- -------- -------- --------- -------- -------- --------- --------- --------- --------
Net sales 6,095 3,212 2,884 1,525 1,682 2,010 (2,010) 15,398 54 15,452
--------------- ------- -------- -------- --------- -------- -------- --------- --------- --------- --------
Operating
profit/(loss)
=============== ======= ======== ======== ========= ======== ======== ========= ========= ========= ========
At budgeted
exchange
rates(1) 2,388 1,086 703 528 346 (22) - 5,029 (256) 4,773
=============== ======= ======== ======== ========= ======== ======== ========= ========= ========= ========
Acquisitions
and disposals (28) 11 - - (10) - - (27) - (27)
=============== ======= ======== ======== ========= ======== ======== ========= ========= ========= ========
SC&P allocation (1) (18) (2) - (1) 22 - - - -
Fair value
remeasurements 32 36 - (8) - - - 60 - 60
--------------- ======= ======== ======== ========= ======== ======== ========= ========= ========= ========
Retranslation
to actual
exchange rates 63 (108) 10 18 (20) - - (37) 18 (19)
--------------- ======= ======== ======== ========= ======== ======== ========= ========= ========= ========
Hyperinflation - 10 - - - - - 10 - 10
--------------- ------- -------- -------- --------- -------- -------- --------- --------- --------- --------
Operating
profit/(loss)
before
exceptional
items 2,454 1,017 711 538 315 - - 5,035 (238) 4,797
=============== ======= ======== ======== ========= ======== ======== ========= ========= ========= ========
Exceptional
items (1) (146) (241) - - - - (388) - (388)
--------------- ------- -------- -------- --------- -------- -------- --------- --------- --------- --------
Operating
profit/(loss) 2,453 871 470 538 315 - - 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
--------------- ------- -------- -------- --------- -------- -------- --------- --------- --------- --------
(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 38% of annual net sales occurred in the last
four months of calendar year 2022.
(b) Category and geographical analysis
Category analysis Geographical analysis
------------- ----------------------------------------------------- ------------------------------------------------
Rest
Ready United Great of
Beer to drink Other Total States India Britain world Total
Year ended 30 Spirits GBP GBP GBP GBP GBP GBP GBP GBP GBP
June 2023 GBP million million million million million million million million million million
------------- ------------ -------- --------- -------- -------- -------- -------- -------- -------- --------
Sales(1) 19,004 3,355 899 257 23,515 6,972 2,751 2,138 11,654 23,515
------------- ------------ -------- --------- -------- -------- -------- -------- -------- -------- --------
Year ended 30
June 2022
------------- ------------ -------- --------- -------- -------- -------- -------- -------- -------- --------
Sales(1) 18,164 3,128 882 274 22,448 6,327 3,219 2,142 10,760 22,448
------------- ------------ -------- --------- -------- -------- -------- -------- -------- -------- --------
(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 pages 48-49 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
2023 2022
GBP million GBP million
----------------------------------------------------------- ----------- -----------
Exceptional operating items
=========================================================== =========== ===========
Brand and goodwill impairment (1) (498) (336)
=========================================================== =========== ===========
Supply chain agility programme (2) (100) -
=========================================================== =========== ===========
Distribution termination fee (3) (44) -
=========================================================== =========== ===========
Winding down Russian operations (4) 20 (50)
=========================================================== =========== ===========
Other exceptional operating items (5) - (2)
----------------------------------------------------------- ----------- -----------
(622) (388)
=========================================================== =========== ===========
Non-operating items
=========================================================== =========== ===========
Sale of businesses and brands
=========================================================== =========== ===========
Guinness Cameroun S.A. (6) 310 -
=========================================================== =========== ===========
Archers brand (7) 20 -
=========================================================== =========== ===========
USL Popular brands (8) 4 -
=========================================================== =========== ===========
USL businesses (9) 1 -
=========================================================== =========== ===========
Tyku brand (10) (3) -
=========================================================== =========== ===========
Picon brand (11) - 91
=========================================================== =========== ===========
Meta Abo Brewery (12) - (95)
=========================================================== =========== ===========
Windsor business (13) - (19)
=========================================================== =========== ===========
Step acquisition - Mr Black (14) (8) -
=========================================================== =========== ===========
Other non-operating exceptional items (15) 4 6
----------------------------------------------------------- ----------- -----------
328 (17)
=========================================================== =========== ===========
Exceptional items before taxation (294) (405)
=========================================================== =========== ===========
Items included in taxation
=========================================================== =========== ===========
Tax on exceptional operating items 158 54
=========================================================== =========== ===========
Tax on exceptional non-operating items (29) (23)
=========================================================== =========== ===========
Exceptional taxation 57 -
----------------------------------------------------------- ----------- -----------
186 31
=========================================================== =========== ===========
Total exceptional items (108) (374)
----------------------------------------------------------- ----------- -----------
Attributable to:
=========================================================== =========== ===========
Equity shareholders of the parent company 33 (271)
=========================================================== =========== ===========
Non-controlling interests (141) (103)
----------------------------------------------------------- ----------- -----------
Total exceptional items (108) (374)
----------------------------------------------------------- ----------- -----------
Exceptional items included in operating profit are charged
to:
=========================================================== =========== ===========
Cost of sales (67) -
=========================================================== =========== ===========
Other operating expenses (555) (388)
----------------------------------------------------------- ----------- -----------
(622) (388)
----------------------------------------------------------- ----------- -----------
(1) In the year ended 30 June 2023, an impairment charge of
GBP498 million was recognised in exceptional operating items mainly
driven by the McDowell's brand in India.
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 brand (GBP240 million), the Bell's brand (GBP77
million) and goodwill related to Smirnov (GBP19 million).
For further information, see note 12.
(2) In the year ended 30 June 2023, an exceptional charge of
GBP100 million was accounted for in respect of the supply chain
agility programme announced in July 2022. With this five-year
spanning programme, Diageo expects to strengthen its supply chain,
improve its resilience and agility, drive efficiencies, deliver
additional productivity savings and make its supply operations more
sustainable. Total implementation cost of the programme is expected
to be up to GBP500 million over the five-year period, which will
comprise non-cash items and one-off expenses, the majority of which
are expected to be recognised as exceptional operating items. The
exceptional charge for the year ended 30 June 2023 was primarily in
respect of accelerated depreciation, being additional depreciation
of assets in the period directly attributable to the programme, and
impairment of property, plant and equipment in respect of North
America and India. Restructuring cash expenditure was GBP12 million
in the year ended 30 June 2023.
(3) In the year ended 30 June 2023, Diageo agreed with one of
its distributors in Africa to terminate the distribution license of
one of its spirits brands, in respect of which a provision of GBP44
million was provided for and was recognised as an operating
exceptional charge. No payment was made in the period.
(4) In the year ended 30 June 2023, Diageo released unutilised
provisions of GBP20 million from the GBP50 million exceptional
charge taken in the year ended 30 June 2022, in respect of winding
down its operations in Russia.
(5) Other exceptional operating items include subsequent gains
and charges of items that were originally recognised as exceptional
at inception. In the year ended 30 June 2022, other exceptional
operating items resulted in a loss of GBP2 million, driven by the
reinvestment of 'Raising the Bar' corporate tax benefits.
(6) On 26 May 2023, Diageo announced the completion of the sale
of its wholly owned subsidiary in Cameroon, Guinness Cameroun S.A.,
to the Castel Group for an aggregate consideration of GBP384
million resulting in an exceptional gain of GBP310 million,
including cumulative translation gain in the amount of GBP17
million recycled to the income statement.
(7) On 26 October 2022, Diageo completed the sale of its Archers
brand. The transaction resulted in an exceptional gain of GBP20
million.
(8) On 30 September 2022, Diageo announced the completion of the
sale of the Popular brands of its United Spirits Limited (USL)
business. The transaction resulted in an exceptional gain of GBP4
million.
(9) Certain subsidiaries of USL were sold in the year ended 30
June 2023. The sale of these subsidiaries resulted in an
exceptional gain of GBP1 million.
(10) In the year ended 30 June 2023, Diageo sold its Tyku brand.
The transaction resulted in an exceptional loss of GBP3
million.
(11) In May 2022, Diageo sold its Picon brand. The sale resulted
in an exceptional non-operating gain of GBP91 million, net of
disposal costs.
(12) In the year ended 30 June 2022, a loss of GBP95 million was
recognised as a non-operating item attributable to the sale of Meta
Abo Brewery Share Company in Ethiopia.
(13) 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. The conditional agreement was
terminated in the year ended 30 June 2023 as the buyer was unable
to meet certain conditions to completion.
(14) On 29 September 2022, the group acquired the part of the
entire issued share capital of Mr Black Spirits Pty Ltd, owner of
Mr Black, the Australian premium cold brew coffee liqueur, that it
did not already own. As a result of Mr Black becoming a subsidiary
of the group in the year ended 30 June 2023, a loss of GBP8 million
arose, being the difference between the book value of the associate
prior to the transaction and its fair value plus transaction
costs.
(15) Other exceptional non-operating items include subsequent
gains and charges of items that were originally recognised as
exceptional at inception. In the year ended 30 June 2023, other
exceptional non-operating items resulted in a net gain of GBP4
million (2022 - GBP6 million), mainly driven by the deferred
consideration received in respect of the sale of United National
Breweries.
4. Finance income and charges
Year Year ended
ended 30 June
30 June 2022
2023
GBP million GBP million
Interest income 160 127
========================================================== =========== ===========
Fair value gain on financial instruments 103 341
---------------------------------------------------------- ----------- -----------
Total interest income 263 468
========================================================== =========== ===========
Interest charge on bank loans, bonds and overdrafts (470) (371)
========================================================== =========== ===========
Interest charge on leases (15) (12)
========================================================== =========== ===========
Fair value loss on financial instruments (102) (346)
========================================================== =========== ===========
Interest charge on other borrowings (271) (92)
---------------------------------------------------------- ----------- -----------
Total interest charges (858) (821)
---------------------------------------------------------- ----------- -----------
Net interest charges (595) (353)
---------------------------------------------------------- ----------- -----------
Net finance income in respect of post employment plans
in surplus 59 22
========================================================== =========== ===========
Hyperinflation adjustment in respect of Turkey (1) 10 -
========================================================== =========== ===========
Hyperinflation adjustment in respect of Venezuela (1) - 1
========================================================== =========== ===========
Interest income in respect of direct and indirect tax 8 2
========================================================== =========== ===========
Unwinding of discounts - 4
Total other finance income 77 29
========================================================== =========== ===========
Net finance charge in respect of post employment plans
in deficit (15) (12)
========================================================== =========== ===========
Hyperinflation adjustment in respect of Turkey (1) - (34)
========================================================== =========== ===========
Hyperinflation adjustment in respect of Venezuela (1) (2) -
========================================================== =========== ===========
Foreign exchange revaluation of monetary items in respect
of Lebanon (1) - (3)
========================================================== =========== ===========
Unwinding of discounts (13) (11)
========================================================== =========== ===========
Interest charge in respect of direct and indirect tax (25) (16)
========================================================== =========== ===========
Change in financial liability (Level 3) (8) (20)
Guarantee fees (1) (1)
========================================================== =========== ===========
Other finance charges (12) (1)
---------------------------------------------------------- ----------- -----------
Total other finance charges (76) (98)
---------------------------------------------------------- ----------- -----------
Net other finance income/(charges) 1 (69)
---------------------------------------------------------- ----------- -----------
(1) Hyperinflation adjustment
The group applied hyperinflationary accounting for its
operations in Turkey, Venezuela and Lebanon.
Turkey has been a hyperinflationary economy where cumulative
inflation for the three years ended 30 June 2022 exceeded 100%.
Consequently, since March 2022, the group applies hyperinflationary
accounting for its Turkish operations. The group's consolidated
financial statements for the years ended 30 June 2023 and 30 June
2022 include the results and financial position of its Turkish
operations restated to the measuring unit current at the end of
each period, with hyperinflationary gains and losses in respect of
monetary items being reported in finance income and charges. The
inflation rate used by the group is the official rate published by
the Turkish Statistical Institute. The movement in the publicly
available official price index for the year ended 30 June 2023 was
38% (2022 - 79%).
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 3,807
for the year ended 30 June 2023 (2022 - VES/GBP 759). This rate
reflects 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 2023 was 382% (2022 -
268%). 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 consolidated net sales, operating profit,
operating cash flow and assets for the years ended 30 June 2023 and
30 June 2022 and with the amounts that would have resulted if the
official reference exchange rate had been applied:
Year ended 30 Year ended 30 June
June 2023 2022
------------------------- -------------------------
At official At official
At estimated reference At estimated reference
exchange exchange exchange exchange
rate rate rate rate
3,807
VES/GBP 36 VES/GBP 759 VES/GBP 7 VES/GBP
GBP million GBP million GBP million GBP million
------------------------------------------------ ------------ ----------- ------------ -----------
Net sales - 9 - 15
================================================ ============ =========== ============ ===========
Operating loss - - (1) (1)
================================================ ============ =========== ============ ===========
Other finance (charges)/income - hyperinflation
adjustment (2) (212) 1 157
================================================ ============ =========== ============ ===========
Net cash outflow from operating activities - (3) - (5)
================================================ ============ =========== ============ ===========
Net assets 6 657 41 4,606
------------------------------------------------ ------------ ----------- ------------ -----------
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 2023, the tax charge of GBP970
million (2022 - GBP1,049 million) comprises a UK tax charge of
GBP224 million (2022 - GBP186 million) and a foreign tax charge of
GBP746 million (2022 - GBP863 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 audits. For
the year ended 30 June 2023, ongoing audits that are provided for
individually are not expected to result in a material tax
liability. The current tax asset of GBP232 million (30 June 2022 -
GBP149 million) and tax liability of GBP135 million (30 June 2022 -
GBP252 million) include GBP173 million (30 June 2022 - GBP156
million) of provisions for tax uncertainties.
In 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. The legislation implementing
the rules in the UK was substantively enacted on 20 June 2023 and
will apply to Diageo from the financial year ending 30 June 2025
onwards. Diageo is reviewing this legislation and also monitoring
the status of implementation of the model rules outside of the UK
to understand the potential impact on the group. Diageo has applied
the temporary exception under IAS 12 in relation to the accounting
for deferred taxes arising from the implementation of the Pillar
Two rules.
The tax rate before exceptional items for the year ended 30 June
2023 was 23.0% compared with 22.5% for the year ended 30 June
2022.
6. Inventories
30 June 30 June
2023 2022
GBP million GBP million
Raw materials and consumables 543 489
==================================== =========== ===========
Work in progress 132 86
==================================== =========== ===========
Maturing inventories 5,794 5,229
==================================== =========== ===========
Finished goods and goods for resale 1,192 1,290
------------------------------------ ----------- -----------
7,661 7,094
------------------------------------ ----------- -----------
7. Net borrowings
30 June 30 June
2023 2022
GBP million GBP million
Borrowings due within one year and bank overdrafts (1,701) (1,522)
=================================================== =========== ===========
Borrowings due after one year (14,801) (14,498)
=================================================== =========== ===========
Fair value of foreign currency forwards and swaps 347 356
=================================================== =========== ===========
Fair value of interest rate hedging instruments (377) (283)
=================================================== =========== ===========
Lease liabilities (448) (475)
--------------------------------------------------- ----------- -----------
(16,980) (16,422)
=================================================== =========== ===========
Cash and cash equivalents 1,439 2,285
--------------------------------------------------- ----------- -----------
(15,541) (14,137)
--------------------------------------------------- ----------- -----------
8. Reconciliation of movement in net borrowings
Year
ended Year ended
30 June 30 June
2023 2022
GBP million GBP million
Net decrease in cash and cash equivalents before exchange (581) (665)
---------------------------------------------------------- ----------- -----------
Net increase in bonds and other borrowings(1) (950) (825)
---------------------------------------------------------- ----------- -----------
Net increase in net borrowings from cash flows (1,531) (1,490)
---------------------------------------------------------- ----------- -----------
Exchange differences on net borrowings 159 (334)
---------------------------------------------------------- ----------- -----------
Other non-cash items(2) (32) (204)
Net borrowings at beginning of the year (14,137) (12,109)
---------------------------------------------------------- ----------- -----------
Net borrowings at end of the year (15,541) (14,137)
---------------------------------------------------------- ----------- -----------
(1)In the year ended 30 June 2023, net increase in bonds and
other borrowings excludes GBP2 million cash outflow in respect of
derivatives designated in forward point hedges (2022 - GBP4
million).
(2)In the year ended 30 June 2023, other non-cash items were
principally in respect of additional leases entered into during the
year partially offset by fair value movements of interest rate
hedging instruments. 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 2023 , the group issued bonds of
$2,000 million (GBP1,788 million - net of discount and fee)
consisting of $500 million 5.2% fixed rate notes due 2025, $750
million 5.3% fixed rate notes due 2027, $750 million 5.5% fixed
rate notes due 2033 and EUR500 million 3.5% fixed rate notes due
2025 (GBP441 million - net discount and fee), and repaid bonds of
$300 million (GBP254 million) and $1,350 million (GBP1,086
million). 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 $1,000 million
(GBP752 million).
All bonds and commercial paper issued by Diageo plc's wholly
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 using the discounted cash flow method and
as at 30 June 2023, an amount of GBP218 million (30 June 2022 -
GBP216 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 2023, 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
2025, the fair value of the liability would increase by
approximately GBP30 million.
Included in other financial liabilities, the contingent
consideration on acquisition of businesses represents the present
value of payments up to GBP422 million, which are expected to be
paid over the next eight years. Contingent considerations linked to
certain volume targets at 30 June 2023 included GBP113 million in
respect of the acquisition of Aviation Gin and Davos Brands (2022 -
GBP157 million), GBP59 million in respect of the acquisition of
21Seeds (2022 - GBP59 million) and GBP18 million in respect of the
acquisition of Lone River Ranch Water (2022 - GBP57 million).
Contingent consideration of GBP70 million in respect of the
acquisition of Don Papa Rum (2022 - GBPnil) is linked to certain
financial performance targets. Contingent considerations are fair
valued based on discounted cash flow method using assumptions not
observable in the market. Contingent considerations are sensitive
to possible changes in assumptions; a 10% increase or decrease in
volume would increase or decrease the fair value of contingent
considerations linked to certain volume targets by approximately
GBP30 million and GBP50 million, respectively, and a 10% increase
or decrease in cash flows would increase or decrease the fair value
of contingent considerations linked to certain financial
performance targets by approximately GBP25 million.
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
2023.
The group's financial assets and liabilities measured at fair
value are categorised as follows:
30 June 30 June
2023 2022
GBP million GBP million
-------------------------------------------------------- ----------- -----------
Derivative assets 594 480
-------------------------------------------------------- ----------- -----------
Derivative liabilities (440) (456)
-------------------------------------------------------- ----------- -----------
Valuation techniques based on observable market input
(Level 2) 154 24
-------------------------------------------------------- ----------- -----------
Financial assets - other 192 184
-------------------------------------------------------- ----------- -----------
Financial liabilities - other (529) (587)
-------------------------------------------------------- ----------- -----------
Valuation techniques based on unobservable market input
(Level 3) (337) (403)
-------------------------------------------------------- ----------- -----------
In the years ended 30 June 2023 and 30 June 2022, the increase
in financial assets - other of GBP8 million (2022 - GBP46 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 liability of businesses
Year Year
ended ended Year ended Year ended
30 June 30 June 30 June 30 June
2023 2023 2022 2022
GBP million GBP million GBP million GBP million
------------------------------------------ ----------- --------------- ----------- ---------------
At the beginning of the year (216) (371) (149) (429)
========================================== =========== =============== =========== ===============
Net (losses)/gains included in the income
statement (8) 117 (20) 62
========================================== =========== =============== =========== ===============
Net gains/(losses) included in exchange
in other comprehensive income 9 11 (26) (39)
========================================== =========== =============== =========== ===============
Net losses included in retained earnings (16) - (34) -
========================================== =========== =============== =========== ===============
Acquisitions - (76) - (70)
========================================== =========== =============== =========== ===============
Settlement of liabilities 13 8 13 105
------------------------------------------ ----------- --------------- ----------- ---------------
At the end of the year (218) (311) (216) (371)
------------------------------------------ ----------- --------------- ----------- ---------------
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 2023, the fair value of gross borrowings
(excluding lease liabilities and the fair value of derivative
instruments) was GBP15,641 million and the carrying value was
GBP16,502 million (30 June 2022 - GBP15,628 million and GBP16,020
million, respectively).
10. Dividends and other reserves
Year
ended Year ended
30 June 30 June
2023 2022
GBP million GBP million
----------------------------------------------------------- ----------- -----------
Amounts recognised as distributions to equity shareholders
in the year
=========================================================== =========== ===========
Final dividend for the year ended 30 June 2022 of
46.82 pence per share (2021 - 44.59 pence) 1,066 1,040
=========================================================== =========== ===========
Interim dividend for the year ended 30 June 2023 of
30.83 pence per share (2022 - 29.36 pence) 696 680
----------------------------------------------------------- ----------- -----------
1,762 1,720
----------------------------------------------------------- ----------- -----------
A final dividend o f 49.17 pence per share was recommended by a
duly authorised committee of the Board of Directors on 31 July 2023
for approval by shareholders at the Annual General Meeting
scheduled to be held on 28 September 2023 bringing the full year
dividend to 80.00 pence per share for the year ended 30 June 2023.
As the approval will be after the balance sheet date, the final
dividend has not been included as a liability.
Other reserves of GBP1,861 million at 30 June 2023 (2022 -
GBP2,174 million) include a capital redemption reserve of GBP3,231
million (2022 - GBP3,220 million), a hedging reserve surplus of
GBP242 million (2022- GBP26 million surplus) and an exchange
reserve deficit of GBP1,612 million (2022 - GBP1,072 million
deficit). Currency basis spreads included in the hedging reserve
represent the cost of hedging arising as a result of imperfections
of foreign exchange markets. Exclusion of currency basis spreads
would result in a GBP20 million credit (2022 - GBP22 million
credit) to the 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 2023 were as follows:
Don Papa Other Total
GBP million GBP million GBP million
Brands and other intangibles 293 45 338
===================================== =========== =========== ===========
Property, plant and equipment 1 24 25
===================================== =========== =========== ===========
Inventories 6 21 27
===================================== =========== =========== ===========
Other working capital (2) (1) (3)
===================================== =========== =========== ===========
Deferred tax (67) (4) (71)
(Overdraft)/Cash (1) 1 -
------------------------------------- ----------- ----------- -----------
Fair value of assets and liabilities 230 86 316
===================================== =========== =========== ===========
Goodwill arising on acquisition 64 28 92
Step acquisitions - (11) (11)
------------------------------------- ----------- ----------- -----------
Consideration payable 294 103 397
------------------------------------- ----------- ----------- -----------
Satisfied by:
===================================== =========== =========== ===========
Cash consideration paid (218) (98) (316)
===================================== =========== =========== ===========
Contingent consideration payable (72) (4) (76)
===================================== =========== =========== ===========
Deferred consideration payable (4) (1) (5)
------------------------------------- ----------- ----------- -----------
(294) (103) (397)
------------------------------------- ----------- ----------- -----------
Cash consideration paid in respect of the acquisition of
businesses and purchase of shares of non-controlling interests in
the year ended 30 June 2023 were as follows:
Consideration
GBP million
------------------------------------------------ -------------
Acquisitions in the year - subsidiaries
------------------------------------------------ =============
Cash consideration paid (316)
Prior year acquisitions - subsidiaries
Other consideration (26)
Investments in associates
------------------------------------------------ =============
Cash consideration paid (14)
------------------------------------------------ =============
Capital injection (79)
------------------------------------------------ -------------
Net cash outflow on acquisition of businesses (435)
------------------------------------------------ =============
Purchase of shares of non-controlling interests (146)
------------------------------------------------ -------------
Total net cash outflow (581)
------------------------------------------------ -------------
On 10 March 2023, Diageo completed the acquisition of Kanlaon
Limited and Chat Noir Co. Inc., (the owner of Don Papa Rum) to
support Diageo's participation in the super-premium dark rum
segment for upfront cash consideration of EUR246 million (GBP218
million), deferred consideration of EUR4 million (GBP4 million) and
contingent consideration of up to EUR178 million (GBP158 million)
through to 2028 subject to certain financial performance targets,
reflecting the brand's expected growth potential. The fair value of
the contingent consideration of EUR82 million (GBP72 million) was
estimated by calculating the present value of the future expected
cash flows which is dependent on management's estimates in respect
of the forecasting of future cash flows and the discount rates
applicable to the future cash flows. The goodwill arising on the
acquisition of Don Papa Rum represents expected revenue synergies
and the acquired workforce. Don Papa Rum contributed GBP10 million
to net sales and GBP15 million operating loss to the period, out of
which GBP15 million is related to acquisition transaction and
integration costs in the year ended 30 June 2023. The fair value
measurement of assets and liabilities acquired is in progress. The
fair values of assets and liabilities acquired are provisional and
will be finalised in the year ending 30 June 2024.
Diageo completed further acquisitions in the year ended 30 June
2023: (i) on 29 September 2022, the acquisition of the remaining
issued share capital of Mr Black Spirits Pty Ltd, owner of Mr
Black, the Australian premium cold brew coffee liqueur, that it did
not already own; and (ii) on 2 November 2022, the acquisition of
the entire issued share capital of Balcones Distilling, a Texas
craft distiller and one of the leading producers of American single
malt whiskey in the United States. The aggregate up-front cash
consideration paid on completion of these transactions in the year
ended 30 June 2023 was GBP98 million.
Purchase of shares of non-controlling interests
On 24 March 2023, Diageo completed the purchase of 14.97% of the
share capital of EABL for an aggregate consideration of KES 22,732
million (GBP142 million) in cash and transaction costs of GBP4
million. This took Diageo's shareholding in EABL from 50.03% to
65%. EABL was already controlled and therefore consolidated prior
to this transaction.
12. Intangible assets
As a result of the impairment review, in the year ended 30 June
2023, an impairment charge of GBP420 million in respect of the
McDowell's brand and GBP24 million in respect of the Director's
Special brand were recognised in exceptional operating items. Value
in use 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.
The charge is mainly driven by the adverse inflationary environment
and the reduction in forecast cash flow assumptions in Lower
Prestige and Popular segments in India. The brand impairment
reduced the deferred tax liability by GBP111 million. The
recoverable amount is GBP379 million in respect of the McDowell's
brand and GBP11 million in respect of the Director's Special brand
cash-generating units.
As a result of the impairment review, in the year ended 30 June
2023, an additional impairment charge of GBP54 million was
recognised in exceptional operating items in respect of some brands
where book value was not recoverable. The charge is mainly driven
by strategic change in some categories as a result of the
challenging operating environment and premiumisation. Value in use
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. The
brand impairment reduced the deferred tax liability by GBP13
million.
In the year ended 30 June 2022, an impairment charge of GBP240
million in respect of the McDowell's brand was recognised in
exceptional operating items, based on its value in use. The brand
impairment reduced the deferred tax liability by GBP35 million.
Further, in the year ended 30 June 2022, an impairment charge of
GBP77 million in respect of the Bell's brand was recognised in
exceptional operating items, based on its value in use. The
impairment reduced the deferred tax liability attributable to the
brand by GBP20 million.
In the year ended 30 June 2022, Diageo decided to wind down its
operations in Russia. As a result, an impairment charge of GBP19
million in respect of the Smirnov goodwill was recognised in
exceptional operating items.
The Turkish economy became hyperinflationary for the year ended
30 June 2022, and 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 2023 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 2023 and the impairment charge that
would be required if the assumptions in the calculation of their
value in use were changed:
Decrease in
Decrease in annual growth
Increase in terminal growth rate in forecast Decrease in
discount rate rate period 2024-2029 cash flows(1)
----------- -------- -------- ---------------------- ---------------------- ---------------------- ----------------------
Carrying Potential Potential Potential Potential
value impairment impairment impairment impairment
of CGU Headroom Reasonably charge Reasonably charge Reasonably charge Reasonably charge
GBP GBP possible GBP possible GBP possible GBP possible GBP
million million change million change million change million change million
McDowell's 379 - 1ppt (38) 1ppt (26) 2ppt (67) 10% (76)
=========== ======== ======== ========== ========== ========== ========== ========== ========== ========== ==========
(1)Including reasonably possible changes in productivity saving
assumptions
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
2023 were as follows:
Guinness
Cameroun
S.A. Other Total
GBP million GBP million GBP million
Sale consideration
================================================== =========== =========== ===========
Cash received 384 115 499
Cash disposed of (13) - (13)
================================================== =========== =========== ===========
Transaction and other directly attributable costs
paid (17) (7) (24)
-------------------------------------------------- ----------- ----------- -----------
Net cash received 354 108 462
-------------------------------------------------- ----------- ----------- -----------
Transaction costs payable (8) 3 (5)
-------------------------------------------------- ----------- ----------- -----------
346 111 457
-------------------------------------------------- ----------- ----------- -----------
Net assets disposed of
Property, plant and equipment (103) (3) (106)
================================================== =========== =========== ===========
Assets and liabilities held for sale - (79) (79)
================================================== =========== =========== ===========
Inventories (24) (4) (28)
================================================== =========== =========== ===========
Other working capital 69 - 69
================================================== =========== =========== ===========
Other borrowings 2 - 2
================================================== =========== =========== ===========
Corporation tax (3) - (3)
================================================== =========== =========== ===========
Deferred tax 5 - 5
================================================== =========== =========== ===========
Post employment benefit liabilities 4 - 4
-------------------------------------------------- ----------- ----------- -----------
(50) (86) (136)
-------------------------------------------------- ----------- ----------- -----------
Impairment charge recognised up until the date
of sale (3) - (3)
-------------------------------------------------- ----------- ----------- -----------
Exchange recycled from other comprehensive income 17 1 18
-------------------------------------------------- ----------- ----------- -----------
Gain on disposal before taxation 310 26 336
================================================== =========== =========== ===========
Taxation (42) 13 (29)
-------------------------------------------------- ----------- ----------- -----------
Gain on disposal after taxation 268 39 307
-------------------------------------------------- ----------- ----------- -----------
On 26 May 2023, Diageo completed the sale of Guinness Cameroun
S.A., its brewery in Cameroon. The aggregate consideration for the
disposal was GBP384 million, the disposed net asset of GBP63
million mainly included property, plant and equipment and trade and
other payables. The transaction resulted in a non-operating
exceptional gain of GBP310 million. The disposed Cameroon
operations contributed net sales of GBP101 million (2022 - GBP124
million; 2021 - GBP113 million), operating profit of GBP26 million
(2022- GBP27 million; 2021- GBP22 million) in the year ended 30
June 2023.
On 30 September 2022, Diageo completed the sale of the Popular
brands of its USL business. The aggregate consideration for the
disposal was GBP87 million, the disposed net assets included net
working capital of GBP31 million and brands of GBP22 million, and
GBP16 million goodwill was derecognised. The transaction resulted
in a non-operating exceptional gain of GBP4 million. Popular brands
contributed net sales of GBP34 million (2022- GBP139 million; 2021
- GBP148 million), operating profit of GBP5 million (2022- GBP26
million; 2021- GBP30 million) in the year ended 30 June 2023.
14. Assets and liabilities held for sale
Assets and liabilities held for sale at 30 June 2022 included
Diageo's Windsor business in Korea and the portfolio of Popular
brands of USL.
In March 2022, Diageo agreed to sell its Windsor business in
Korea to Bayside/Metis Private Equity Consortium. On 27 September
2022, Diageo announced the termination of the conditional
agreement. Consequently, the recoverable assets and liabilities
attributable to the business were reclassified out of held for
sale.
On 27 May 2022, USL reached agreement with Inbrew Beverages Pvt
Limited for the sale of Popular brands. On 30 September 2022,
Diageo announced the completion of the sale of the selected Popular
brands, accordingly the assets and liabilities attributable to the
business were disposed from held for sale.
15. Contingent liabilities and legal proceedings
(a) Guarantees and related matters
As of 30 June 2023, 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 2023, Diageo has a 55.88% 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 (GBP60 million) to Dr Mallya
over a five-year period of which $40 million (GBP32 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 (GBP112 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
(GBP32 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 (GBP113 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 (GBP107 million) plus
various amounts in respect of interest to DHN, with CASL being held
liable as co-surety for 50% of any such amount unpaid by Watson.
These amounts were, contrary to the relevant orders, not paid by
the relevant deadlines and Watson and CASL's remaining defences in
the proceedings were struck out. Diageo and DHN have accordingly
sought asset disclosure and are considering further enforcement
steps against Watson and CASL, both in the United Kingdom and in
other jurisdictions where they are present or hold assets.
A trial of the remaining elements of these claims was due to
commence on 21 November 2022. However, on 26 July 2021 Dr Mallya
was declared bankrupt by the English High Court pursuant to a
bankruptcy petition presented by a consortium of Indian banks.
Diageo and the relevant members of its group have informed the
Trustee in Bankruptcy of their position as creditors in the
bankruptcy and have engaged with the Trustee regarding their claims
and the status of the current proceedings. An appeal by Dr Mallya
against his bankruptcy (and an appeal by the bank consortium
against orders made in the course of the bankruptcy proceedings)
are pending. In light of the uncertainty posed by the ongoing
bankruptcy proceedings, the trial of Diageo's claim was initially
relisted to take place in February 202 4. However, Dr Mallya's
appeal against his bankruptcy and the banks' cross appeal will not
now be heard until April 2024, and thus the trial of Diageo's claim
has been deferred from February 2024 until after those appeals have
been determined.
At this stage, it is not possible to assess the extent to which
the various ongoing proceedings related to the bankruptcy will
affect the remaining elements of the claims by Diageo and the
relevant members of its group.
Upon completion of an initial inquiry in April 2015 into past
improper transactions which identified references to certain
additional parties and matters, USL carried out an additional
inquiry into these transactions (Additional Inquiry) which was
completed in July 2016. The Additional Inquiry, prima facie,
identified transactions indicating actual and potential diversion
of funds from USL and its Indian and overseas subsidiaries to, in
most cases, entities that appeared to be affiliated or associated
with Dr Mallya. All amounts identified in the Additional Inquiry
have been provided for or expensed in the financial statements of
USL or its subsidiaries in the respective prior periods. USL has
filed recovery suits against relevant parities identified pursuant
to the Additional Inquiry. Further, at this stage, it is not
possible for the management of USL to estimate the financial impact
on USL, if any, arising out of potential non-compliance with
applicable laws in relation to such fund diversions.
(d) Other matters in relation to USL
In respect of the Watson backstop guarantee arrangements, the
Securities and Exchange Board of India (SEBI) issued a notice to
Diageo on 16 June 2016 that if there is any net liability incurred
by Diageo (after any recovery under relevant security or other
arrangements, which matters remain pending) on account of the
Watson backstop guarantee, such liability, if any, would be
considered to be part of the price paid for the acquisition of USL
shares under the SPA which formed part of the Original USL
Transaction and that, in that case, additional equivalent payments
would be required to be made to those shareholders (representing
0.04% of the shares in USL) who tendered in the open offer made as
part of the Original USL Transaction. Diageo believes that the
Watson backstop guarantee arrangements were not part of the price
paid or agreed to be paid for any USL shares under the Original USL
Transaction and that therefore SEBI's decision was not consistent
with applicable law, and Diageo appealed against it before the
Securities Appellate Tribunal, Mumbai (SAT). On 1 November 2017,
SAT issued an order in respect of Diageo's appeal in which, amongst
other things, it observed that the relevant officer at SEBI had
neither considered Diageo's earlier reply nor provided Diageo with
an opportunity to be heard, and accordingly directed SEBI to pass a
fresh order after giving Diageo an opportunity to be heard.
Following SAT's order, Diageo made its further submissions in the
matter, including at a personal hearing before a Deputy General
Manager of SEBI. On 26 June 2019, SEBI issued an order reiterating
the directions contained in its previous notice dated 16 June 2016.
A s with the previous SEBI notice, Diageo believes that SEBI's
latest order is not consistent with applicable law. Diageo appealed
against this order before SAT and, after a hearing in March 2023,
SAT allowed Diageo's appeal on 26 July 2023. Accordingly, SEBI's
order dated 26 June 2019 stands quashed. Under applicable law, SEBI
is entitled to file an appeal against SAT's order before the
Supreme Court of India. Therefore, pending any appeal which may be
filed by SEBI, there can be no certainty as to its outcome or the
timeframe within which any such appeal would be concluded.
(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 (GBP60
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 (GBP4 million) on account of the outstanding
principal, accrued interest and other amounts, and also threatening
to enforce the security in the event that USL did not make these
further payments. Pursuant to an application filed by USL before
the High Court in the writ proceedings, the High Court directed
that, subject to USL depositing such further amount with the bank
(which amount was duly deposited by USL), the bank should hold the
amount in a suspense account and not deal with any of the secured
assets including the shares until disposal of the original writ
petition filed by USL before the High Court.
On 27 June 2019, a single judge bench of the High Court issued
an order dismissing the writ petition filed by USL, amongst other
things, on the basis that the matter involved an issue of breach of
contract by USL and was therefore not maintainable in exercise of
the court's writ jurisdiction. USL filed an appeal against this
order before a division bench of the High Court, which on 30 July
2019 issued an interim order directing the bank to not deal with
any of the secured assets until the next date of hearing. On 13
January 2020, the division bench of the High Court admitted the
writ appeal and extended the interim stay. This appeal is currently
pending. Based on the assessment of USL's management supported by
external legal opinions, USL continues to believe that it has a
strong case on the merits and therefore continues to believe that
the secured assets will be released to USL and the aforesaid amount
of INR 459 million (GBP4 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,
and for which tax audits can take several years to resolve. 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 GBP616 million for Brazil and up to approximately
GBP90 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 2023 is GBP116 million
(corporate tax payments of GBP104 million and indirect tax payments
of GBP12 million).
(g) Other disputes
On 31 May 2023, a complaint against Diageo North America, Inc
(DNA) was filed in the Supreme Court of New York by Combs Wine and
Spirits LLC (an entity associated with Mr Sean Combs) alleging,
inter alia, breach of contract in respect of a joint venture
agreement related to DeLeón tequila. DNA has also served notice of
material breaches and termination to Mr Combs and his relevant
associated entities of certain agreements related to services
provided by Mr Combs and these entities in respect of Cîroc, and
notice of material breaches and an intent to arbitrate in respect
of the DeLeón joint venture agreement. Diageo categorically denies
the allegations that have been made by Mr Combs and his associated
parties in the complaint and will defend itself vigorously. Diageo
will refrain from making any further disclosures given the inherent
uncertainties of these matters and the prejudicial nature any such
disclosures may have on the potential outcomes related thereto or
other associated matters.
(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.
In October 2022, Diageo plc provided an interim credit facility
to Diageo Pension Trust Limited, consisting of GBP850 million for
the Diageo Pension Scheme, to support temporary liquidity
challenges until 29 December 2022. In December 2022, the maturity
date was extended to 29 June 2023. The facility amount was reduced
on 22 May 2023 to GBP350 million and on 14 June 2023 the maturity
date was extended to 11 October 2023. The facility was subsequently
cancelled on 25 July 2023.
There were no transactions with these related parties during the
year ended 30 June 2023 on terms other than those that prevail in
arm's length transactions.
17. Post balance sheet events
Starting 1 July 2023, in line with reporting requirements the
functional currency of Diageo plc has changed from sterling to US
dollar which is applied prospectively. This is because the group's
share of net sales and expenses in the US and other countries whose
currencies correlate closely with the US dollar has been increasing
over the years, and that trend is expected to continue in line with
the group's strategic focus. Diageo has also decided to change its
presentation currency to US dollar with effect from 1 July 2023,
applied retrospectively, as it believes that this change will
provide better alignment of the reporting of performance with its
business exposures.
Diageo will propose adopting new Articles of Association (New
Articles) at the AGM to be held on 28 September 2023 which reflects
the change in the functional currency of Diageo plc and
presentation currency of the group from sterling to US dollar. The
New Articles shall, among other things, empower the Board to
declare and/or pay dividends in any currency or currencies and
enable the Board to make provisions for shareholders to receive
dividends in a different currency to the currency in which
dividends were declared. Subject to the approval of the New
Articles by shareholders at the AGM and commencing with the interim
dividend that is expected to be declared in January 2024, Diageo's
future dividends will be declared in US dollar. Holders of ordinary
shares will continue to receive their dividends in sterling but
will have the option to elect to receive it in US dollar. Holders
of ADRs will continue to receive dividends in US dollar.
On 31 July 2023, the Board approved plans for a further return
of capital programme of $1.0 billion to shareholders.
Additional information
Explanatory notes
Comparisons are to the year ended 30 June 2022 (2022) unless
otherwise stated. Unless otherwise stated, percentage movements
given throughout this document for volume, sales, net sales,
marketing spend, operating profit and operating margin are organic
movements after retranslating current period reported numbers at
prior period exchange rates and after adjusting for the effect of
exceptional operating items and acquisitions and disposals,
excluding fair value remeasurements.
This document includes names of Diageo's products which
constitute trademarks or trade names which Diageo owns or which
others own and license to Diageo for use.
Definitions and reconciliation of non-GAAP measures to GAAP
measures
Diageo's strategic planning process is based on certain non-GAAP
measures, including organic movements. These non-GAAP measures are
chosen for planning and reporting, and some of them are used for
incentive purposes. The group's management believes that these
measures provide valuable additional information for users of the
financial statements in understanding the group's performance.
These non-GAAP measures should be viewed as complementary to, and
not replacements for, the comparable GAAP measures and reported
movements therein.
It is not possible to reconcile the forecast tax rate before
exceptional items, forecast organic net sales growth and forecast
organic operating profit growth to the most comparable GAAP measure
as it is not possible to predict, without unreasonable effort, with
reasonable certainty, the future impact of changes in exchange
rates, acquisitions and disposals and potential exceptional
items.
Volume
Volume is a performance indicator that is measured on an
equivalent units basis to nine-litre cases of spirits. An
equivalent unit represents one nine-litre case of spirits, which is
approximately 272 servings. A serving comprises 33ml of spirits,
165ml of wine, or 330ml of ready to drink or beer. Therefore, to
convert volume of products other than spirits to equivalent units,
the following guide has been used: beer in hectolitres, divide by
0.9; wine in nine-litre cases, divide by five; ready to drink and
certain pre-mixed products that are classified as ready to drink in
nine-litre cases, divide by ten.
Organic movements
Organic information is presented using sterling amounts on a
constant currency basis excluding the impact of exceptional items,
certain fair value remeasurement, hyperinflation and acquisitions
and disposals. Organic measures enable users to focus on the
performance of the business which is common to both years and which
represents those measures that local managers are most directly
able to influence.
Calculation of organic movements
The organic movement percentage is the amount in the row titled
'Organic movement' in the tables below, expressed as a percentage
of the relevant absolute amount in the row titled '2022 adjusted'.
Organic operating margin is calculated by dividing operating profit
before exceptional items by net sales after excluding the impact of
exchange rate movements, certain fair value remeasurements,
hyperinflation and acquisitions and disposals.
(a) Exchange rates
Exchange in the organic movement calculation reflects the
adjustment to recalculate the reported results as if they had been
generated at the prior period weighted average exchange rates.
Exchange impacts in respect of the external hedging of
intergroup sales by the markets in a currency other than their
functional currency and the intergroup recharging of services are
also translated at prior period weighted average exchange rates and
are allocated to the geographical segment to which they relate.
Residual exchange impacts are reported as part of the Corporate
segment. Results from hyperinflationary economies are translated at
forward-looking rates.
(b) Acquisitions and disposals
For acquisitions in the current period, the post-acquisition
results are excluded from the organic movement calculations. For
acquisitions in the prior period, post-acquisition results are
included in full in the prior period but are included in the
organic movement calculation from the anniversary of the
acquisition date in the current period. The acquisition row also
eliminates the impact of transaction costs that have been charged
to operating profit in the current or prior period in respect of
acquisitions that, in management's judgement, are expected to be
completed.
Where a business, brand, brand distribution right or agency
agreement was disposed of or terminated in the reporting period,
the group, in the organic movement calculations, excludes the
results for that business from the current and prior period. In the
calculation of operating profit, the overheads included in
disposals are only those directly attributable to the businesses
disposed of, and do not result from subjective judgements of
management.
(c) Exceptional items
Exceptional items are those that in management's judgement need
to be disclosed separately. Such items are included within the
income statement caption to which they relate, and are excluded
from the organic movement calculatio ns. Management believes that
that separate disclosure of exceptional items and the
classification between operating and non-operating items further
helps investors to understand the performance of the group. Changes
in estimates and reversals in relation to items previously
recognised as exceptional are presented consistently as exceptional
in the current year.
Exceptional operating items are those that are considered to be
material and unusual or non-recurring in nature and are part of the
operating activities of the group, such as one-off global
restructuring programmes which can be multi-year, impairment of
intangible assets and fixed assets, indirect tax settlements,
property disposals and changes in post employment plans.
Gains and losses on the sale or directly attributable to a
prospective sale of businesses, brands or distribution rights, step
up gains and losses that arise when an investment becomes an
associate or an associate becomes a subsidiary and other material,
unusual non-recurring items that are not in respect of the
production, marketing and distribution of premium drinks, are
disclosed as exceptional non-operating items below operating profit
in the income statement.
Exceptional current and deferred tax items comprise material and
unusual or non-recurring items that impact taxation. Examples
include direct tax provisions and settlements in respect of prior
years and the remeasurement of deferred tax assets and liabilities
following tax rate changes.
(d) Fair value remeasurement
Fair value remeasurement in the organic movement calculation
reflects an adjustment to eliminate the impact of fair value
changes in biological assets, earn-out arrangements that are
accounted for as remuneration and fair value changes relating to
contingent consideration liabilities and equity options that arose
on acquisitions recognised in the income statement.
Growth on a constant basis
Growth on a constant basis is a measure used by the group to
understand the trends of the business and its recovery towards
pre-Covid-19 performance.
2019 to 2023 growth on a constant basis for volume, sales, net
sales and operating profit before exceptional items is calculated
by adding up the respective periods' organic movement in the row
titled 'Organic movement' in the tables below, expressed as a
percentage of the relevant absolute amount in the row titled '2019
adjusted'. The most comparable GAAP financial measure is '2019 to
2023 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.
Adjustment in respect of hyperinflation
The group's experience is that hyperinflationary conditions
result in price increases that include both normal pricing actions
reflecting changes in demand, commodity and other input costs or
considerations to drive commercial competitiveness, as well as
hyperinflationary elements and that for the calculation of organic
movements, the distortion from hyperinflationary elements should be
excluded.
Cumulative inflation over 100% (2% per month compounded) over
three years is one of the key indicators within IAS 29 to assess
whether an economy is deemed to be hyperinflationary. As a result,
the definition of 'Organic movements' includes price growth in
markets deemed to be hyperinflationary economies, up to a maximum
of 2% per month while also being on a constant currency basis.
Corresponding adjustments have been made to all income statement
related lines in the organic movement calculations.
In the tables presenting the calculation of organic movements,
'hyperinflation' is included as a reconciling item between reported
and organic movements and that also includes the relevant IAS 29
adjustments.
Organic movement calculations for the year ended 30 June 2023
were as follows:
Latin
North Asia America
America Europe Pacific and Caribbean Africa Corporate Total
million million million million million million million
------------------------------ -------- -------- -------- -------------- -------- --------- --------
Volume (equivalent units)
============================== ======== ======== ======== ============== ======== ========= ========
2019 reported 49.4 45.4 95.1 22.4 33.6 - 245.9
Disposals (2.1) (0.1) - - (2.7) - (4.9)
------------------------------ -------- -------- -------- -------------- -------- --------- --------
2019 adjusted 47.3 45.3 95.1 22.4 30.9 - 241.0
Organic movement (2020) 0.1 (5.2) (14.5) (3.4) (4.0) - (27.0)
Organic movement (2021) 5.1 2.9 7.0 4.1 4.8 - 23.9
======== ======== ========
Organic movement (2022) 1.4 8.5 6.6 4.0 4.0 - 24.5
-------- -------- --------
2020, 2021 and 2022 movement
on a constant basis 6.6 6.2 (0.9) 4.7 4.8 - 21.4
------------------------------ -------- -------- -------- -------------- -------- --------- --------
Volume (equivalent units)
============================== ======== ======== ======== ============== ======== ========= ========
2022 reported 54.8 51.2 94.2 27.1 35.7 - 263.0
============================== ======== ======== ======== ============== ======== ========= ========
Disposals(2) - (0.8) (23.3) - (1.9) - (26.0)
------------------------------ -------- -------- -------- -------------- -------- --------- --------
2022 adjusted 54.8 50.4 70.9 27.1 33.8 - 237.0
------------------------------
Organic movement (2.5) 0.1 3.9 (0.9) (2.4) - (1.8)
------------------------------ --------
Acquisitions and disposals(2) 0.1 0.8 6.0 - 1.3 - 8.2
------------------------------ -------- -------- -------- -------------- -------- --------- --------
2023 reported 52.4 51.3 80.8 26.2 32.7 - 243.4
------------------------------ -------- -------- -------- -------------- -------- --------- --------
Organic movement % (5) - 5 (3) (7) - (1)
2019 to 2023 reported growth
% 6 13 (15) 17 (3) - (1)
------------------------------ -------- -------- -------- -------------- -------- --------- --------
2019 to 2023 growth on a
constant basis % 9 14 3 17 8 - 8
------------------------------ -------- -------- -------- -------------- -------- --------- --------
Latin
America
North Asia and
America Europe Pacific Caribbean Africa Corporate Total
GBP GBP GBP GBP GBP GBP GBP
million million million million million million million
------------------------------ -------- -------- -------- ---------- -------- --------- --------
Sales
============================== ======== ======== ======== ========== ======== ========= ========
2022 reported 6,682 5,740 5,624 1,945 2,403 54 22,448
============================== ======== ======== ======== ========== ======== ========= ========
Exchange (51) (149) (4) (19) (1) - (224)
Disposals(2) - (36) (884) - (195) - (1,115)
============================== ======== ======== ======== ========== ======== ========= ========
Hyperinflation - (213) - - - - (213)
------------------------------ -------- -------- -------- ---------- -------- --------- --------
2022 adjusted 6,631 5,342 4,736 1,926 2,207 54 20,896
Organic movement (15) 553 317 132 71 33 1,091
Acquisitions and disposals(2) 23 22 225 6 156 - 432
============================== ======== ======== ======== ========== ======== ========= ========
Exchange 743 (205) 125 196 (48) 1 812
============================== ======== ======== ======== ========== ======== ========= ========
Hyperinflation - 284 - - - - 284
2023 reported 7,382 5,996 5,403 2,260 2,386 88 23,515
------------------------------ -------- -------- -------- ---------- -------- --------- --------
Organic movement % - 10 7 7 3 61 5
------------------------------ -------- -------- -------- ---------- -------- --------- --------
Latin
America
North Asia and
America Europe Pacific Caribbean Africa Corporate Total
GBP GBP GBP GBP GBP GBP GBP
million million million million million million million
------------------------------ -------- -------- -------- ---------- -------- --------- --------
Net sales
============================== ======== ======== ======== ========== ======== ========= ========
2019 reported 4,460 2,939 2,688 1,130 1,597 53 12,867
============================== ======== ======== ======== ========== ======== ========= ========
Exchange (34) (19) 1 4 (2) 2 (48)
============================== ======== ======== ======== ========== ======== ========= ========
Reclassification - - - (10) - - (10)
============================== ======== ======== ======== ========== ======== ========= ========
Disposals (75) (1) (1) (1) (91) - (169)
------------------------------ -------- -------- -------- ---------- -------- --------- --------
2019 adjusted 4,351 2,919 2,688 1,123 1,504 55 12,640
Organic movement (2020) 105 (358) (423) (169) (200) (16) (1,061)
Organic movement (2021) 929 108 308 275 258 (18) 1,860
Organic movement (2022) 754 766 402 451 308 35 2,716
------------------------------ -------- -------- -------- ---------- -------- --------- --------
2020, 2021 and 2022 movement
on a constant basis 1,788 516 287 557 366 1 3,515
------------------------------ -------- -------- -------- ---------- -------- --------- --------
Net sales
============================== ======== ======== ======== ========== ======== ========= ========
2022 reported 6,095 3,212 2,884 1,525 1,682 54 15,452
============================== ======== ======== ======== ========== ======== ========= ========
Exchange(1) (46) (44) (8) (16) (1) - (115)
Disposals(2) - (29) (137) - (130) - (296)
============================== ======== ======== ======== ========== ======== ========= ========
Hyperinflation - (71) - - - - (71)
------------------------------ -------- -------- -------- ---------- -------- --------- --------
2022 adjusted 6,049 3,068 2,739 1,509 1,551 54 14,970
Organic movement 11 347 353 142 83 33 969
Acquisitions and disposals(2) 20 20 35 3 104 - 182
============================== ======== ======== ======== ========== ======== ========= ========
Exchange(1) 678 (41) 73 145 (39) 1 817
============================== ======== ======== ======== ========== ======== ========= ========
Hyperinflation - 175 - - - - 175
------------------------------ -------- -------- -------- ---------- -------- --------- --------
2023 reported 6,758 3,569 3,200 1,799 1,699 88 17,113
------------------------------ -------- -------- -------- ---------- -------- --------- --------
Organic movement % - 11 13 9 5 61 6
2019 to 2023 reported growth
% 52 21 19 59 6 66 33
------------------------------ -------- -------- -------- ---------- -------- --------- --------
2019 to 2023 growth on a
constant basis % 41 30 24 62 30 62 35
------------------------------ -------- -------- -------- ---------- -------- --------- --------
Latin
America
North Asia and
America Europe Pacific Caribbean Africa Corporate Total
GBP GBP GBP GBP GBP GBP GBP
million million million million million million million
------------------------------- -------- -------- -------- ---------- -------- --------- --------
Marketing
=============================== ======== ======== ======== ========== ======== ========= ========
2022 reported 1,200 577 490 243 199 12 2,721
=============================== ======== ======== ======== ========== ======== ========= ========
Exchange (12) 5 (2) (3) (2) (1) (15)
Fair value remeasurement
of contingent considerations,
equity option and earn out
arrangements 1 - - - - - 1
=============================== ======== ======== ======== ========== ======== ========= ========
Disposals(2) - (1) - - (9) - (10)
=============================== ======== ======== ======== ========== ======== ========= ========
Hyperinflation - (6) - - - - (6)
------------------------------- -------- -------- -------- ---------- -------- --------- --------
2022 adjusted 1,189 575 488 240 188 11 2,691
-------------------------------
Organic movement 22 42 46 34 4 4 152
-------------------------------
Acquisitions and disposals(2) 15 3 - 1 4 2 25
-------------------------------
Exchange 134 (2) 12 21 (1) 2 166
=============================== ======== ======== ======== ========== ======== ========= ========
Hyperinflation - 17 - - - - 17
------------------------------- -------- -------- -------- ---------- -------- --------- --------
2023 reported 1,360 635 546 296 195 19 3,051
------------------------------- -------- -------- -------- ---------- -------- --------- --------
Organic movement % 2 7 9 14 2 36 6
------------------------------- -------- -------- -------- ---------- -------- --------- --------
Latin
America
North Asia and
America Europe Pacific Caribbean Africa Corporate Total
GBP GBP GBP GBP GBP GBP GBP
million million million million million million million
------------------------------ -------- -------- -------- ---------- -------- --------- --------
Operating profit before
exceptional items
2019 reported 4,116
============================== ======== ======== ======== ========== ======== ========= ========
Disposal (29)
------------------------------ -------- -------- -------- ---------- -------- --------- --------
2019 adjusted 4,087
Organic movement (2020) (589)
Organic movement (2021) 627
============================== ======== ======== ======== ========== ======== ========= ========
Organic movement (2022) 995
------------------------------ -------- -------- -------- ---------- -------- --------- --------
2020, 2021 and 2022 movement
on a constant basis 1,033
------------------------------ -------- -------- -------- ---------- -------- --------- --------
Operating profit before
exceptional items
============================== ======== ======== ======== ========== ======== ========= ========
2022 reported 2,454 1,017 711 538 315 (238) 4,797
============================== ======== ======== ======== ========== ======== ========= ========
Exchange(1) (31) (13) (5) (14) 11 (30) (82)
------------------------------
Fair value remeasurement
of contingent considerations
and equity option (32) (36) - 8 - - (60)
==============================
Acquisitions and disposals(2) 6 (18) (26) - (18) - (56)
============================== ======== ======== ======== ========== ======== ========= ========
Hyperinflation - (1) - - - - (1)
------------------------------ -------- -------- -------- ---------- -------- --------- --------
2022 adjusted 2,397 949 680 532 308 (268) 4,598
------------------------------
Organic movement (57) 103 200 62 37 (24) 321
Acquisitions and disposals(2) (18) (13) 5 - 27 (6) (5)
============================== ======== ======== ======== ========== ======== ========= ========
Fair value remeasurement
of contingent considerations,
equity option and earn out
arrangements 87 25 - 1 - - 113
Exchange(1) 280 18 20 66 (152) (28) 204
============================== ======== ======== ======== ========== ======== ========= ========
Hyperinflation - 23 - - - - 23
------------------------------ -------- -------- -------- ---------- -------- --------- --------
2023 reported 2,689 1,105 905 661 220 (326) 5,254
------------------------------ -------- -------- -------- ---------- -------- --------- --------
Organic movement % (2) 11 29 12 12 (9) 7
Organic operating margin
% (3)
------------------------------ -------- -------- -------- ---------- -------- --------- --------
2023 38.6 30.8 28.5 36.0 21.1 n/a 30.9
------------------------------ ======== ======== ======== ========== ======== ========= ========
2022 39.6 30.9 24.8 35.3 19.9 n/a 30.7
------------------------------ -------- -------- -------- ---------- -------- --------- --------
Organic operating margin
movement (bps) (101) (13) 363 72 126 n/a 15
------------------------------ -------- -------- -------- ---------- -------- --------- --------
2019 to 2023 reported growth
% 28
------------------------------ -------- -------- -------- ---------- -------- --------- --------
2019 to 2023 growth on a
constant basis % 33
------------------------------ -------- -------- -------- ---------- -------- --------- --------
(i)For the reconciliation of sales to net sales, see page
21.
(ii)Percentages and margin movements are calculated on rounded
figures.
Notes: Information in respect of the organic movement
calculations
(1)The impact of movements in exchange rates on reported figures
for operating profit was principally in respect of the favourable
exchange impact of the strengthening of the US dollar and Mexican
peso against the sterling, partially offset by the weakening of the
Nigerian naira, Ghanaian cedi and the Turkish lira.
(2)Acquisitions and disposals that had an effect on volume,
sales, net sales, marketing and operating profit in the year ended
30 June 2023, are detailed on page 53.
(3)Organic operating margin calculated by dividing Operating
profit before exceptional items by net sales.
In the year ended 30 June 2023, 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
EUm GBP million GBP million GBP million GBP million
--------------------------- ------ ----------- ----------- ----------- -----------
Year ended 30 June 2022
Acquisitions
Chase Distillery - - - - 1
=========================== ====== =========== =========== =========== ===========
Lone River Ranch Water - - - - 6
- - - - 7
Disposals
USL Popular brands (23.3) (884) (137) - (26)
=========================== ====== =========== =========== =========== ===========
Archers brand (0.1) (16) (10) - (7)
=========================== ====== =========== =========== =========== ===========
Meta Abo Brewery (0.3) (16) (12) (1) 8
=========================== ====== =========== =========== =========== ===========
Picon brand (0.7) (20) (19) (1) (12)
=========================== ====== =========== =========== =========== ===========
Guinness Cameroun S.A. (1.6) (179) (118) (8) (26)
--------------------------- ------ ----------- ----------- ----------- -----------
(26.0) (1,115) (296) (10) (63)
--------------------------- ------ ----------- ----------- ----------- -----------
Acquisitions and disposals (26.0) (1,115) (296) (10) (56)
Year ended 30 June 2023
=========================== ====== =========== =========== =========== ===========
Acquisitions
Mr Black - 8 7 3 (2)
=========================== ====== =========== =========== =========== ===========
Balcones Distilling - 4 4 4 (12)
Mezcal Unión - 8 4 3 (1)
=========================== ====== =========== =========== =========== ===========
21Seeds 0.1 9 8 8 (9)
=========================== ====== =========== =========== =========== ===========
Don Papa Rum 0.1 10 10 3 (15)
--------------------------- ------ ----------- ----------- ----------- -----------
0.2 39 33 21 (39)
--------------------------- ------ ----------- ----------- ----------- -----------
Disposals
=========================== ====== =========== =========== =========== ===========
USL Popular brands 6.0 225 35 - 5
=========================== ====== =========== =========== =========== ===========
Archers brand 0.7 12 10 - 2
=========================== ====== =========== =========== =========== ===========
Guinness Cameroun S.A. 1.3 156 104 4 27
8.0 393 149 4 34
--------------------------- ------ ----------- ----------- ----------- -----------
Acquisitions and disposals 8.2 432 182 25 (5)
--------------------------- ------ ----------- ----------- ----------- -----------
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 years ended
30 June 2023 and 30 June 2022 are set out in the table below:
2023 2022
GBP million GBP million
Profit attributable to equity shareholders of the parent
company 3,734 3,249
============================================================ =========== ===========
Exceptional operating and non-operating items 294 405
Exceptional tax items and tax in respect of exceptional
operating and non-operating items (186) (31)
Exceptional items attributable to non-controlling interests (141) (103)
------------------------------------------------------------ ----------- -----------
Profit attributable to equity shareholders of the parent
company before exceptional items 3,701 3,520
------------------------------------------------------------ ----------- -----------
Weighted average number of shares million million
------------------------------------------------------------ ----------- -----------
Shares in issue excluding own shares 2,264 2,318
============================================================ =========== ===========
Dilutive potential ordinary shares 7 7
------------------------------------------------------------ ----------- -----------
Diluted shares in issue excluding own shares 2,271 2,325
------------------------------------------------------------ ----------- -----------
pence pence
------------------------------------------------------------ ----------- -----------
Basic earnings per share before exceptional items 163.5 151.9
============================================================ =========== ===========
Diluted earnings per share before exceptional items 163.0 151.4
------------------------------------------------------------ ----------- -----------
Free cash flow
Free cash flow comprises the net cash flow from operating
activities aggregated with the net cash received/paid for working
capital loans receivable, cash paid or received for investments and
the net cash expenditure paid for property, plant and equipment and
computer software that are included in net cash flow from investing
activities.
The remaining components of net cash flow from investing
activities that do not form part of free cash flow, as defined by
the group's management, are in respect of the acquisition and sale
of businesses and non-working capital loans to and from
associates.
The group's management regards a portion of the purchase and
disposal of property, plant and equipment and computer software as
ultimately non-discretionary since ongoing investment in plant,
machinery and technology is required to support the day-to-day
operations, whereas acquisition and sale of businesses are
discretionary.
Where appropriate, separate explanations are given for the
impacts of acquisition and sale of businesses, dividends paid and
the purchase of own shares, each of which arises from decisions
that are independent from the running of the ongoing underlying
business.
Free cash flow reconciliations for the years ended 30 June 2023
and 30 June 2022 are set out in the table below:
2023 2022
GBP million GBP million
Net cash inflow from operating activities 3,024 3,935
======================================================= =========== ===========
Disposal of property, plant and equipment and computer
software 13 17
======================================================= =========== ===========
Purchase of property, plant and equipment and computer
software (1,180) (1,097)
======================================================= =========== ===========
Movements in loans and other investments (57) (72)
------------------------------------------------------- ----------- -----------
Free cash flow 1,800 2,783
------------------------------------------------------- ----------- -----------
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 years ended 30 June 2023 and
30 June 2022 were as follows:
2023 2022
GBP million GBP million
------------------------------------------------------------ ----------- -----------
Profit for the year 3,766 3,338
============================================================ ----------- -----------
Taxation 970 1,049
============================================================ ----------- -----------
Share of after tax results of associates and joint ventures (370) (417)
============================================================ ----------- -----------
Net finance charges 594 422
============================================================ =========== ===========
Non-operating items (328) 17
------------------------------------------------------------ ----------- -----------
Operating profit 4,632 4,409
------------------------------------------------------------ ----------- -----------
Exceptional operating items 622 388
============================================================ ----------- -----------
Fair value remeasurement (124) (60)
============================================================ ----------- -----------
Depreciation, amortisation and impairment(1) 496 489
============================================================ ----------- -----------
Hyperinflation adjustment (28) (10)
============================================================ ----------- -----------
Retranslation to budgeted exchange rates (198) 27
------------------------------------------------------------ ----------- -----------
5,400 5,243
------------------------------------------------------------ ----------- -----------
Cash generated from operations 4,779 5,212
============================================================ =========== ===========
Net exceptional cash paid(2) 25 15
============================================================ =========== ===========
Post employment payments less amounts included in operating
profit(1) 25 89
============================================================ =========== ===========
Net movement in maturing inventories(3) 577 360
============================================================ =========== ===========
Provision movement 65 58
============================================================ ----------- ===========
Dividends received from associates (219) (190)
============================================================ =========== ===========
Other items(1) 14 (53)
============================================================ =========== ===========
Hyperinflation adjustment (29) (22)
============================================================ ----------- ===========
Retranslation to budgeted exchange rates (198) 42
------------------------------------------------------------ ----------- -----------
5,039 5,511
------------------------------------------------------------ ----------- -----------
Operating cash conversion 93.3% 105.1%
------------------------------------------------------------ ----------- -----------
(1)Excluding exceptional items.
(2)Exceptional cash payments for winding down our Russian
operations was GBP13 million (2022 - GBP13 million) and for Supply
chain agility programme was GBP12 million (2022 - GBPnil). In the
year ended 30 June 2022 exceptional cash payments for other
donations were GBP2 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
years ended 30 June 2023 and 30 June 2022 are set out in the table
below:
2023 2022
GBP million GBP million
------------------------------------------------------------ ----------- -----------
Operating profit 4,632 4,409
============================================================ =========== ===========
Exceptional operating items 622 388
============================================================ =========== ===========
Profit before exceptional operating items attributable
to non-controlling interests (173) (192)
============================================================ =========== ===========
Share of after tax results of associates and joint ventures 370 417
============================================================ =========== ===========
Tax at the tax rate before exceptional items of 23.0%
(2022 - 22.5%) (1,294) (1,173)
------------------------------------------------------------ ----------- -----------
4,157 3,849
------------------------------------------------------------ ----------- -----------
Average net assets (excluding net post employment benefit
assets/liabilities) 8,924 8,428
============================================================ =========== ===========
Average non-controlling interests (1,638) (1,641)
============================================================ =========== ===========
Average net borrowings 14,949 12,859
============================================================ =========== ===========
Average integration and restructuring costs (net of tax) 1,639 1,639
============================================================ =========== ===========
Goodwill at 1 July 2004 1,562 1,562
------------------------------------------------------------ ----------- -----------
Average invested capital 25,436 22,847
------------------------------------------------------------ ----------- -----------
Return on average invested capital 16.3% 16.8%
------------------------------------------------------------ ----------- -----------
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, non-operating items, interest,
tax, depreciation, amortisation and impairment).
Calculations for the ratio of adjusted net borrowings to
adjusted EBITDA for the years ended 30 June 2023 and 30 June 2022
are set out in the table below:
2023 2022
GBP million GBP million
Borrowings due within one year 1,701 1,522
======================================================== =========== ===========
Borrowings due after one year 14,801 14,498
======================================================== =========== ===========
Fair value of foreign currency derivatives and interest
rate hedging instruments 30 (73)
======================================================== =========== ===========
Lease liabilities 448 475
======================================================== =========== ===========
Less: Cash and cash equivalents (1,439) (2,285)
-------------------------------------------------------- ----------- -----------
Net borrowings 15,541 14,137
======================================================== =========== ===========
Post employment benefit liabilities before tax 373 402
-------------------------------------------------------- ----------- -----------
Adjusted net borrowings 15,914 14,539
-------------------------------------------------------- ----------- -----------
Profit for the year 3,766 3,338
======================================================== =========== ===========
Taxation 970 1,049
======================================================== =========== ===========
Net finance charges 594 422
======================================================== =========== ===========
Depreciation, amortisation and impairment (excluding
exceptional impairment) 496 492
======================================================== =========== ===========
Exceptional impairment 570 336
-------------------------------------------------------- ----------- -----------
EBITDA 6,396 5,637
-------------------------------------------------------- ----------- -----------
Exceptional operating items (excluding impairment) 52 49
======================================================== =========== ===========
Non-operating items (328) 17
-------------------------------------------------------- ----------- -----------
Adjusted EBITDA 6,120 5,703
-------------------------------------------------------- ----------- -----------
Adjusted net borrowings to adjusted EBITDA 2.6 2.5
-------------------------------------------------------- ----------- -----------
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 years ended 30 June 2023 and 30 June 2022
are set out in the table below:
2023 2022
GBP million GBP million
------------------------------------------------- ----------- -----------
Taxation on profit (a) 970 1,049
================================================= =========== ===========
Tax in respect of exceptional items 129 31
================================================= =========== ===========
Exceptional tax credit 57 -
------------------------------------------------- ----------- -----------
Tax before exceptional items (b) 1,156 1,080
------------------------------------------------- ----------- -----------
Profit before taxation (c) 4,736 4,387
================================================= =========== ===========
Non-operating items (328) 17
Exceptional operating items 622 388
Profit before taxation and exceptional items (d) 5,030 4,792
------------------------------------------------- ----------- -----------
Tax rate after exceptional items (a/c) 20.5% 23.9%
================================================= =========== ===========
Tax rate before exceptional items (b/d) 23.0% 22.5%
------------------------------------------------- ----------- -----------
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, Latin America and Caribbean, Africa and Asia Pacific
(excluding Australia, Korea and Japan).
References to reserve brands include, but are not limited to,
Johnnie Walker Blue Label, Johnnie Walker Green Label, Johnnie
Walker Gold Label Reserve, Johnnie Walker Aged 18 Years, John
Walker & Sons Collection and other Johnnie Walker super and
ultra-premium brands; The Singleton, Cardhu, Talisker, Lagavulin,
Oban and other malt brands; Buchanan's Special Reserve, Buchanan's
Red Seal; Haig Club whisky; Copper Dog whisky; Roe & Co;
Bulleit Bourbon, Bulleit Rye; Orphan Barrel whiskey; Balcones
whisky and rum; Tanqueray No. TEN and Tanqueray Malacca gin;
Aviation, Chase, Jinzu and Villa Ascenti gin; Cîroc, Ketel One
vodka, Ketel One Botanical; Don Julio, Casamigos, DeLeón and
21Seeds tequila; Mezcal Unión mezcal; Zacapa, Bundaberg Master
Distillers' Collection, Pampero Aniversario and Don Papa 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 price tier definitions on a methodology that uses external
metrics (including market pricing data from Nielsen, IRI etc., as
well as the IWSR segmentation) for benchmarking and internal
pricing metrics for a consistent segmentation.
References to the disposal of the USL Popular brands include
non-exhaustively the Haywards, Old Tavern, White Mischief, Honey
Bee, Green Label and Romanov brands.
References to the group include Diageo plc and its consolidated
subsidiaries.
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 or 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 24 outlook, Diageo's medium-term guidance for
fiscal 23 to fiscal 25, Diageo's supply chain agility programme,
future TBA market share ambitions and any other statements relating
to Diageo's performance for the year ending 30 June 2024 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
macroeconomic events that may affect Diageo's customers, suppliers
and/or financial counterparties; (ii) the effects of climate
change, or legal, regulatory or market measures intended to address
climate change; (iii) changes in consumer preferences and tastes,
including as a result of disruptive market forces, changes in
demographics and evolving social trends (including any shifts in
consumer tastes towards at-home occasions, premiumisation,
small-batch craft alcohol, or lower or no alcohol products and/or
developments in e-commerce); (iv) changes in the domestic and
international tax environment that could lead to uncertainty around
the application of existing and new tax laws and unexpected tax
exposures; (v) changes in the cost of production, including as a
result of increases in the cost of commodities, labour and/or
energy due to inflation and/or supply chain disruptions; (vi) any
litigation or other similar proceedings (including with tax,
customs, competition, environmental, anti-corruption or other
regulatory authorities); (vii) legal and regulatory developments,
including changes in regulations relating to environmental issues
and/or e-commerce; (viii) the consequences of any failure of
internal controls; (ix) 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; (x) Diageo's ability to make
sufficient progress against or achieve its ESG ambitions; (xi)
cyber-attacks and IT threats or any other disruptions to core
business operations; (xii) contamination, counterfeiting or other
circumstances which could harm the level of customer support for
Diageo's brands and adversely impact its sales; (xiii) Diageo's
ability to maintain its brand image and corporate reputation or to
adapt to a changing media environment; (xiv) fluctuations in
exchange rates and/or interest rates; (xv) Diageo's ability to
derive the expected benefits from its business strategies,
including Diageo's investments in e-commerce and its luxury
portfolio; (xvi) increased competitive product and pricing
pressures, including as a result of introductions of new products
or categories that are competitive with Diageo's products and
consolidations by competitors and retailers; (xvii) increased costs
for, or shortages of, talent, as well as labour strikes or
disputes; (xviii) movements in the value of the assets and
liabilities related to Diageo's pension plans; (xix) 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 (xx) 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 2022 and in our Annual Report on Form 20-F for the year
ended 30 June 2022.
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.
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 2023.
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 2023,
which will be published on 3 August 2023 (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 2023, 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 2023 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), Debra Crew (Chief Executive), Lavanya Chandrashekar
(Chief Financial Officer), Susan Kilsby (Senior Independent
Director and Chair of the Remuneration Committee), Alan Stewart
(Non-Executive Director and Chairman of the Audit Committee) and
Non-Executive Directors: Melissa Bethell, Karen Blackett, Valérie
Chapoulaud-Floquet, Sir John Manzoni, Lady Mendelsohn and Ireena
Vittal.
Webcast and presentation slides
At 07:15 (UK time) on Tuesday 1 August 2023, Debra Crew, 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
Debra Crew and Lavanya Chandrashekar will be hosting a Q&A
conference call on Tuesday 1 August 2023 at 09:30 (UK time). If you
would like to listen to the call or ask a question, please use the
dial in details below.
From the UK: +44 (0) 20 3936 2999
From the UK (free
call): 0800 358 1035
From the USA: +1 646 787 9445
From the USA (free
call): +1 855 979 6654
The conference call is for analysts and investors only. To join
the call please use the conference ID code already sent to you or
email investor.relations@diageo.com .
Transcript and recording
Following the Q&A conference call, a transcript and
recording will be available from the link below:
https://www.diageo.com/en/investors/results-reports-and-presentations
Investor enquiries
to: Durga Doraisamy +44 (0) 79 021 26906
Andy Ryan +44 (0) 78 038 54842
Brian Shipman +1 917 710 3007
investor.relations@diageo.com
Media enquiries
to: Dominic Redfearn +44 (0) 79 719 77759
Clare Cavana +44 (0) 77 517 42072
Isabel Batchelor +44 (0) 77 319 88857
press@diageo.com
Diageo plc LEI: 213800ZVIELEA55JMJ32
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END
FR VFLFXXDLZBBQ
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August 01, 2023 02:00 ET (06:00 GMT)
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