Unassociated Document
List
identifying information required to be furnished
by
Diageo plc pursuant to Rule 13a-16 or 15d-16 of
The
Securities Exchange Act 1934
1
– 31 August 2009
Information
|
Required
by/when
|
|
|
Public
Announcements/Press
|
The
Stock Exchange, London
|
Announcement
Company
releases shares from treasury to satisfy grants made under employee share
plans.
(03
August 2009)
|
|
Announcement
Preliminary
results announcement.
(27
August 2009)
|
Announcement
Company
releases shares from treasury to satisfy grants made under employee share
plans.
(07
August 2009)
|
|
Announcement
Company
announces directorate change.
(27
August 2009)
|
Announcement
Company
notified of transactions in respect of the Diageo Share Incentive Plan and
Messrs Walsh, Rose and those persons discharging managerial responsibility
inform the Company of their interests therein.
Dr
Humer and Mr Stitzer inform the Company of their beneficial
interests.
(10
August 2009)
|
|
Announcement
Company
releases shares from treasury to satisfy grants made under employee share
plans.
(28
August 2009)
|
Announcement
Company
releases shares from treasury to satisfy grants made under employee share
plans.
(26
August 2009)
|
|
Announcement
Company
announces total voting rights.
(28
August 2009)
|
FORM
6-K
SECURITIES
AND EXCHANGE COMMISSION
Report
of Foreign Issuer
Pursuant
to Rule 13a-16 or 15d-16 of
the
Securities Exchange Act of 1934
Diageo
plc
(Translation
of registrant's name into English)
8
Henrietta Place, London W1G 0NB
(Address
of principal executive offices)
indicate
by check mark whether the registrant files or will file annual reports under
cover Form 20-F or Form 40-F
Form
20-F x Form
40-F ¨
indicate
by check mark whether the registrant by furnishing the information contained in
this Form is also thereby furnishing the information to the Commission pursuant
to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes ¨ No x
If "Yes" is marked, indicate below the
file number assigned to the registrant in connection with Rule
12g3-2(b):82 .............
SIGNATURES
Pursuant
to the requirements of the Securities Exchange Act of 1934, the registrant has
duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorised.
Diageo
plc
(Registrant)
Date
8 September 2009
|
By
|
|
|
Name:
|
C
Kynaston
|
|
Title:
|
Senior
Company Secretarial
Assistant
|
Company
|
Diageo PLC
|
TIDM
|
DGE
|
Headline
|
Transaction
in Own Shares
|
Released
|
10:31
03-Aug-2009
|
Number
|
91029-E6B7
|
TO:
|
Regulatory
Information Service
|
PR
Newswire
RE:
|
PARAGRAPH
12.6.4 OF THE LISTING RULES
|
Diageo
plc - Transaction in Own Shares
Diageo
plc (the 'Company') announces that today, it released from treasury 3,342
ordinary shares of 28 101/108 pence each ('Ordinary Shares'), to satisfy grants
made under employee share plans. The average price at which these Ordinary
Shares were released from treasury was 976.71 pence per share.
Following
this release, the Company holds 254,273,704 Ordinary Shares as treasury shares
and the total number of Ordinary Shares in issue (excluding shares held as
treasury shares) is 2,499,645,405.
03 August
2009
END
Company
|
Diageo PLC
|
TIDM
|
DGE
|
Headline
|
Transaction
in Own Shares
|
Released
|
14:35
07-Aug-2009
|
Number
|
91434-79B6
|
TO:
|
Regulatory
Information Service
|
PR
Newswire
RE:
|
PARAGRAPH
12.6.4 OF THE LISTING RULES
|
Diageo
plc - Transaction in Own Shares
Diageo
plc (the 'Company') announces that today, it released from treasury 3,200
ordinary shares of 28 101/108 pence each ('Ordinary Shares'), to satisfy grants
made under employee share plans. The average price at which these Ordinary
Shares were released from treasury was 976.71 pence per share.
Following
this release, the Company holds 254,270,504 Ordinary Shares as treasury shares
and the total number of Ordinary Shares in issue (excluding shares held as
treasury shares) is 2,499,648,605.
07 August
2009
END
Company
|
Diageo PLC
|
TIDM
|
DGE
|
Headline
|
Director/PDMR
Shareholding
|
Released
|
15:47
10-Aug-2009
|
Number
|
91542-917C
|
TO:
|
Regulatory
Information Service
|
PR
Newswire
RE: PARAGRAPH
3.1.4 OF THE DISCLOSURE AND TRANSPARENCY RULES
The
notifications listed below were all received under Paragraph 3.1.2 of the
Disclosure and Transparency Rules.
Diageo
plc (the 'Company') announces that:
1.
|
it
received notification on 10 August 2009 of the following allocations of
ordinary shares of 28 101/108 pence each in the Company ('Ordinary
Shares') under the Diageo Share Incentive Plan (the 'Plan'),
namely:
|
(i) the
following directors of the Company were allocated Ordinary Shares on 10 August
2009 under the Plan, by Diageo Share Ownership Trustees Limited (the
'Trustee'):
Name
of Director
|
|
Number
of Ordinary Shares
|
|
|
|
|
|
N C
Rose
|
|
|
19 |
|
|
|
|
|
|
P S
Walsh
|
|
|
19 |
|
(ii) the
following 'Persons Discharging Managerial Responsibilities' ('PDMR') were
allocated Ordinary Shares on 10 August 2009 under the Plan, by the
Trustee:
Name
of PDMR
|
|
Number
of Ordinary Shares
|
|
|
|
|
|
N
Blazquez
|
|
|
20 |
|
|
|
|
|
|
S
Fletcher
|
|
|
19 |
|
|
|
|
|
|
D
Gosnell
|
|
|
19 |
|
|
|
|
|
|
J
Grover
|
|
|
19 |
|
|
|
|
|
|
A
Morgan
|
|
|
19 |
|
|
|
|
|
|
G
Williams
|
|
|
19 |
|
|
|
|
|
|
I
Wright
|
|
|
19 |
|
The
number of Ordinary Shares allocated comprises those purchased on behalf of the
employee using an amount which the employee has chosen to have deducted from
salary ('Sharepurchase') and those awarded to the employee by the Company
('Sharematch') on the basis of one Sharematch Ordinary Share for every two
Sharepurchase Ordinary Shares.
The
Sharepurchase Ordinary Shares were purchased and the Sharematch Ordinary Shares were awarded at a
price per share of £9.27.
The
Ordinary Shares are held by the Trustee and in the name of the Trustee.
Sharepurchase Ordinary Shares can normally be sold at any time. Sharematch
Ordinary Shares cannot normally be disposed of for a period of three years after
the award date.
2. it
received notification on 10 August 2009 from Dr F B Humer, a director of the
Company, that he had purchased 858 Ordinary Shares on 10 August 2009 under an arrangement with the
Company, whereby he has agreed to use an amount of £ 8,000 each month,
net of tax, from his director's fees to purchase Ordinary Shares. Dr Humer has
agreed to retain the Ordinary Shares while he remains a director of the
Company.
The
Ordinary Shares were purchased at a price per share of £9.27.
3. it
received notification on 10 August 2009 from Mr H T Stitzer, a director of the
Company, that he had purchased 107 Ordinary Shares on 10 August 2009 under an
arrangement with the Company, whereby he has agreed to use an amount of £1,000 each month, net
of tax, from his director's fees to purchase Ordinary
Shares.
The Ordinary Shares were
purchased at a price per share of £9.27.
As a
result of the above transactions, interests of directors and PDMRs in the
Company's Ordinary Shares (excluding options, awards under the Company's LTIPs
and interests as potential beneficiaries of the Company's Employee Benefit
Trusts) are as follows:
Name
of Director
|
|
Number
of Ordinary Shares
|
|
|
|
|
|
Dr
F B Humer
|
|
|
15,272 |
|
|
|
|
|
|
N C
Rose
|
|
|
453,937 |
|
|
|
|
|
|
H T
Stitzer
|
|
|
6,922 |
|
|
|
|
|
|
P S
Walsh
|
|
|
719,918 |
|
|
|
|
|
|
Name
of PDMR
|
|
Number
of Ordinary Shares
|
|
|
|
|
|
|
N
Blazquez
|
|
|
43,341 |
|
|
|
|
|
|
S
Fletcher
|
|
|
152,077 |
|
|
|
|
|
|
D
Gosnell
|
|
|
59,531 |
|
|
|
|
|
|
J
Grover
|
|
|
149,679 |
|
|
|
|
|
|
A
Morgan
|
|
|
176,785 |
|
|
|
|
|
|
G
Williams
|
|
243,955
(of which 5,992 are held as ADS*)
|
|
|
|
|
|
|
I
Wright
|
|
|
30,152 |
|
P D
Tunnacliffe
Company
Secretary
10 August
2009
*1 ADS is
the equivalent of 4 Ordinary Shares.
END
Company
|
Diageo PLC
|
TIDM
|
DGE
|
Headline
|
Transaction
in Own Shares
|
Released
|
11:58
26-Aug-2009
|
Number
|
91156-F742
|
TO: Regulatory
Information Service
PR
Newswire
RE: PARAGRAPH
12.6.4 OF THE LISTING RULES
Diageo
plc - Transaction in Own Shares
Diageo
plc (the 'Company') announces that today, it released from treasury 3,198
ordinary shares of 28 101/108 pence each ('Ordinary Shares'), to satisfy grants
made under employee share plans. The average price at which these Ordinary
Shares were released from treasury was 976.71 pence per share.
Following
this release, the Company holds 254,267,306 Ordinary Shares as treasury shares
and the total number of Ordinary Shares in issue (excluding shares held as
treasury shares) is 2,499,651,803. 26 August 2009
END
Company
|
Diageo PLC
|
TIDM
|
DGE
|
Headline
|
Final
Results
|
Released
|
07:00
27-Aug-2009
|
Number
|
0785Y07
|
RNS
Number : 0785Y
Diageo
PLC
27 August
2009
Preliminary
results for the year ended 30 June 2009
|
Preliminary results for the
year ended 30 June 2009
|
Diageo’s
full year results demonstrate the resilience of the business
In
a year of global economic downturn Diageo delivered organic net sales in line
with the prior year; 4% organic growth in operating profit and 10% growth in
reported eps.
Results
at a glance
Volume in millions of equivalent
|
|
2009
|
|
|
2008
|
|
|
Organic
movement
|
|
|
Reported
movement
|
|
units
|
|
|
141.3 |
|
|
|
145.0 |
|
|
|
(4%) |
|
|
|
(3%) |
|
£
million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
sales
|
|
|
9,311 |
|
|
|
8,090 |
|
|
|
- |
|
|
|
15 |
% |
Operating
profit before exceptional items
|
|
|
2,613 |
|
|
|
2,304 |
|
|
|
4 |
% |
|
|
13 |
% |
Operating
profit
|
|
|
2,443 |
|
|
|
2,226 |
|
|
|
|
|
|
|
10 |
% |
Profit
attributable to parent company’s equity shareholders
|
|
|
1,621 |
|
|
|
1,521 |
|
|
|
|
|
|
|
7 |
% |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Basic
eps
|
|
|
65.2p |
|
|
|
59.3p |
|
|
|
|
|
|
|
10 |
% |
Highlights
|
·
|
Exchange
rate movements increased net sales by £1,095 million; brand additions,
primarily Ketel One vodka, contributed £151 million and there was an
organic decline of £25 million.
|
|
·
|
Operating
profit before exceptional items benefited by £167 million from exchange
rate movements, £43 million from brand additions and £99 million from
organic growth.
|
|
·
|
Exceptional
operating costs were £170 million, in respect of the global restructuring
programme and the restructuring of Irish brewing
operations.
|
|
·
|
Associate
income was £164 million.
|
|
·
|
Finance
charges were £592 million. Net interest was £516 million, including £14
million impact of IAS 39, and other finance charges were £76 million,
including £44 million impact of IAS 21 and
39.
|
|
·
|
Exchange
rate movements increased finance charges by £66
million.
|
|
·
|
The
reported tax rate was 14.5% and the underlying tax rate was
22.2%.
|
|
·
|
Free
cash flow was £1,204 million.
|
|
·
|
Recommended
increase of 5% in final dividend per share to 22.20
pence.
|
Paul
Walsh, Chief Executive Officer of Diageo, said:
“This has
been a very challenging year. Overall however our results demonstrate the
resilience of our business. Our brand range and our geographic reach enabled us
to deliver 4% organic operating profit growth and 10% eps
growth. While the economic downturn has affected all markets, the
response of customers and consumers has not been uniform and therefore the
impact on our business has been varied. By region, International, North America
and Asia Pacific have been stronger than Europe. By category, we have delivered
growth in categories which account for over 50% of our sales, primarily vodka,
rum, tequila and beer. The gin and wine categories have been weaker
and scotch and liqueurs have been most impacted by de-stocking.
“Smirnoff,
Captain Morgan, Jose Cuervo and Guinness, two of our three largest local
priority brands, Buchanan’s and Windsor, and category brands, Cîroc, Cacique and
Harp, all grew supported by innovation and effective marketing. We benefited
from the addition of Ketel One vodka, Zacapa rum and Rosenblum Cellars wine, all
of which have broadened our brand range in important categories. Johnnie Walker
faced a tougher market environment being at a relatively higher price point and
saw more impact from de-stocking. The consumer downturn in Spain and de-stocking
in a number of markets also affected the performance of Baileys.
“We took
action quickly to manage these difficult times, reducing our cost base and
refocusing marketing spend as consumer trends changed. In fiscal 2010
we will benefit from cost reductions of £120 million as a result of our global
restructuring initiative.
“While
the global economy appears to be stabilising, there is still uncertainty as to
the sustainability and pace of any recovery and F10 will be challenging, as we
lap a strong first quarter and a reasonable first half performance this year.
That being recognised, we expect to deliver low single digit organic operating
profit growth in fiscal 2010.”
Notes
Unless
otherwise stated in this announcement: percentage movements are organic
movements; commentary refers to organic movements and share refers to value
share. See page 33 for additional information for shareholders and an
explanation of non-GAAP measures including the reconciliation of basic eps to
underlying eps.
Marketing
spend
Marketing
spend in the year was prioritised behind those brands which offered the most
attractive growth opportunities. A further reduction in spend on ready to drink
brands and lower spend on beer and wine outside of Africa contributed 4
percentage points to the overall organic reduction in marketing spend of
9%. Spend on spirits, which has a higher level of media activity,
benefited from savings as a result of media rate deflation. However, in those
markets where consumer spend has been particularly constrained by the economic
situation, such as in Spain, marketing spend was reduced in line with reductions
across the industry. In the United States, the decision was made to increase
share of voice on spirits and in Latin America Diageo’s significant leadership
in share of voice was maintained.
Restructuring
initiatives
Diageo
announced two restructuring initiatives in the year. The first programme, which
was announced in February, will generate £120 million of cost reductions in the
year ending 30 June 2010. An exceptional charge of £166 million was taken in the
year ended 30 June 2009 in respect of this global restructuring programme and a
further charge of approximately £70 million will be taken in the year ending 30
June 2010. In July 2009 Diageo announced a second restructuring initiative which
will generate cost savings of £40 million in the year ending 30 June 2012 and
will reduce the cost of production of maturing stocks by £10 million per annum
in the year ending 30 June 2011. An exceptional charge of £120
million will be taken in the year ending 30 June 2010 in respect of this
restructuring.
Regional
summary
North
America - Growth in spirits offset weakness in wine and beer sales
·
|
Marketing
spend down 9%
|
Despite
the difficult economic climate, the total beverage alcohol market in the United
States remained in growth. Growth in spirits offset weakness in wine and beer as
Diageo was again the best performing full line spirits company in the United
States. Smirnoff vodka, Captain Morgan and Jose Cuervo performed well as the
premium spirits segment proved to be the most resilient as consumers traded down
from the ultra and super premium segments. Diageo’s innovation capability also
contributed to the performance of these brands with successful launches of
Captain Morgan 100, Jose Cuervo Silver and a range of ready to serve Smirnoff
Cocktails. By the year end, Diageo’s share of US spirits, as measured by IRI,
was 30%, an organic decline of 0.2 percentage points in the year and an increase
of 1.4 percentage points from brand additions, Ketel One vodka and Zacapa rum.
As a result of the planned stock reduction and as consumers traded out of
imported beer to domestic beer, beer net sales declined 6%. The wine category
was affected by the economic climate as consumers traded down from higher price
points and net sales declined 7%. The performance of Ketel One vodka and Zacapa
rum was ahead of our expectations despite the more difficult economic
environment in the year. Marketing spend decreased by 9% reflecting reduced
investment behind ready to drink and as a result of media rate deflation.
Marketing spend was re-allocated behind growth opportunities in the premium
segment, behind innovation and behind the strong growth of Cîroc vodka and share
of voice in spirits grew 4 percentage points.
Europe
– Challenging economies, especially in Spain and Ireland, created even tougher
trading conditions this year; however in Great Britain Diageo performed
strongly
·
|
Marketing
spend down 14%
|
·
|
Operating
profit down 1%
|
Performance
in Europe was impacted by the worsening economic environment, which led to the
overall decline in both volume and net sales. Spirits, beer and ready to drink
net sales were down as a result of the decline in the beverage alcohol market
across Europe and a further shift to the off-trade; wine net sales increased
driven by Blossom Hill in Great Britain. Spain and Ireland, two of
the region’s biggest markets, were hit hardest, as their economies went into
steep decline, and a significant rise in unemployment impacted consumer
confidence and spending power. In Great Britain net sales grew 2% as Diageo
continued to out-perform a declining total beverage alcohol market. The market
in Russia weakened in the second half although full year net sales growth was
achieved following a strong first half performance. Price increases were taken
in the majority of markets although at more moderate levels than in previous
years. Marketing spend was significantly reduced, mainly in Spain and
Ireland where Diageo acted in response to the economic conditions and as a
result of media rate deflation.
International
- Continued growth in Africa and price increases in Latin America drove net
sales growth in the region
·
|
Marketing
spend down 3%
|
·
|
Operating
profit up 10%
|
International
continued to be the key contributor to Diageo’s performance. In Africa 2% volume
growth and strong pricing led to 16% net sales growth led by Guinness and Harp.
Growth for the full year was slightly behind the rates seen in the first half
because, as expected, the global economic downturn impacted the consumer in
Africa in the second half. In Latin America and the Caribbean the performance
was mixed. Volume and net sales grew in the three largest markets Venezuela,
Mexico and Brazil with good performances by Buchanan’s and Johnnie
Walker. This was partially offset by volume and net sales decline
elsewhere in the region as price increases were taken to offset major currency
devaluations. In the duty free business in Latin America the difficult trading
environment, resulting from the slowdown in economic growth, currency
devaluations and credit issues, led to a decline in volume and net sales. In
Global Travel volume and net sales declined as the travel retail business
continued to be impacted by lower passenger numbers. This was partially offset
by volume and net sales growth in the Middle East driven by a strong performance
in scotch. Marketing spend in International declined by 3%. In Latin America
Diageo’s significant leadership in share of voice was maintained and
efficiencies were delivered through multi-market campaigns. In Africa the
transfer of spend on ready to drink, cider and beer brands in South Africa to
the new joint venture there, offset increased spend elsewhere in Africa on beer
and ready to drink brands.
Asia
Pacific - Trade de-stocking, a modest decline in consumer demand
but
mainly
the decline in Australian ready to drink sales offset the benefit
from
return
to in-market distribution in Korea
·
|
Marketing
spend down 5%
|
The
decline in ready to drink in Australia, following the significant excise duty
increase last year, reduced the region’s volume by 3 percentage points and net
sales by 4 percentage points. Spirits net sales across the region
declined 1%, impacted by reduced sales in the on-trade channel and trade
de-stocking throughout the supply chain in particular in South East Asia and
China. Guinness remained resilient with net sales growth of 6%. In Korea strong
share gains for Windsor more than offset scotch category decline in this
important market. Marketing spend in spirits increased 7%, ahead of growth in
net sales, although reduced spend behind ready to drink led to an overall 5%
reduction for the region.
Key brand
performance
|
|
Volume
movement
%
|
|
|
Organic
net sales
movement
%
|
|
|
Reported
net sales
movement
%
|
|
|
|
|
|
|
|
|
|
|
|
Smirnoff
|
|
|
(2 |
) |
|
|
2 |
|
|
|
17 |
|
Johnnie
Walker
|
|
|
(11 |
) |
|
|
(6 |
) |
|
|
4 |
|
Captain
Morgan
|
|
|
3 |
|
|
|
7 |
|
|
|
29 |
|
Baileys
|
|
|
(10 |
) |
|
|
(9 |
) |
|
|
3 |
|
JεB
|
|
|
(13 |
) |
|
|
(12 |
) |
|
|
- |
|
Jose
Cuervo
|
|
|
2 |
|
|
|
3 |
|
|
|
27 |
|
Tanqueray
|
|
|
(10 |
) |
|
|
(8 |
) |
|
|
12 |
|
Crown
Royal - North America
|
|
|
(1 |
) |
|
|
(1 |
) |
|
|
23 |
|
Buchanan’s
- International
|
|
|
(15 |
) |
|
|
2 |
|
|
|
18 |
|
Windsor
- Asia Pacific
|
|
|
3 |
|
|
|
22 |
|
|
|
17 |
|
Guinness
|
|
|
(3 |
) |
|
|
4 |
|
|
|
16 |
|
|
|
|
(5 |
) |
|
|
(1 |
) |
|
|
13 |
|
Volume
movement is both reported and organic. Spirits brand performance excludes ready
to drink
Smirnoff
vodka: strong net sales growth in North America, International and Australia
offset weakness in Europe. The performance of Smirnoff Black in all its markets
along with price increases which were taken in the majority of markets delivered
4 percentage points of price/mix.
Johnnie
Walker: the global economic environment had a significant impact on Johnnie
Walker as it is the most global premium drinks brand. De-stocking, the reduction
in travel which led to a decline in sales through travel retail outlets and a
reduction in business entertaining and consumption in traditional on-trade
outlets in Asia Pacific have led to a reduction in net sales.
Captain
Morgan: strong performance mainly driven by share gains in North America which
accounts for almost 90% of net sales. The successful introduction of the brand
into markets in Europe and International has continued. Innovation
with the launch of Captain Morgan 100 in North America, together with price
increases drove overall price/mix improvement.
Baileys:
weakness in Spain and de-stocking in many markets was partially offset by growth
in Great Britain.
JεB: the weakness of
the Spanish scotch category was the primary driver of the decline in JεB.
Jose
Cuervo: share gains on Jose Cuervo Gold plus a successful launch of Jose Cuervo
Silver in North America led to volume and net sales growth.
Tanqueray:
weakness in North America drove overall performance although the brand grew in
Europe and Asia Pacific.
Crown
Royal: volume reduction on the higher priced Reserve and Cask 16
variants led to a small decline in volume and net sales despite growth in Crown
Royal.
Buchanan’s:
growth in the key markets of Venezuela, Mexico and Colombia was offset by the
decline in the Caribbean and other Latin American markets. The brand continued
to grow in North America and gained share. Price increases drove net
sales growth.
Windsor:
growth in Korea following the return to Diageo’s normal route to market. The
brand’s share grew in Korea benefiting from a bottle re-design and also grew in
China following its recent launch.
Guinness:
strong growth in Africa with net sales up 18%. Its performance in Asia Pacific
continued to improve and sales stabilised in Ireland. Out-performance in the
declining Great Britain beer category delivered further share gains in that
market.
Category
summary
|
|
Organic
volume
movement
%
|
|
|
Organic
net sales
movement
%
|
|
|
Reported
volume
movement
%
|
|
|
Reported
net sales
movement
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global
priority brands
|
|
|
(5 |
) |
|
|
(2 |
) |
|
|
(5 |
) |
|
|
11 |
|
Local
priority brands
|
|
|
(1 |
) |
|
|
1 |
|
|
|
5 |
|
|
|
24 |
|
Category
brands
|
|
|
(2 |
) |
|
|
4 |
|
|
|
(1 |
) |
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spirits
|
|
|
(4 |
) |
|
|
- |
|
|
|
(3 |
) |
|
|
16 |
|
Beer
|
|
|
- |
|
|
|
5 |
|
|
|
- |
|
|
|
16 |
|
Wine
|
|
|
1 |
|
|
|
(5 |
) |
|
|
2 |
|
|
|
12 |
|
Ready
to drink
|
|
|
(11 |
) |
|
|
(8 |
) |
|
|
(11 |
) |
|
|
5 |
|
Ketel One
vodka and Rosenblum Cellars wine are included in local priority brands in North
America and in category brands in other regions while Zacapa rum is reported in
category brands globally. Spirits brand performance excludes ready to
drink.
Spirits:
Vodka net sales up 8% and rum net sales up 6% were the strongest categories in
spirits. Scotch net sales declined 3% mainly as a result of de-stocking. The
liqueurs category was weak as a result of de-stocking and declining consumer
demand and net sales declined by 9%.
Beer: The
strong performance of Diageo's beer brands in Africa was the key driver of the
overall performance of beer. There was continued growth in Asia Pacific and
while beer net sales declined in Ireland by 4% and in Great Britain by 1%, this
performance was significantly stronger than that of the beer category in both
countries.
Wine: The
weakness of the higher priced wine segment in the US was the biggest contributor
to the 5% overall decline in wine as the US accounts for over half of Diageo's
total wine net sales. In contrast wine performed strongly in Great Britain and
net sales grew 6%.
Ready to
drink: The 2008 excise duty increase on ready to drink products in Australia
drove much of the weakness in performance. While in International the
segment continued to grow strongly, the planned de-stock of ready to drink
brands in the US, together with weakness in the segment there and in Europe,
contributed to the overall decline.
Exchange rate movements for
year ending 30 June 2010
For the
year ending 30 June 2010 at current exchange rates (US$/£1.65, €/£1.15) foreign
exchange movements (excluding the exchange impacts of IAS 21 and IAS 39) are
estimated to increase operating profit by £80 million and decrease the interest
charge by £10 million.
Taxation
For the
year ended 30 June 2009 the reported tax rate was 14.5%. The
underlying tax rate was 22.2%. In the year ending 30 June 2010 the
underlying tax rate is expected to remain at approximately 22% and the cash tax
rate is expected to improve to 20%.
Corporate
Diageo
undertakes the majority of its currency transaction hedging centrally and
therefore £86 million of negative year on year transaction impact was taken to
corporate. In addition there was a negative year on year translation impact of
£8 million in corporate. The regions are reported using forecast transaction
exchange rates with the difference between forecast and achieved rates being
included in corporate. This amounted to a benefit of £38 million in the year.
There was a £12 million reduction in underlying corporate net
costs.
Post employment
liabilities
The
deficit before taxation in respect of post employment plans increased by £975
million from £408 million at 30 June 2008 to £1,383 million at 30 June 2009. In
the year ended 30 June 2009, finance income under IAS 19 in respect of post
employment plans was £2 million. In the year ending 30 June 2010, the
finance charge under IAS 19 is expected to be £48 million. Since the last
actuarial valuation Diageo has made three annual cash payments of £50 million to
an escrow account in respect of the deficit on the UK scheme. The
transfer of the balance on the escrow account to the UK pension scheme will
reduce the deficit. The company will now hold discussions with the Pension
Funds’ trustees as to future funding plans, however, annual cash contributions
are not expected to increase significantly.
Management
reports
The
Annual Report for the year ended 30 June 2009, which will be published on 15
September 2009, will comprise the Annual Financial Report which Diageo is
required to publish under the Disclosure and Transparency Rules of the United
Kingdom’s Financial Services Authority for the financial year which began on 1
July 2008. Diageo will issue the first interim management statement
for the year ending 30 June 2010 at the time of the AGM on 14 October
2009.
BUSINESS
REVIEW
For
the year ended 30 June 2009
OPERATING
REVIEW – analysis by business area
North
America
Summary:
·
|
Despite
the difficult economic environment, North America delivered net sales
growth.
|
·
|
Total
spirits volume grew 1% with 3 percentage points of price/mix. Smirnoff
vodka, Captain Morgan and Jose Cuervo positioned in the more resilient
premium segment contributed most to net sales
growth.
|
·
|
Vodka
remained the largest and most resilient of the major categories in the
United States. Diageo out-performed the category as a whole, growing net
sales 16% led by Smirnoff in the premium segment and Cîroc and Ketel One
at higher price points.
|
·
|
Stock
levels of beer and malt based ready to drink brands were reduced adversely
impacting mix.
|
·
|
Stock
levels of spirits have reduced across the supply
chain.
|
·
|
Innovation
launches contributed significantly to overall performance as the focus on
premium spirits line extensions and pre-mixed cocktails capitalised on
consumer shifts.
|
·
|
Ketel
One vodka performed ahead of
expectations.
|
·
|
Marketing
spend decreased as a result of media efficiencies and a refocus away from
beer and ready to drink, however Diageo’s share of voice in spirits
improved.
|
·
|
Net
sales growth of 7% in Canada was led by strong performances of Captain
Morgan rum of 19% and Smirnoff vodka of
10%.
|
Key measures:
|
|
2009
|
|
|
2008
|
|
|
Organic
movement
|
|
|
Reported
movement
|
|
|
|
£ million
|
|
|
£ million
|
|
|
%
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume
|
|
|
|
|
|
|
|
|
- |
|
|
|
4 |
|
Net
sales
|
|
|
3,290 |
|
|
|
2,523 |
|
|
|
1 |
|
|
|
30 |
|
Marketing
spend
|
|
|
429 |
|
|
|
366 |
|
|
|
(9 |
) |
|
|
17 |
|
Operating
profit before exceptional items
|
|
|
1,156 |
|
|
|
907 |
|
|
|
- |
|
|
|
27 |
|
Reported
performance:
Net sales
increased by £767 million in the year ended 30 June 2009 to £3,290 million, from
£2,523 million in the prior year. Reported operating profit before exceptional
items increased by £249 million in the year ended 30 June 2009 to £1,156
million, from £907 million in the prior year.
Organic
performance:
The
weighted average exchange rate used to translate US dollar sales and profit
moved from £1 = $2.01 in the year ended 30 June 2008 to £1 = $1.60 in the year
ended 30 June 2009. Exchange rate impacts increased net sales by £602
million, acquisitions increased net sales by £142 million and there was an
organic increase in net sales of £23 million. Exchange rate impacts increased
operating profit by £206 million, acquisitions increased operating profit by £45
million and there was an organic decrease in operating profit of £2
million.
Brand
performance:
|
|
Organic
volume
movement
|
|
|
Organic
net
sales
movement
|
|
|
Reported
volume
movement
|
|
|
Reported
net
sales
movement
|
|
|
|
%
|
|
|
%
|
|
|
%
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global
priority brands
|
|
|
(2 |
) |
|
|
(2 |
) |
|
|
(2 |
) |
|
|
22 |
|
Local
priority brands*
|
|
|
1 |
|
|
|
- |
|
|
|
19 |
|
|
|
47 |
|
Category
brands*
|
|
|
6 |
|
|
|
11 |
|
|
|
6 |
|
|
|
36 |
|
Total
|
|
|
- |
|
|
|
1 |
|
|
|
4 |
|
|
|
30 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key
spirits brands:**
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Smirnoff
|
|
|
1 |
|
|
|
6 |
|
|
|
1 |
|
|
|
30 |
|
Johnnie
Walker
|
|
|
(6 |
) |
|
|
(8 |
) |
|
|
(6 |
) |
|
|
14 |
|
Captain
Morgan
|
|
|
3 |
|
|
|
7 |
|
|
|
3 |
|
|
|
32 |
|
Baileys
|
|
|
(5 |
) |
|
|
(5 |
) |
|
|
(5 |
) |
|
|
16 |
|
Jose
Cuervo
|
|
|
3 |
|
|
|
4 |
|
|
|
3 |
|
|
|
30 |
|
Tanqueray
|
|
|
(12 |
) |
|
|
(12 |
) |
|
|
(12 |
) |
|
|
10 |
|
Crown
Royal
|
|
|
(1 |
) |
|
|
(1 |
) |
|
|
(1 |
) |
|
|
23 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guinness
|
|
|
(11 |
) |
|
|
(6 |
) |
|
|
(11 |
) |
|
|
15 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ready
to drink
|
|
|
(10 |
) |
|
|
(8 |
) |
|
|
(10 |
) |
|
|
14 |
|
*
|
Brand
additions in the year ended 30 June 2008 Ketel One vodka and Rosenblum
Cellars wine are included in local priority brands while Zacapa
rum is included in category
brands.
|
**
|
Spirits
brands excluding ready to drink.
|
Despite
the economic climate, the total beverage alcohol market in North America grew in
both volume and value. Within spirits, there has been a trend for consumers to
trade out of the super and ultra premium segments and down to lower price
segments; however the premium segment, where Diageo is most represented, has
proved the most resilient and has gained share of the overall spirits category.
As consumer demand slowed stock levels reduced in aggregate across the whole
supply chain. Spirits stocks with distributors at the end of June 2009 were
higher when compared to June 2008, although there has been a significant
reduction in absolute levels since December. Stock levels held by
retailers are down year on year. The planned beer and ready to drink stock
reduction was completed successfully resulting in net sales declines of 6% in
beer and 8% in ready to drink. The slowdown of the wine category, especially at
price points above $25 per bottle has led to a decline in Diageo wine net sales
of 7%. Overall price/mix of 1 percentage point was achieved by strong price
increases in the first half on premium brands partially offset by negative mix
driven by volume declines in the higher net sales per case scotch category and
ready to drink segment.
Smirnoff
vodka grew as a result of higher marketing spend and price increases on Smirnoff
Red. Marketing spend increased 2% behind core growth drivers reinforcing the
quality message combined with investment behind innovation launches on the
Smirnoff Flavours range.
Johnnie
Walker was impacted by the economic climate that led to the total scotch
category declining 3% in value with weaker performance in the deluxe segment.
Johnnie Walker Red Label net sales declined 2% and Black Label declined 7% but
both gained share of their segments while maintaining price premiums. In the
super deluxe segment, Johnnie Walker Blue Label experienced double digit
declines and marketing spend was re-directed towards Johnnie Walker Black Label.
Investment behind the ‘Strides’ marketing campaign and driving loyalty through
relationship marketing have led to strong improvements across key brand equity
measures.
Captain
Morgan had a strong year, delivering volume and net sales growth and share
gains. Four percentage points of positive price/mix was delivered through price
increases on Original Spiced Rum and the launch of the higher priced Captain
Morgan 100. Increased marketing spend behind the ‘Got a little Captain in you’
television campaign led to share gains in the rum category and improved brand
equity scores.
The
liqueur category has been among the hardest hit in the current economic
environment and Baileys net sales declined but share was maintained. The decline
of Original Irish Cream was partially offset by the successful launch of Baileys
with a hint of Coffee.
Jose
Cuervo grew volume 3% and net sales 4%. Share gains on Jose Cuervo Gold driven
by an increase in distribution points and the launch of Jose Cuervo Silver more
than offset weakness in the on-trade.
Tanqueray
net sales declined 12% in line with volumes as price increases on the core
London Dry variant were offset by faster declines on the higher priced variants
Tanqueray No.10 and Rangpur. Marketing investment was reduced as spend was
re-directed to fund proven growth drivers on other brands.
Crown
Royal volume and net sales declined 1%. Positive net sales growth on the core
variant was more than offset by the poor economic conditions impacting the
higher priced Reserve and Cask 16 variants. Crown Royal in Canada
under-performed the United States, as price increases were not followed by the
competition leading to price gaps at retail that impacted volume.
Guinness
net sales declined 6% as a result of three factors: the planned stock reduction,
consumers trading out of the higher priced imported beer segment and into
domestic beer, and overall weakness in the on-trade which particularly impacted
keg volume. Price increases on both keg and packaged Guinness contributed 5
percentage points of price/mix.
Local
priority brands grew volume 1% and held net sales flat driven by the organic
contribution of Ketel One vodka and sales of Seagram’s 7. This was offset by the
decline in US wines, in particular on Chalone wines, as consumers traded down
from higher price points. To offset this, Diageo wines increased promotional
activity in the second half and launched a number of new products at
price-points of $10 and below.
Category
brand volume grew 6% and net sales grew 11% reflecting the opportunities
presented by Diageo’s broad brand range. Cîroc vodka continued its strong growth
trajectory, as a result of the combination of Diageo, Sean Combs and the brand
itself, and grew volume 137% and net sales 159%. At the other end of the pricing
spectrum and capitalising on the consumer shift towards value brands were
Gordon’s gin with net sales up 9%, Gordon’s vodka up 11% and Popov vodka up
14%.
Ready to
drink net sales declined 8% as a result of segment decline and the planned stock
reduction. Diageo continued to innovate in this segment with the launch of
several new Smirnoff Ice flavours and a range of ready to serve Smirnoff
Cocktails, reflecting the trend for increased at-home consumption.
Marketing
spend for the year decreased 9% due to a reduction of investment behind those
brands and segments most impacted by the current economic climate and media rate
deflation. While investment behind ready to drink, beer and Tanqueray decreased,
proven growth drivers elsewhere in the brand range were fully supported, in
particular on Captain Morgan, Cîroc vodka and innovation launches. Overall,
Diageo’s share of voice of total spirits advertising spend increased 4
percentage points.
Canada
has also been affected by the global economic slowdown but it has not
experienced contractions on the scale of the United States. Price increases on
core spirits together with increased marketing spend behind Smirnoff and Captain
Morgan delivered 7% net sales growth.
Gross
margin was adversely affected by input cost increases, the negative mix effect
of consumers trading down within brands and the volume decline of higher gross
margin segments and categories such as ready to drink, scotch and
liqueurs. Price increases on core variants taken in the first half
plus reductions in overall marketing spend combined to deliver constant
operating profit for the year.
Europe
Summary:
·
|
The
region was severely impacted by the economic downturn, with conditions in
Spain and Ireland deteriorating
significantly.
|
·
|
Great
Britain out-performed a declining total beverage alcohol market, growing
net sales despite the difficult trading
environment.
|
·
|
Russia
net sales grew 1% following a strong first half although the worsening
economic conditions in the second half led to consumers trading down,
driving negative mix. In response to this trend, smaller bottle sizes at
lower price points were introduced.
|
·
|
In
a declining beer category, Guinness performed well with flat net sales
across the region and grew share in the on-trade in Great Britain and
Ireland supported by the 250th
Anniversary and ‘Alive Inside’
campaigns.
|
Key
measures:
|
|
2009
|
|
|
2008
|
|
|
Organic
movement
|
|
|
Reported
movement
|
|
|
|
£
million
|
|
|
£
million
|
|
|
%
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume
|
|
|
|
|
|
|
|
|
(6 |
) |
|
|
(6 |
) |
Net
sales
|
|
|
2,750 |
|
|
|
2,630 |
|
|
|
(5 |
) |
|
|
5 |
|
Marketing
spend
|
|
|
419 |
|
|
|
438 |
|
|
|
(14 |
) |
|
|
(4 |
) |
Operating
profit before exceptional items
|
|
|
856 |
|
|
|
798 |
|
|
|
(1 |
) |
|
|
7 |
|
Reported
performance:
Net sales
increased by £120 million in the year ended 30 June 2009 to £2,750 million, from
£2,630 million in the prior year. Reported operating profit before exceptional
items increased by £58 million in the year ended 30 June 2009 to £856 million,
from £798 million in the prior year.
Organic
performance:
The
weighted average exchange rate used to translate euro sales and profit moved
from £1 = €1.36 in the year ended 30 June 2008 to £1 = €1.17 in the year ended
30 June 2009. Exchange rate impacts increased net sales by £260 million,
acquisitions increased net sales by £6 million and there was an organic decrease
in net sales of £146 million. Exchange rate impacts increased operating profit
by £66 million, acquisitions decreased operating profit by £2 million and there
was an organic decrease in operating profit of £6 million.
Brand performance:
|
|
Organic
volume
movement
|
|
|
Organic
net sales
movement
|
|
|
Reported
volume
movement
|
|
|
Reported
net sales
movement
|
|
|
|
%
|
|
|
%
|
|
|
%
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global
priority brands
|
|
|
(8 |
) |
|
|
(6 |
) |
|
|
(8 |
) |
|
|
4 |
|
Local
priority brands
|
|
|
(6 |
) |
|
|
(6 |
) |
|
|
(6 |
) |
|
|
4 |
|
Category
brands*
|
|
|
(1 |
) |
|
|
(2 |
) |
|
|
(1 |
) |
|
|
8 |
|
Total
|
|
|
(6 |
) |
|
|
(5 |
) |
|
|
(6 |
) |
|
|
5 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key
spirits brands:**
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Smirnoff
|
|
|
(8 |
) |
|
|
(6 |
) |
|
|
(8 |
) |
|
|
- |
|
Johnnie
Walker
|
|
|
(5 |
) |
|
|
(4 |
) |
|
|
(5 |
) |
|
|
7 |
|
Baileys
|
|
|
(9 |
) |
|
|
(10 |
) |
|
|
(9 |
) |
|
|
- |
|
JεB
|
|
|
(13 |
) |
|
|
(13 |
) |
|
|
(13 |
) |
|
|
- |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guinness
|
|
|
(6 |
) |
|
|
- |
|
|
|
(6 |
) |
|
|
8 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ready
to drink
|
|
|
(17 |
) |
|
|
(11 |
) |
|
|
(17 |
) |
|
|
(2 |
) |
* Brand
additions in the year ended 30 June 2008 Ketel One vodka, Rosenblum Cellars wine
and Zacapa rum are included in category
brands.
** Spirits
brands excluding ready to drink.
In Great
Britain net sales were up 2% driven by strong spirits and wine performance and
Diageo gained share of beer in the on-trade and of spirits and wine in the
off-trade. Bell’s and Baileys performed strongly with both brands gaining share
in the on-trade and off-trade following a robust Christmas. Smirnoff vodka net
sales declined 3% as the brand came under increased pressure from heavily
promoted competitor brands.
The
performance in Ireland was impacted by the continued decline of the total
beverage alcohol market where volume declined by 4% and value by 3%. Against
this, Guinness net sales were flat as Diageo maintained investment behind the
brand with the 250th
Anniversary and the ‘Alive inside’ campaigns. For the second consecutive year
Guinness grew share in the key Republic of Ireland and Northern Ireland on-trade
channels.
In Spain
volume was down 21% and net sales were down 20% in line with market trends
following the steep decline in the economy from mid-November onwards. Rising
unemployment, lower consumer confidence and spending power reduced demand across
consumer categories and led to a shift from on-trade to off-trade impacting
spirits consumption. Significant de-stocking occurred as limited credit
availability in the market led to some wholesalers being unable to fund their
stock.
In Russia
volume was up 2% and net sales were up 1% following a strong first half
performance. Johnnie Walker remained the key brand and accounted for almost 50%
of net sales. Price/mix was down 1 percentage point as consumers traded down
from deluxe to standard scotch and both Johnnie Walker Red Label and White Horse
grew share. In many markets in Eastern Europe Diageo’s key brands gained
share.
Smirnoff
vodka net sales were down 6% with declines in Great Britain and Spain partially
offset by net sales growth in Continental Europe. Smirnoff continued to be the
number one premium spirit in Great Britain and grew share in
Ireland.
Johnnie
Walker net sales decreased by 4% mainly driven by the performance in Spain and
Russia. The brand continued to perform well in Greece where Johnnie
Walker Black Label grew net sales by 14% following the successful launch of the
anniversary pack supported by the ‘Strides’ and ‘Crossroads’ campaigns. The
brand benefited from price increases in all markets leading to positive
price/mix in the region.
Baileys
net sales were down 10%. The overall decline of the brand was mainly due to
performance in Iberia, where net sales declined in line with the category. In
Great Britain both Baileys Original and the Baileys Flavours variants grew
volume and net sales with positive price/mix following the successful launch of
Baileys Coffee.
JεB volume and net
sales were down 13%, principally due to performance in Iberia where the economic
environment has driven a significant decline in consumption and customer stock
levels.
In Great
Britain Guinness has now delivered 30 consecutive months of volume share growth
in the on-trade and therefore despite the difficult on-trade beer segment, net
sales of Guinness declined only 1%. In the second half net sales were flat,
while the beer market continued to decline driven by the switch from on-trade to
off-trade and the increase in beer duty. This share gain was driven by the
execution of a new strategy to focus on less frequent purchasers, investment
behind the 250th Anniversary and the ‘17:59’ and ‘Alive inside’ campaigns. In
Ireland net sales were also flat and Guinness grew share in key on-trade
channels.
Local
priority brand net sales were down 6% driven by Cacique and Cardhu in Iberia and
the agency beer brands in Ireland partially offset by Harp, which benefited from
the continued rollout of Harp Ice Cold. Bell’s had good net sales and
volume growth in Great Britain, driven by the launch of Bell’s Original
supported by a marketing programme called ‘The Spirit of Arthur Bell’ which
included television, newspaper and direct mail advertising.
Category
brand volume was down 1% and net sales were down 2% with declines in most
markets offset by growth in Blossom Hill in Great Britain and growth of White
Horse scotch in Russia.
Ready to
drink volume was down 17% as the segment continued to
decline. Smirnoff Ice volume was down 20% in Great Britain although
the brand grew share in the on-trade.
Marketing
spend was down 14% across the region particularly driven by Spain and Ireland,
countries where the economic conditions were harder and the beverage alcohol
consumption declined more significantly.
International
Summary:
·
|
Volume
growth in Africa and price increases in both Africa and Latin America
drove net sales growth of 7%.
|
·
|
Volume
and net sales growth in Venezuela, Mexico and Brazil, the three largest
markets in Latin America offset declines in the duty free channel in Latin
America and in the Caribbean.
|
·
|
Strong
growth in beer with volume up 5% and net sales up
17%.
|
·
|
Pressure
on the Global Travel business due to declining passenger numbers and
customer de-stocking.
|
·
|
Marketing spend efficiencies in
Latin America and the transition of spend on ready to drink, cider and
beer brands into the new South Africa joint venture offset increases on
beer and ready to drink elsewhere in
Africa.
|
Key measures:
|
|
2009
|
|
|
2008
|
|
|
Organic
movement
|
|
|
Reported
movement
|
|
|
|
£ million
|
|
|
£ million
|
|
|
%
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume
|
|
|
|
|
|
|
|
|
(4 |
) |
|
|
(4 |
) |
Net
sales
|
|
|
2,286 |
|
|
|
1,971 |
|
|
|
7 |
|
|
|
16 |
|
Marketing
spend
|
|
|
256 |
|
|
|
244 |
|
|
|
(3 |
) |
|
|
5 |
|
Operating
profit before exceptional items
|
|
|
645 |
|
|
|
593 |
|
|
|
10 |
|
|
|
9 |
|
Reported
performance:
Net sales
increased by £315 million in the year ended 30 June 2009 to £2,286 million, from
£1,971 million in the prior year. Reported operating profit before
exceptional items increased by £52 million in the year ended 30 June 2009 to
£645 million, from £593 million in the prior year.
Organic
performance:
Exchange
rate impacts increased net sales by £156 million, acquisitions increased net
sales by £2 million and there was an organic increase in net sales of £157
million. Exchange rate impacts decreased operating profit by £5 million and
there was an organic increase in operating profit of £57 million.
Brand performance:
|
|
Organic
volume
movement
|
|
|
Organic
net sales
movement
|
|
|
Reported
volume
movement
|
|
|
Reported
net sales
movement
|
|
|
|
%
|
|
|
%
|
|
|
%
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global
priority brands
|
|
|
(5 |
) |
|
|
5 |
|
|
|
(5 |
) |
|
|
12 |
|
Local
priority brands
|
|
|
- |
|
|
|
9 |
|
|
|
- |
|
|
|
20 |
|
Category
brands*
|
|
|
(5 |
) |
|
|
11 |
|
|
|
(5 |
) |
|
|
20 |
|
Total
|
|
|
(4 |
) |
|
|
7 |
|
|
|
(4 |
) |
|
|
16 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key
spirits brands:**
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Smirnoff
|
|
|
- |
|
|
|
9 |
|
|
|
- |
|
|
|
17 |
|
Johnnie
Walker
|
|
|
(12 |
) |
|
|
(3 |
) |
|
|
(12 |
) |
|
|
2 |
|
Baileys
|
|
|
(16 |
) |
|
|
(11 |
) |
|
|
(16 |
) |
|
|
(5 |
) |
Buchanan’s
|
|
|
(15 |
) |
|
|
2 |
|
|
|
(15 |
) |
|
|
18 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guinness
|
|
|
2 |
|
|
|
15 |
|
|
|
2 |
|
|
|
28 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ready
to drink
|
|
|
6 |
|
|
|
13 |
|
|
|
6 |
|
|
|
23 |
|
*
|
Brand
additions in the year ended 30 June 2008 Ketel One vodka, Rosenblum
Cellars wine and Zacapa rum are included in category
brands.
|
**
|
Spirits
brands excluding ready to drink.
|
Continued
strong performance in Africa and net sales growth in Latin America drove
International performance as Global Travel was impacted by the global economic
weakness.
In
International 70% of scotch net sales are in Latin America where significant
price increases were taken in the first half to offset the impact of major
devaluations of local currencies. The strengthening of the US dollar
particularly impacted the US dollar priced duty free business in the region. In
the second half a number of these currencies have strengthened easing volume
pressure, and prices have been moderated in line with the currency movement. In
Venezuela, Mexico and Brazil volume and net sales grew with strong performances
of Buchanan’s, Johnnie Walker and Smirnoff ready to drink.
Similarly
Africa accounts for 90% of beer net sales in the region and performed strongly
driven by Guinness, local beer brands and a strong innovation
pipeline. Although growth slowed in the second half of the year as
the region started to be impacted by the global economic downturn, volume was up
2% and net sales grew 16%.
Global
Travel continued to be impacted as global economic weakness led to a decline in
passenger numbers and de-stocking in travel retail. Lower volume in
the super deluxe segment led to negative mix. In the Middle East,
volume grew 3% and net sales grew 6% primarily from the growth in standard
scotch.
Smirnoff
vodka volume was flat and net sales were up 9%. Volume performance was driven by
growth in Brazil and South Africa offset by declines in the Global Travel and
Middle East business and the Caribbean. Net sales growth was driven by price
increases in Brazil and South Africa.
Johnnie
Walker volume declined by 12% and net sales by 3%. Johnnie Walker Red Label grew
net sales following strong growth in Mexico while Johnnie Walker Black Label net
sales were flat. Super deluxe variants net sales declined as growth in Latin
America, Africa and the Middle East was offset by declines in Global
Travel.
Baileys
net sales declined 11% as growth in Venezuela and Africa was offset by the
slowdown in the duty free channel.
Buchanan’s
net sales grew by 2% with strong volume and net sales growth in Venezuela, the
brand’s biggest market with net sales up 24% and in Mexico where net sales were
up 28%. Volume and net sales saw declines in the duty free channel in Latin
America as a result of de-stocking and credit and currency issues impacted
performance.
Guinness
volume was up 2% and net sales grew 15% driven by the continued performance of
the brand in Africa where volume was up 4% and net sales up 18%. Strong
double-digit net sales growth was achieved in Nigeria, Ghana and East Africa
supported by on-trade promotion around English Premier League
football.
Local
priority brands net sales grew 9% with consistent performance across many
markets. There was 7% volume and 15% net sales growth in Africa, notably from
Malta Guinness in Nigeria, Pilsner and Tusker in East Africa and Bell’s in South
Africa. Price increases across the region offset the impact of the volume
decline on scotch in Latin America.
Category
brand net sales were up 11% primarily as a result of Harp in Nigeria, Cacique in
Venezuela, Senator in East Africa and Star in Ghana.
Ready to
drink volume increased by 6% and net sales grew 13% on price increases on
Smirnoff ready to drink brands in most markets and volume gains in Latin
America, especially Brazil, and in Nigeria. Volume growth in Brazil, Nigeria and
Cameroon offset a volume decrease in South Africa where the ready to drink
segment declined compared to the prior year.
In a
tough trading environment East Africa grew net sales 6%. Excise duty increases
on non-malted beer led to declining volumes of Allsopps and Citizen though
overall beer volumes were up driven by Guinness, Tusker and Senator. Further
excise duty increases negatively impacted the spirits category with total
spirits net sales declining 8%.
Nigeria
had a strong performance with volume up 22% and net sales up 30% driven by
Guinness, Malta Guinness and Harp which all took price increases in the period.
Smirnoff Ice performed well with volume up over 50% while Malta Guinness
continued to benefit from the bottle relaunch in 2008.
South
Africa’s global and local priority brands grew whilst category brands declined
as a result of the focus on driving value in scotch. Smirnoff vodka drove global
priority brand growth while growth in local priority brands was driven by
Bell’s, which grew share and maintained its position as the number one scotch in
South Africa.
Ghana
faced a challenging year as a result of the economic environment and water
shortages in the first half which led to constrained production and a full year
volume decline of 6%. Strong pricing led to net sales growth of 24% as price
increases were taken to cover off the increase in cost of goods arising as a
result of the devaluation of the Cedi.
Cameroon
performed well with volume up 17% and net sales up 19%. Volume performance was
driven by Guinness, Saltzenbrau and the successful launch of Smirnoff Ice in
November. Net sales grew two percentage points ahead of volume as price
increases on Guinness offset the small price decrease on Malta Quench, which
brought it in line with competitor brands.
In Mexico
strong volume and net sales growth of Johnnie Walker and Buchanan’s drove
overall scotch net sales up 38% and maintained Diageo’s leadership position in
the scotch category.
In
Paraguay, Uruguay and Brazil volume declines in scotch were partially offset by
growth in Smirnoff vodka while net sales grew as price increases, particularly
on scotch brands were made in the individual markets. Positive channel mix with
stronger volumes from the higher value Brazil domestic channel helped to grow
the top line.
Strong
performance of deluxe and super deluxe scotch along with Cacique growth ahead of
the rum category drove volume and net sales growth in Venezuela. Johnnie Walker,
Buchanan’s and Old Parr all grew net sales by double digits as price increases
were put through in line with Diageo’s scotch strategy.
Marketing
spend in the region declined by 3% as increased spend in Nigeria and Cameroon
was offset by efficiencies in Latin America and the transfer of ready to drink,
cider and beer brand spend to the new South African joint venture.
Asia
Pacific
Summary:
|
·
|
Net
sales declines were primarily driven by the impact of the excise duty
increase on ready to drink products in
Australia.
|
|
·
|
Declining
consumer confidence and supply chain inventory reductions have impacted
performance particularly in China and South East
Asia.
|
|
·
|
Top
and bottom line growth in Korea and share gains for Windsor following the
return to in-market company
distribution.
|
|
·
|
Price/mix
benefit of 7 percentage points came from the return to in-market
distribution in Korea and strong price increases on scotch brands offset
by negative product mix from lower volume in the higher net sales per case
ready to drink segment.
|
|
·
|
Marketing
spend decreased 5% although investment behind spirits grew 7% reflecting
the importance of this category to future growth of the
region.
|
Key measures:
|
|
2009
|
|
|
2008
|
|
|
Organic
movement
|
|
|
Reported
movement
|
|
|
|
£
million
|
|
|
£
million
|
|
|
%
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Volume
|
|
|
|
|
|
|
|
|
(11 |
) |
|
|
(11 |
) |
Net
sales
|
|
|
910 |
|
|
|
877 |
|
|
|
(4 |
) |
|
|
4 |
|
Marketing
spend
|
|
|
208 |
|
|
|
191 |
|
|
|
(5 |
) |
|
|
9 |
|
Operating
profit before exceptional items
|
|
|
164 |
|
|
|
170 |
|
|
|
- |
|
|
|
(4 |
) |
Reported
performance:
Net sales
increased by £33 million in the year ended 30 June 2009 to £910 million, from
£877 million in the prior year. Reported operating profit before
exceptional items decreased by £6 million in the year ended 30 June 2009 to £164
million, from £170 million in the prior year.
Organic
performance:
Exchange
rate impacts increased net sales by £74 million, acquisitions increased net
sales by £1 million and there was an organic decrease in net sales of £42
million. Exchange rate impacts decreased operating profit by £6
million and there was no organic movement in operating profit.
Brand performance:
|
|
Organic
volume
movement
|
|
|
Organic
net sales
movement
|
|
|
Reported
volume
movement
|
|
|
Reported
net sales
movement
|
|
|
|
%
|
|
|
%
|
|
|
%
|
|
|
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Global
priority brands
|
|
|
(14 |
) |
|
|
(8 |
) |
|
|
(14 |
) |
|
|
2 |
|
Local
priority brands
|
|
|
(1 |
) |
|
|
8 |
|
|
|
(1 |
) |
|
|
8 |
|
Category
brands*
|
|
|
(10 |
) |
|
|
(8 |
) |
|
|
(10 |
) |
|
|
3 |
|
Total
|
|
|
(11 |
) |
|
|
(4 |
) |
|
|
(11 |
) |
|
|
4 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Key
spirits brands: **
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Smirnoff
|
|
|
1 |
|
|
|
13 |
|
|
|
1 |
|
|
|
24 |
|
Johnnie
Walker
|
|
|
(20 |
) |
|
|
(12 |
) |
|
|
(20 |
) |
|
|
(1 |
) |
Bundaberg
rum
|
|
|
17 |
|
|
|
29 |
|
|
|
17 |
|
|
|
34 |
|
Windsor
|
|
|
3 |
|
|
|
22 |
|
|
|
3 |
|
|
|
17 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Guinness
|
|
|
5 |
|
|
|
6 |
|
|
|
5 |
|
|
|
20 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ready
to drink
|
|
|
(26 |
) |
|
|
(22 |
) |
|
|
(26 |
) |
|
|
(17 |
) |
*
|
Brand
additions in the year ended 30 June 2008 Ketel One vodka,
Rosenblum Cellars wine and Zacapa rum are included in category
brands.
|
**
|
Spirits
brands excluding ready to drink.
|
Smirnoff
vodka grew volume 1% and net sales 13% in the region led by a strong performance
from Australia, which grew volume 12% and net sales 38%. Strong price/mix was
delivered by price increases taken in the first half combined with positive mix
from the strong volume growth of the higher priced Smirnoff Black variant due to
the successful ‘Bond’ activation.
Johnnie
Walker performance across the region was heavily impacted by the economic
slowdown, which impacted consumer confidence and led to weakness in the on-trade
and supply chain inventory reductions in key markets. Within the variants,
Johnnie Walker Red Label performed well in the standard segment with net sales
down 6% and grew share in its largest markets of Thailand and Australia. Johnnie
Walker Black Label and super deluxe were down 13% as they were
disproportionately affected by the weakness of the traditional on-trade in key
markets such as China and South East Asia. The successful launch of Johnnie
Walker Gold Label Reserve across the region provided a new premium offering for
the brand and partially mitigated declines in the super deluxe
segment.
Bundaberg
rum in Australia benefited from consumers trading out of the ready to drink
segment but remaining loyal to the brand, and delivered 17% volume growth. Price
increases implemented in the first half taken together with the successful
launch of the premium priced Bundaberg Red combined to deliver 12 percentage
points of price/mix and share gains.
Windsor
continued to grow share in its largest market of Korea, more than offsetting the
scotch category decline and also benefited from the return of in-market
distribution to deliver net sales growth of 23% in Korea. Price increases on the
main 12 and 17 year-old variants plus the introduction of a new bottle design
led to Windsor ending the year as the clear number one scotch brand in Korea
having gained 5 percentage points of share.
Guinness
grew net sales 6% as the brand proved resilient in the turbulent economic
environment, growing 11% in its largest market of South East Asia.
Australia
remained the key market for Diageo’s ready to drink brands in Asia
Pacific. A 70% duty increase on spirit-based ready to drink brands
imposed by the Australian government in April 2008 resulted in a decrease of 27%
in volume and 23% in net sales in Australia this year. The impact of this duty
increase was less severe in the final quarter as sales began to lap higher
prices from the last fiscal year.
Local
priority brands, mainly comprised of Windsor in Korea and Bundaberg in
Australia, grew net sales 8%.
Category
brands net sales declined 8% primarily as a result of volume decline in value
scotch brands such as Haig in India and Spey Royal in Thailand in line with
Diageo’s scotch value strategy.
In
Australia net sales declined 10% as the weakness in the ready to drink segment
was partially offset by a 13% net sales increase on spirits. This was
driven by share gains on Bundaberg and Johnnie Walker and a successful
innovation programme on the Bundaberg and Smirnoff
trademarks. Excluding ready to drink, Australia grew net sales
11%.
A full
year of sales through the normal route to market in Korea had a positive effect
on price/mix as volume was down 3% but net sales were up 16% reflecting higher
net sales per case rates than in the comparable period. The two main brands in
Korea, Windsor and Johnnie Walker, both grew volume and net sales, more than
offsetting scotch category declines.
In China,
low consumer confidence levels severely impacted consumption occasions as
consumers reduced purchase frequency, especially in the traditional on-trade
channel which accounts for almost half of the sales of international spirits in
the market. In addition, trade de-stocking at the secondary and tertiary tiers
reduced volumes to wholesalers in the South and East of the country where
Johnnie Walker is strongest. Net sales of brands through the Diageo China
organisation grew strongly albeit from a low base as they derived the majority
of sales through the modern on-trade channel which has been less impacted by the
financial crisis.
In India
net sales declined 3%. Inappropriately high stock levels across many brands at
31 December 2008 were de-stocked in the second half. For the full year the
volume decline in Smirnoff and Haig was only partially offset by growth in
Johnnie Walker, Shark Tooth and VAT 69.
Taiwan
grew net sales 7%. Price increases on Johnnie Walker and the continued success
of The Singleton roll out combined to outperform the 11% volume decline in the
scotch category.
Thailand
saw net sales decline 3% but recorded share gains on Johnnie Walker Red and
Black Labels, Benmore and Smirnoff.
Marketing
spend declined 5% overall as a result of the reduction in spend behind ready to
drink in Australia. However, investment behind spirits increased 7% reflecting
the benefit of the transfer of advertising spend back to the in-market company
in Korea and the importance of this category to future growth.
Corporate
revenue and costs
Net sales
decreased by £14 million in the year ended 30 June 2009 to £75 million, from £89
million in the prior year. Net operating costs before exceptional items
increased by £44 million in the year ended 30 June 2009 to £208 million, from
£164 million in the prior year.
Diageo
undertakes the majority of its currency transaction hedging centrally and
therefore £86 million of negative year on year transaction impact was taken to
corporate. In addition there was a negative year on year translation impact of
£8 million in corporate. The regions are reported using forecast transaction
exchange rates with the difference between forecast and achieved rates being
included in corporate. This amounted to a benefit of £38 million in the year.
There was a £12 million reduction in underlying corporate net
costs.
FINANCIAL
REVIEW
Summary
consolidated income statement
|
|
Year ended
30 June 2009
|
|
|
Year ended
30 June 2008
|
|
|
|
£
million
|
|
|
£
million
|
|
|
|
|
|
|
|
|
Sales
|
|
|
12,283 |
|
|
|
10,643 |
|
Excise
duties
|
|
|
(2,972 |
) |
|
|
(2,553 |
) |
Net
sales
|
|
|
9,311 |
|
|
|
8,090 |
|
Operating
costs
|
|
|
(6,698 |
) |
|
|
(5,786 |
) |
Operating
profit before exceptional items
|
|
|
2,613 |
|
|
|
2,304 |
|
Exceptional
items
|
|
|
(170 |
) |
|
|
(78 |
) |
Operating
profit
|
|
|
2,443 |
|
|
|
2,226 |
|
Sale
of businesses
|
|
|
- |
|
|
|
9 |
|
Net
finance charges
|
|
|
(592 |
) |
|
|
(319 |
) |
Share
of associates’ profits after tax
|
|
|
164 |
|
|
|
177 |
|
Profit
before taxation
|
|
|
2,015 |
|
|
|
2,093 |
|
Taxation
|
|
|
(292 |
) |
|
|
(522 |
) |
Profit
from continuing operations
|
|
|
1,723 |
|
|
|
1,571 |
|
Discontinued
operations
|
|
|
2 |
|
|
|
26 |
|
|
|
|
|
|
|
|
|
|
Profit
for the year
|
|
|
1,725 |
|
|
|
1,597 |
|
|
|
|
|
|
|
|
|
|
Attributable
to:
|
|
|
|
|
|
|
|
|
Equity
shareholders of the parent company
|
|
|
1,621 |
|
|
|
1,521 |
|
Minority
interests
|
|
|
104 |
|
|
|
76 |
|
|
|
|
1,725 |
|
|
|
1,597 |
|
Sales
and net sales
On a
reported basis, sales increased by £1,640 million from £10,643 million in the
year ended 30 June 2008 to £12,283 million in the year ended 30 June 2009. On a
reported basis net sales increased by £1,221 million from £8,090 million in the
year ended 30 June 2008 to £9,311 million in the year ended 30 June 2009.
Exchange rate movements increased reported sales by £1,362 million and reported
net sales by £1,095 million. Acquisitions increased reported sales by £160
million and reported net sales by £151 million.
Operating
costs before exceptional items
On a
reported basis, operating costs before exceptional items increased by £912
million in the year ended 30 June 2009 due to an increase in cost of sales of
£623 million, from £3,245 million to £3,868 million, an increase in marketing
expenses of £73 million, from £1,239 million to £1,312 million, and an increase
in other operating expenses of £216 million, from £1,302 million to £1,518
million. The impact of exchange rate movements increased total operating costs
before exceptional items by £928 million.
Exceptional
items
Exceptional
costs totalling £170 million, being £166 million in respect of the global
restructuring programme and £4 million in respect of the restructuring of Irish
brewing operations are included within operating costs for the year ended 30
June 2009. Exceptional costs of £78 million in respect of the
restructuring of Irish brewing operations were included within operating costs
in the year ended 30 June 2008.
Post
employment plans
Post
employment costs for the year ended 30 June 2009 were £63 million (2008 - £53
million) of which £65 million (2008 - £99 million) was included in operating
costs and income of £2 million (2008 - £46 million) was included in net finance
charges. Exceptional pension curtailment gains were £32 million for
the year ended 30 June 2009.
The
deficit before taxation in respect of post employment plans increased by £975
million from £408 million at 30 June 2008 to £1,383 million at 30 June 2009. The
increase in the deficit is primarily a result of a reduction in the value of the
assets held by the plans, and a lower discount rate, partly offset by a lower
inflation rate.
Operating
profit
Reported
operating profit for the year ended 30 June 2009 increased by £217 million to
£2,443 million from £2,226 million in the prior year. Exchange rate movements
increased operating profit for the year ended 30 June 2009 by £154 million.
Excluding exceptional costs, operating profit for the year ended 30 June 2009
increased by £309 million to £2,613 million from £2,304 million in the prior
year. Exchange rate movements increased operating profit before
exceptional items by £167 million.
Acquisitions
Brand
additions made in the year ended 30 June 2008, principally Ketel One vodka,
Rosenblum Cellars wine and the distribution rights for Zacapa rum, contributed
£151 million to net sales and £43 million to operating profit in the year ended
30 June 2009 in addition to the organic element.
Sale of
businesses
In the
year ended 30 June 2008, a gain of £9 million arose from the sale of
businesses.
Net
finance charges
Net
finance charges increased from £319 million in the year ended 30 June 2008 to
£592 million in the year ended 30 June 2009.
The net
interest charge for the year ended 30 June 2009 increased by £175 million to
£516 million from £341 million in the prior year. This increase resulted
principally from the increase in net borrowings in the year, adverse exchange
rate movements of £64 million and an increase in the adverse impact of the
revaluation to year end market rates of interest rate swaps under IAS 39 of £8
million.
The
income statement interest cover was 5.4 times and cash interest cover was 7.3
times.
Net other
finance charges for the year ended 30 June 2009 were £76 million (2008 - net
other finance income of £22 million). There was a reduction of £44
million in income in respect of the group’s post employment plans from £46
million in the year ended 30 June 2008 to £2 million in the year ended 30 June
2009. Other finance charges also include £33 million (2008 - £5
million income) in respect of exchange rate translation differences on
inter-company funding arrangements that do not meet the accounting criteria for
recognition in equity, £11 million (2008 - £6 million) in respect of exchange
movements on net borrowings not in a hedge relationship and therefore recognised
in the income statement, £21 million (2008 - £17 million) on unwinding of
discounts on liabilities and £13 million (2008 – £6 million) in respect of other
finance charges.
Associates
The
group’s share of associates’ profits after interest and tax was £164 million for
the year ended 30 June 2009 compared to £177 million in the prior
year. Diageo’s 34% equity interest in Moët Hennessy contributed £151
million (2008 - £161 million) to share of associates’ profits after interest and
tax.
Profit
before taxation
Profit
before taxation decreased by £78 million from £2,093 million to £2,015 million
in the year ended 30 June 2009.
Taxation
The
reported tax rate for the year ended 30 June 2009 is 14.5% compared with 24.9%
for the year ended 30 June 2008. Factors that reduced the reported tax rate in
the year included settlements agreed with tax authorities that gave rise to
changes in the value of deferred tax assets and tax provisions. The underlying
tax rate for continuing operations for the year ended 30 June 2009 was 22.2%
compared with 24.5% for the year ended 30 June 2008. The underlying
tax rate for the year ending 30 June 2010 is expected to be
22%.
Discontinued
operations
In
connection with the past disposal of the Pillsbury business, Diageo guaranteed
debt of a third party until November 2009 and profit after tax from discontinued
operations in the year ended 30 June 2009 of £2 million (2008 - £2 million)
represents a provision release in respect of this. In the year ended
30 June 2008 there was a £24 million tax credit relating to the disposal of the
Pillsbury business.
Exchange
rate movements
Exchange
rate movements are calculated by retranslating the prior year results as if they
had been generated at the current year exchange rates and are excluded from
organic growth.
The
estimated effect of exchange rate movements on the results for the year ended 30
June 2009 was as follows:
|
|
Gains/(losses)
£ million
|
|
Operating
profit before exceptional items
|
|
|
|
Translation
impact
|
|
|
274 |
|
Transaction
impact
|
|
|
(107 |
) |
|
|
|
167 |
|
Translation
impact – operating exceptional items
|
|
|
(13 |
) |
Total
operating profit impact
|
|
|
154 |
|
Associates
|
|
|
|
|
Translation
impact
|
|
|
30 |
|
Interest
and other finance charges
|
|
|
|
|
Net
finance charges – translation impact
|
|
|
(66 |
) |
Exchange
– in respect of IAS 21 and IAS 39
|
|
|
(43 |
) |
Mark
to market impact of IAS 39 on interest expense
|
|
|
(8 |
) |
Total
exchange effect on profit before taxation
|
|
|
67 |
|
|
|
Year ended
30 June 2009
|
|
|
Year ended
30 June 2008
|
|
Exchange
rates
|
|
|
|
|
|
|
Translation
US$/£ rate
|
|
|
1.60 |
|
|
|
2.01 |
|
Transaction
US$/£ rate
|
|
|
2.29 |
|
|
|
1.90 |
|
Translation
€/£ rate
|
|
|
1.17 |
|
|
|
1.36 |
|
Transaction
€/£ rate
|
|
|
1.40 |
|
|
|
1.39 |
|
Outlook
for the impact of exchange rate movements:
For the
year ending 30 June 2010 at current exchange rates (US$/£1.65, €/£1.15) foreign
exchange movements (excluding the exchange impacts of IAS 21 and IAS 39) are
estimated to increase operating profit by £80 million and decrease the interest
charge by £10 million.
Dividend
The
directors recommend a final dividend of 22.20 pence per share, an increase of 5%
on last year’s final dividend. The full dividend would therefore be 36.10 pence
per share, an increase of 5.1% from the year ended 30 June 2008. Subject to
approval by shareholders, the final dividend will be paid on 19 October 2009 to
shareholders on the register on 11 September 2009. Payment to US ADR holders
will be made on 23 October 2009. A dividend reinvestment plan is available in
respect of the final dividend and the plan notice date is 28 September
2009.
Cash
flow
|
|
Year
ended
30
June 2009
|
|
|
Year
ended
30
June 2008
|
|
|
|
£
million
|
|
|
£
million
|
|
|
|
|
|
|
|
|
Cash
generated from operations before exceptional costs
|
|
|
2,679 |
|
|
|
2,305 |
|
Exceptional
restructuring costs paid
|
|
|
(53 |
) |
|
|
- |
|
Cash
generated from operations
|
|
|
2,626 |
|
|
|
2,305 |
|
Interest
paid (net)
|
|
|
(415 |
) |
|
|
(320 |
) |
Dividends
paid to equity minority interests
|
|
|
(98 |
) |
|
|
(56 |
) |
Taxation
|
|
|
(522 |
) |
|
|
(369 |
) |
Net
capital expenditure
|
|
|
(313 |
) |
|
|
(262 |
) |
Net
(purchase)/sale of other investments
|
|
|
(24 |
) |
|
|
4 |
|
Payment
into escrow in respect of UK pension fund
|
|
|
(50 |
) |
|
|
(50 |
) |
Free
cash flow
|
|
|
1,204 |
|
|
|
1,252 |
|
Free cash
flow decreased by £48 million to £1,204 million in the year ended 30 June 2009.
Cash generated from operations increased from £2,305 million to £2,626 million
principally as a result of increased operating profit. Cash paid in
respect of restructuring was £53 million. Working capital increased by £282
million principally in respect of increased maturing stock
levels. Taxation paid increased by £153 million primarily as a result
of settlements agreed with tax authorities. Net capital expenditure on property,
plant and equipment increased £51 million to £313 million in the period, being
decreased capital expenditure of £1 million and lower disposal proceeds of £52
million.
Balance
sheet
At 30
June 2009, total equity was £3,936 million compared with £4,175 million at 30
June 2008. This decrease was mainly due to the increase in the
pension deficit of £975 million, the dividend paid out of shareholders’ equity
of £870 million and the shares repurchased for cancellation of £354 million
partly offset by profit for the period of £1,725 million.
Net
borrowings were £7,419 million at 30 June 2009, an increase of £972 million from
net borrowings at 30 June 2008 of £6,447 million. The principal components of
this increase were: £354 million (2008 - £1,008 million) including costs, to
repurchase 38.0 million shares as part of the share buyback programme (2008 –
96.7 million shares); £38 million net repurchase of own shares for share schemes
(2008 - £78 million); £102 million in respect of acquisitions (2008 – £575
million), principally the purchase of the remaining minority interest in the
Russian joint venture and an increase in the shareholding in Sichuan Quanxing
Group; adverse exchange rate movements of £784 million (2008 - £372 million) and
£870 million equity dividend paid (2008 - £857 million). This was
partly offset by free cash flow of £1,204 million (2008 - £1,252
million).
The share
buyback programme has not been activated since December 2008 and it is not
envisaged that the buyback programme will be reopened in current market
conditions. Diageo targets a range of ratios which are currently broadly
consistent with an A band credit rating. Diageo would consider
modifying these ratios in order to effect strategic initiatives within its
stated goals and which could have an impact on its rating.
Economic
profit
Economic
profit increased by £86 million from £739 million in the year ended 30 June 2008
to £825 million in the year ended 30 June 2009. See page 39 for the
calculation and definition of economic profit.
DIAGEO
CONDENSED CONSOLIDATED INCOME STATEMENT
|
|
|
|
|
Year ended
30 June 2009
|
|
|
Year ended
30 June 2008
|
|
|
|
Notes
|
|
|
£ million
|
|
|
£ million
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
|
2
|
|
|
|
12,283 |
|
|
|
10,643 |
|
Excise
duties
|
|
|
|
|
|
(2,972 |
) |
|
|
(2,553 |
) |
Net
sales
|
|
|
|
|
|
9,311 |
|
|
|
8,090 |
|
Cost
of sales
|
|
|
|
|
|
(3,883 |
) |
|
|
(3,245 |
) |
Gross
profit
|
|
|
|
|
|
5,428 |
|
|
|
4,845 |
|
Marketing
expenses
|
|
|
|
|
|
(1,312 |
) |
|
|
(1,239 |
) |
Other
operating expenses
|
|
|
|
|
|
(1,673 |
) |
|
|
(1,380 |
) |
Operating
profit
|
|
2/3
|
|
|
|
2,443 |
|
|
|
2,226 |
|
Sale
of businesses
|
|
3
|
|
|
|
- |
|
|
|
9 |
|
Net
interest payable
|
|
4
|
|
|
|
(516 |
) |
|
|
(341 |
) |
Net
other finance (charges)/income
|
|
4
|
|
|
|
(76 |
) |
|
|
22 |
|
Share
of associates' profits after tax
|
|
|
|
|
|
164 |
|
|
|
177 |
|
Profit
before taxation
|
|
|
|
|
|
2,015 |
|
|
|
2,093 |
|
Taxation
|
|
5
|
|
|
|
(292 |
) |
|
|
(522 |
) |
Profit
from continuing operations
|
|
|
|
|
|
1,723 |
|
|
|
1,571 |
|
Discontinued
operations
|
|
6
|
|
|
|
2 |
|
|
|
26 |
|
Profit
for the year
|
|
|
|
|
|
1,725 |
|
|
|
1,597 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Attributable
to:
|
|
|
|
|
|
|
|
|
|
|
|
Equity
shareholders of the parent company
|
|
|
|
|
|
1,621 |
|
|
|
1,521 |
|
Minority
interests
|
|
|
|
|
|
104 |
|
|
|
76 |
|
|
|
|
|
|
|
1,725 |
|
|
|
1,597 |
|
|
|
|
|
|
|
|
|
|
|
|
|
Pence
per share
|
|
|
|
|
|
|
|
|
|
|
|
Basic
earnings
|
|
|
|
|
|
65.2 |
p |
|
|
59.3 |
p |
Diluted
earnings
|
|
|
|
|
|
65.0 |
p |
|
|
58.9 |
p |
Average
shares
|
|
|
|
|
|
2,485 |
m |
|
|
2,566 |
m |
DIAGEO
CONDENSED CONSOLIDATED STATEMENT OF
RECOGNISED
INCOME AND EXPENSE
|
|
Year ended
30 June 2009
|
|
|
Year ended
30 June 2008
|
|
|
|
£ million
|
|
|
£ million
|
|
|
|
|
|
|
|
|
Exchange
differences on translation of foreign operations
excluding borrowings
|
|
|
931 |
|
|
|
336 |
|
Exchange
differences on borrowings and derivative net investment hedges
|
|
|
(773 |
) |
|
|
(366 |
) |
Effective
portion of changes in fair value of cash flow hedges
|
|
|
|
|
|
|
|
|
- gains
taken to equity
|
|
|
90 |
|
|
|
26 |
|
- transferred
to income statement
|
|
|
(71 |
) |
|
|
(69 |
) |
Net
actuarial losses on post employment plans
|
|
|
(1,007 |
) |
|
|
(15 |
) |
Fair
value movement on available for sale investments
|
|
|
4 |
|
|
|
- |
|
Tax
on items taken directly to equity
|
|
|
254 |
|
|
|
15 |
|
Net
expense recognised directly in equity
|
|
|
(572 |
) |
|
|
(73 |
) |
Profit
for the year
|
|
|
1,725 |
|
|
|
1,597 |
|
Total
recognised income and expense for the year
|
|
|
1,153 |
|
|
|
1,524 |
|
|
|
|
|
|
|
|
|
|
Attributable
to:
|
|
|
|
|
|
|
|
|
Equity
shareholders of the parent company
|
|
|
957 |
|
|
|
1,445 |
|
Minority
interests
|
|
|
196 |
|
|
|
79 |
|
|
|
|
1,153 |
|
|
|
1,524 |
|
DIAGEO
CONDENSED CONSOLIDATED BALANCE SHEET
|
|
|
|
|
30 June 2009
|
|
|
30 June 2008
|
|
|
|
Notes
|
|
|
£ million
|
|
|
£ million
|
|
|
£ million
|
|
|
£ million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Non-current
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible
assets
|
|
|
|
|
|
6,215 |
|
|
|
|
|
|
5,530 |
|
|
|
|
Property,
plant and equipment
|
|
|
|
|
|
2,268 |
|
|
|
|
|
|
2,122 |
|
|
|
|
Biological
assets
|
|
|
|
|
|
37 |
|
|
|
|
|
|
31 |
|
|
|
|
Investments
in associates
|
|
|
|
|
|
2,045 |
|
|
|
|
|
|
1,809 |
|
|
|
|
Other
investments
|
|
|
|
|
|
231 |
|
|
|
|
|
|
168 |
|
|
|
|
Other
receivables
|
|
|
|
|
|
18 |
|
|
|
|
|
|
11 |
|
|
|
|
Other
financial assets
|
|
|
|
|
|
364 |
|
|
|
|
|
|
111 |
|
|
|
|
Deferred
tax assets
|
|
|
|
|
|
672 |
|
|
|
|
|
|
590 |
|
|
|
|
Post
employment benefit assets
|
|
|
|
|
|
41 |
|
|
|
|
|
|
47 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
11,891 |
|
|
|
|
|
|
|
10,419 |
|
Current
assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
|
7
|
|
|
|
3,162 |
|
|
|
|
|
|
|
2,739 |
|
|
|
|
|
Trade
and other receivables
|
|
|
|
|
|
2,031 |
|
|
|
|
|
|
|
2,051 |
|
|
|
|
|
Other
financial assets
|
|
|
|
|
|
98 |
|
|
|
|
|
|
|
104 |
|
|
|
|
|
Cash
and cash equivalents
|
|
8
|
|
|
|
914 |
|
|
|
|
|
|
|
714 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
6,205 |
|
|
|
|
|
|
|
5,608 |
|
Total
assets
|
|
|
|
|
|
|
|
|
|
18,096 |
|
|
|
|
|
|
|
16,027 |
|
Current
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings
and bank overdrafts
|
|
8
|
|
|
|
(890 |
) |
|
|
|
|
|
|
(1,663 |
) |
|
|
|
|
Other
financial liabilities
|
|
|
|
|
|
(220 |
) |
|
|
|
|
|
|
(126 |
) |
|
|
|
|
Trade
and other payables
|
|
|
|
|
|
(2,173 |
) |
|
|
|
|
|
|
(2,143 |
) |
|
|
|
|
Corporate
tax payable
|
|
|
|
|
|
(532 |
) |
|
|
|
|
|
|
(685 |
) |
|
|
|
|
Provisions
|
|
|
|
|
|
(172 |
) |
|
|
|
|
|
|
(72 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(3,987 |
) |
|
|
|
|
|
|
(4,689 |
) |
Non-current
liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings
|
|
8
|
|
|
|
(7,685 |
) |
|
|
|
|
|
|
(5,545 |
) |
|
|
|
|
Other
financial liabilities
|
|
|
|
|
|
(99 |
) |
|
|
|
|
|
|
(124 |
) |
|
|
|
|
Other
payables
|
|
|
|
|
|
(30 |
) |
|
|
|
|
|
|
(34 |
) |
|
|
|
|
Provisions
|
|
|
|
|
|
(314 |
) |
|
|
|
|
|
|
(329 |
) |
|
|
|
|
Deferred
tax liabilities
|
|
|
|
|
|
(621 |
) |
|
|
|
|
|
|
(676 |
) |
|
|
|
|
Post
employment benefit liabilities
|
|
|
|
|
|
(1,424 |
) |
|
|
|
|
|
|
(455 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(10,173 |
) |
|
|
|
|
|
|
(7,163 |
) |
Total
liabilities
|
|
|
|
|
|
|
|
|
|
(14,160 |
) |
|
|
|
|
|
|
(11,852 |
) |
Net
assets
|
|
|
|
|
|
|
|
|
|
3,936 |
|
|
|
|
|
|
|
4,175 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Called
up share capital
|
|
|
|
|
|
797 |
|
|
|
|
|
|
|
816 |
|
|
|
|
|
Share
premium
|
|
|
|
|
|
1,342 |
|
|
|
|
|
|
|
1,342 |
|
|
|
|
|
Other
reserves
|
|
|
|
|
|
3,282 |
|
|
|
|
|
|
|
3,163 |
|
|
|
|
|
Retained
deficit
|
|
|
|
|
|
(2,200 |
) |
|
|
|
|
|
|
(1,823 |
) |
|
|
|
|
Equity
attributable to equity shareholders of the parent company
|
|
|
|
|
|
|
|
|
|
3,221 |
|
|
|
|
|
|
|
3,498 |
|
Minority
interests
|
|
|
|
|
|
|
|
|
|
715 |
|
|
|
|
|
|
|
677 |
|
Total
equity
|
|
10
|
|
|
|
|
|
|
|
3,936 |
|
|
|
|
|
|
|
4,175 |
|
DIAGEO
CONDENSED CONSOLIDATED CASH FLOW STATEMENT
|
|
Year ended
30 June 2009
|
|
|
Year ended
30 June 2008
|
|
|
|
£ million
|
|
|
£ million
|
|
|
£ million
|
|
|
£ million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from operating activities
|
|
|
|
|
|
|
|
|
|
|
|
|
Profit
for the year
|
|
|
1,725 |
|
|
|
|
|
|
1,597 |
|
|
|
|
Discontinued
operations
|
|
|
(2 |
) |
|
|
|
|
|
(26 |
) |
|
|
|
Taxation
|
|
|
292 |
|
|
|
|
|
|
522 |
|
|
|
|
Share
of associates’ profits after taxation
|
|
|
(164 |
) |
|
|
|
|
|
(177 |
) |
|
|
|
Net
interest and net other finance charges
|
|
|
592 |
|
|
|
|
|
|
319 |
|
|
|
|
Gains
on sale of businesses
|
|
|
- |
|
|
|
|
|
|
(9 |
) |
|
|
|
Depreciation
and amortisation
|
|
|
276 |
|
|
|
|
|
|
233 |
|
|
|
|
Movements
in working capital
|
|
|
(282 |
) |
|
|
|
|
|
(282 |
) |
|
|
|
Dividend
income
|
|
|
179 |
|
|
|
|
|
|
143 |
|
|
|
|
Other
items
|
|
|
10 |
|
|
|
|
|
|
(15 |
) |
|
|
|
Cash
generated from operations
|
|
|
|
|
|
|
2,626 |
|
|
|
|
|
|
|
2,305 |
|
Interest
received
|
|
|
|
|
|
|
63 |
|
|
|
|
|
|
|
67 |
|
Interest
paid
|
|
|
|
|
|
|
(478 |
) |
|
|
|
|
|
|
(387 |
) |
Dividends
paid to minority interests
|
|
|
|
|
|
|
(98 |
) |
|
|
|
|
|
|
(56 |
) |
Taxation
paid
|
|
|
|
|
|
|
(522 |
) |
|
|
|
|
|
|
(369 |
) |
Net
cash from operating activities
|
|
|
|
|
|
|
1,591 |
|
|
|
|
|
|
|
1,560 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Disposal
of property, plant and equipment and computer software
|
|
|
14 |
|
|
|
|
|
|
|
66 |
|
|
|
|
|
Purchase
of property, plant and equipment and computer software
|
|
|
(327 |
) |
|
|
|
|
|
|
(328 |
) |
|
|
|
|
Net
(purchase)/disposal of other investments
|
|
|
(24 |
) |
|
|
|
|
|
|
4 |
|
|
|
|
|
Payment
into escrow in respect of the UK pension fund
|
|
|
(50 |
) |
|
|
|
|
|
|
(50 |
) |
|
|
|
|
Disposal
of businesses
|
|
|
1 |
|
|
|
|
|
|
|
4 |
|
|
|
|
|
Purchase
of businesses
|
|
|
(102 |
) |
|
|
|
|
|
|
(575 |
) |
|
|
|
|
Net
cash outflow from investing activities
|
|
|
|
|
|
|
(488 |
) |
|
|
|
|
|
|
(879 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Proceeds
from issue of share capital
|
|
|
- |
|
|
|
|
|
|
|
1 |
|
|
|
|
|
Net
purchase of own shares for share schemes
|
|
|
(38 |
) |
|
|
|
|
|
|
(78 |
) |
|
|
|
|
Own
shares repurchased
|
|
|
(354 |
) |
|
|
|
|
|
|
(1,008 |
) |
|
|
|
|
Net
increase in loans
|
|
|
256 |
|
|
|
|
|
|
|
1,094 |
|
|
|
|
|
Equity
dividends paid
|
|
|
(870 |
) |
|
|
|
|
|
|
(857 |
) |
|
|
|
|
Net
cash used in financing activities
|
|
|
|
|
|
|
(1,006 |
) |
|
|
|
|
|
|
(848 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
increase/(decrease) in net cash and cash equivalents
|
|
|
|
|
|
|
97 |
|
|
|
|
|
|
|
(167 |
) |
Exchange
differences
|
|
|
|
|
|
|
66 |
|
|
|
|
|
|
|
11 |
|
Net
cash and cash equivalents at beginning of the year
|
|
|
|
|
|
|
683 |
|
|
|
|
|
|
|
839 |
|
Net
cash and cash equivalents at end of the year
|
|
|
|
|
|
|
846 |
|
|
|
|
|
|
|
683 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
cash and cash equivalents consist of:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
|
|
|
|
|
914 |
|
|
|
|
|
|
|
714 |
|
Bank
overdrafts
|
|
|
|
|
|
|
(68 |
) |
|
|
|
|
|
|
(31 |
) |
|
|
|
|
|
|
|
846 |
|
|
|
|
|
|
|
683 |
|
NOTES
1.
Basis of preparation
The
condensed consolidated financial information has been extracted from the
consolidated financial statements of Diageo plc for the year ended 30 June
2009. These consolidated financial statements were prepared in
accordance with International Financial Reporting Standards (IFRS) as issued by
the International Accounting Standards Board (IASB) and as endorsed and adopted
for use in the European Union. This consolidated financial information has been
prepared on the basis of accounting policies consistent with those applied in
the consolidated financial statements for the year ended 30 June 2008 except as
noted below. IFRS is subject to ongoing review and endorsement by the EU or
possible amendment by interpretative guidance from the IASB.
(a) Adopted by the group The
following accounting standards and interpretations, issued by the International
Accounting Standards Board (IASB) or International Financial Reporting
Interpretations Committee (IFRIC), are effective for the first time in the
current financial year and have been adopted by the group with no significant
impact on its consolidated results or financial position:
An
amendment to IAS 23 –
Borrowing costs requires that finance costs attributable to the
acquisition, construction or production of a qualifying asset, being an asset
that necessarily takes a substantial period of time to get ready for its
intended use or sale, are added to the cost of that asset. The group has adopted
this amendment for capital expenditure incurred on significant projects that
commenced after 1 July 2007. In the year ended 30 June 2009, the amount of
borrowing costs capitalised was £4 million and the interest rates used for
projects financed in sterling and other currencies were 5.2% and 6.2%,
respectively.
IFRIC 14 – IAS 19: The limit on a
defined benefit asset, minimum funding requirements and their interaction
provides additional guidance on assessing the amount of a defined benefit
pension surplus that can be recognised as an asset, and as a consequence the
amount of deferred tax on that surplus. The group has adopted IFRIC 14 as at 1
July 2008, with no material impact on the balance sheet of the group at 30 June
2009 and no impact on the income statement for the year then ended. No
restatement of prior year financial information is necessary as the amounts
involved are immaterial.
IFRIC 12 – Service concession
arrangements, IFRIC 13
– Customer loyalty programmes and IFRIC 16 – Hedges of a net
investment in a foreign operation have also been adopted by the group
with no significant impact on its consolidated results or financial
position.
(b) Not adopted by the group The
following standards and interpretations, issued by the IASB or IFRIC, have not
yet been adopted by the group. The group does not currently believe the adoption
of these standards or interpretations would have a material impact on the
consolidated results or financial position of the group unless stated otherwise
below:
IAS 1 (Revised) – Presentation of
financial statements (effective for annual periods beginning on or after
1 January 2009, endorsed by the EU in December 2008)
IAS 27 (Revised) – Consolidated and
separate financial statements (effective for annual periods beginning on
or after 1 July 2009, endorsed by the EU in June 2009)
Improvements to International
Financial Reporting Standards 2008 (effective for annual periods
beginning on or after 1 January 2009, endorsed by the EU in January 2009)
include an amendment to IAS 38
– Intangible assets which clarifies the accounting for advertising
expenditure. The group will be required to charge advertising expenditure to the
income statement when it has a right of access to the goods or services
acquired, as opposed to charging such costs to the income statement when the
advertisement is first shown to the public. It is expected that application of
the amendment will result in a minor restatement of prior year
information.
Amendments to IAS 39 and IFRIC 9 – Embedded
derivatives (effective for annual periods beginning on or after 30 June
2009, not yet endorsed by the EU)
Amendment to IAS 39 – Eligible hedged
items (effective for annual periods beginning on or after 1 July 2009,
not yet endorsed by the EU)
Amendment to IFRS 2 – Share-based
payment: vesting conditions and cancellations (effective for annual
periods beginning on or after 1 January 2009, endorsed by the EU in December
2008)
Amendment to IFRS 2 – Group
cash-settled share-based payment transactions (effective for annual
periods beginning on or after 1 January 2010, not yet endorsed by the
EU)
IFRS 3 (Revised) – Business
combinations (effective for annual periods beginning on or after 1 July
2009, endorsed by the EU in June 2009) continues to apply the acquisition method
to business combinations but with some significant changes, particularly in
respect of the measurement of contingent payments, the calculation of goodwill
and the treatment of transaction costs.
Amendments to IFRS 7 – Improving
disclosures about financial instruments (effective for annual periods
beginning on or after 1 January 2009, not yet endorsed by the EU) requires
enhanced disclosures about fair value measurements of financial instruments by
using a three-level fair value hierarchy that prioritises the inputs to
valuation techniques used in fair value calculations. The amended
standard also requires improved disclosures relating to liquidity
risk.
IFRS 8 – Operating segments
(effective for annual periods beginning on or after 1 January 2009, endorsed by
the EU in November 2007) contains requirements for the disclosure of information
about an entity’s operating segments and also about the entity’s products and
services, the geographical areas in which it operates, and its major customers.
The standard is concerned only with disclosure and replaces IAS 14 – Segment reporting.
The group is currently assessing the impact this standard would have on the
presentation of its consolidated results.
Improvements to International
Financial Reporting Standards 2009 (effective for annual periods
beginning on or after 1 July 2009, not yet endorsed by the EU)
The
information in this preliminary announcement does not constitute the statutory
accounts of the group within the meaning of Section 434 of the Companies Act
2006. The statutory accounts of Diageo plc for the year ended 30 June 2008 have
been delivered to the registrar of companies. KPMG Audit Plc has reported on
those accounts and on the statutory accounts for the year ended 30 June 2009.
Both audit reports were (i) unqualified, (ii) did not include a reference to any
matters to which the auditors drew attention by way of emphasis without
qualifying their report and (iii) did not contain a statement under section 237
(2) or (3) of the Companies Act 1985 in respect of the accounts for the year
ended 30 June 2008 nor a statement under section 498 (2) or (3) of the Companies
Act 2006 in respect of the accounts for the year ended 30 June
2009.
2.
|
Business
and geographical analyses
|
Business
analysis is presented under the categories of North America, Europe,
International, Asia Pacific and Corporate, reflecting the group’s management and
internal reporting structure.
Business
analysis:
|
|
Year ended
30 June 2009
|
|
|
Year ended
30 June 2008
|
|
|
|
Sales
|
|
|
Operating
profit/(loss)
|
|
|
Sales
|
|
|
Operating
profit/(loss)
|
|
|
|
£ million
|
|
|
£ million
|
|
|
£ million
|
|
|
£ million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
America
|
|
|
3,858 |
|
|
|
1,131 |
|
|
|
2,965 |
|
|
|
907 |
|
Europe
|
|
|
4,279 |
|
|
|
790 |
|
|
|
4,046 |
|
|
|
720 |
|
International
|
|
|
2,803 |
|
|
|
623 |
|
|
|
2,376 |
|
|
|
593 |
|
Asia
Pacific
|
|
|
1,268 |
|
|
|
128 |
|
|
|
1,168 |
|
|
|
170 |
|
|
|
|
12,208 |
|
|
|
2,672 |
|
|
|
10,555 |
|
|
|
2,390 |
|
Corporate
|
|
|
75 |
|
|
|
(229 |
) |
|
|
88 |
|
|
|
(164 |
) |
|
|
|
12,283 |
|
|
|
2,443 |
|
|
|
10,643 |
|
|
|
2,226 |
|
Geographical
analysis of sales and operating profit by destination:
|
|
Year ended
30 June 2009
|
|
|
Year ended
30 June 2008
|
|
|
|
Sales
|
|
|
Operating
profit
|
|
|
Sales
|
|
|
Operating
profit
|
|
|
|
£ million
|
|
|
£ million
|
|
|
£ million
|
|
|
£ million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
America
|
|
|
3,887 |
|
|
|
1,142 |
|
|
|
3,001 |
|
|
|
922 |
|
Europe
|
|
|
4,431 |
|
|
|
592 |
|
|
|
4,187 |
|
|
|
576 |
|
Asia
Pacific
|
|
|
1,314 |
|
|
|
146 |
|
|
|
1,208 |
|
|
|
186 |
|
Latin
America
|
|
|
1,167 |
|
|
|
250 |
|
|
|
963 |
|
|
|
238 |
|
Rest
of World
|
|
|
1,484 |
|
|
|
313 |
|
|
|
1,284 |
|
|
|
304 |
|
|
|
|
12,283 |
|
|
|
2,443 |
|
|
|
10,643 |
|
|
|
2,226 |
|
Sales and
operating profit by geographical destination have been stated according to the
location of the third party customers and an allocation of certain corporate
items. Certain businesses have been reallocated from the business segment in
which they are managed, for internal purposes and have been reported within the
appropriate region in the geographical analysis above.
The
festive holiday season provides the peak period for sales. Approximately 43% of
annual net sales arise in the last four months of each calendar
year.
Analysis
of total assets:
|
|
30 June
2009
|
|
|
30 June
2008
|
|
|
|
£ million
|
|
|
£ million
|
|
|
|
|
|
|
|
|
North
America
|
|
|
1,006 |
|
|
|
889 |
|
Europe
|
|
|
1,070 |
|
|
|
1,239 |
|
International
|
|
|
1,090 |
|
|
|
964 |
|
Asia
Pacific
|
|
|
486 |
|
|
|
474 |
|
Moët
Hennessy
|
|
|
1,814 |
|
|
|
1,643 |
|
Corporate
and other
|
|
|
12,630 |
|
|
|
10,818 |
|
|
|
|
18,096 |
|
|
|
16,027 |
|
Corporate
and other total assets consist primarily of brands that are capitalised in the
balance sheet, property, plant and equipment, maturing whisky inventories and
other assets that are not readily allocable to the group’s operating
segments.
Weighted
average exchange rates used in the translation of income statements were US
dollar - £1 = $1.60 (2008 - £1 = $2.01) and euro - £1 = €1.17 (2008 - £1 =
€1.36). Exchange rates used to translate assets and liabilities at the balance
sheet date were US dollar - £1 = $1.65 (2008 - £1 = $1.99) and euro - £1 = €1.17
(2008 - £1 = €1.26). The group uses exchange rate transaction hedges to mitigate
the effect of exchange rate movements.
Exceptional
items are those that in management’s judgement need to be disclosed by virtue of
their size or incidence in order for the user to obtain a proper understanding
of the financial information.
In the
year ended 30 June 2009, operating costs of £166 million in respect of the
global restructuring programme and £4 million in respect of the restructuring of
Irish brewing operations have been identified as pre-tax exceptional
items. In the year ended 30 June 2008, operating costs of £78 million
in respect of the restructuring of Irish brewing operations and a gain of £9
million in respect of business disposals were identified as pre-tax exceptional
items.
Exceptional
items relating to tax are identified in note 5.
4.
|
Net
interest and other finance charges
|
|
|
Year ended
30 June 2009
|
|
|
Year ended
30 June 2008
|
|
|
|
£ million
|
|
|
£ million
|
|
|
|
|
|
|
|
|
Interest
payable
|
|
|
(604 |
) |
|
|
(419 |
) |
Interest
receivable
|
|
|
102 |
|
|
|
84 |
|
Market
value movements on interest rate instruments
|
|
|
(14 |
) |
|
|
(6 |
) |
Net
interest payable
|
|
|
(516 |
) |
|
|
(341 |
) |
|
|
|
|
|
|
|
|
|
Net
finance income in respect of post employment plans
|
|
|
2 |
|
|
|
46 |
|
Unwinding
of discounts
|
|
|
(21 |
) |
|
|
(17 |
) |
Other
finance charges
|
|
|
(13 |
) |
|
|
(6 |
) |
|
|
|
(32 |
) |
|
|
23 |
|
Net
exchange movements on certain financial instruments
|
|
|
(44 |
) |
|
|
(1 |
) |
Net
other finance (charges)/income
|
|
|
(76 |
) |
|
|
22 |
|
Interest
payable is after capitalisation of £4 million borrowing costs, following
adoption of the amendment to IAS 23 (2008 - £nil).
For the
year ended 30 June 2009, the £292 million taxation charge (2008 - £522 million)
comprises a UK tax credit of £143 million (2008 - £43 million charge) and a
foreign tax charge of £435 million (2008 - £479 million). A tax
credit of £37 million on exceptional operating items (2008 - £8 million) is
included in the tax charge together with an exceptional tax credit of £155
million arising as a result of settlements agreed with tax authorities (2008 -
£nil).
6.
|
Discontinued
operations
|
In the
year ended 30 June 2009, profit after tax in respect of discontinued operations
relating to the disposal of the Pillsbury business was £2 million (2008 - £26
million).
|
|
30 June 2009
|
|
|
30 June 2008
|
|
|
|
£ million
|
|
|
£ million
|
|
|
|
|
|
|
|
|
Raw
materials and consumables
|
|
|
351 |
|
|
|
294 |
|
Work
in progress
|
|
|
25 |
|
|
|
21 |
|
Maturing
inventories
|
|
|
2,274 |
|
|
|
1,939 |
|
Finished
goods and goods for resale
|
|
|
512 |
|
|
|
485 |
|
|
|
|
3,162 |
|
|
|
2,739 |
|
|
|
30 June 2009
|
|
|
30 June 2008
|
|
|
|
£ million
|
|
|
£ million
|
|
|
|
|
|
|
|
|
Borrowings
due within one year and bank overdrafts
|
|
|
(890 |
) |
|
|
(1,663 |
) |
Borrowings
due after one year
|
|
|
(7,685 |
) |
|
|
(5,545 |
) |
Fair
value of interest rate hedging instruments
|
|
|
93 |
|
|
|
27 |
|
Fair
value of foreign currency swaps and forwards
|
|
|
170 |
|
|
|
29 |
|
Finance
lease liabilities
|
|
|
(21 |
) |
|
|
(9 |
) |
|
|
|
(8,333 |
) |
|
|
(7,161 |
) |
Cash
and cash equivalents
|
|
|
914 |
|
|
|
714 |
|
|
|
|
(7,419 |
) |
|
|
(6,447 |
) |
In the
year ended 30 June 2009, the group issued a US $1,500 million global bond
repayable in January 2014 with a coupon of 7.375% and a €1,000 million global
bond repayable in December 2014 with a coupon of 6.625%. A €500 million medium
term note, US $400 million medium term note and a US $250 million bond were
repaid.
9.
|
Reconciliation
of movement in net borrowings
|
|
|
Year ended
30 June 2009
|
|
|
Year ended
30 June 2008
|
|
|
|
£ million
|
|
|
£ million
|
|
|
|
|
|
|
|
|
Net
borrowings at beginning of the year
|
|
|
(6,447 |
) |
|
|
(4,845 |
) |
|
|
|
|
|
|
|
|
|
Increase/(decrease)
in net cash and cash equivalents before exchange
|
|
|
97 |
|
|
|
(167 |
) |
Cash
flow from change in loans
|
|
|
(256 |
) |
|
|
(1,094 |
) |
Change
in net borrowings from cash flows
|
|
|
(159 |
) |
|
|
(1,261 |
) |
Exchange
differences
|
|
|
(784 |
) |
|
|
(372 |
) |
Other
non-cash items
|
|
|
(29 |
) |
|
|
31 |
|
Net
borrowings at end of the year
|
|
|
(7,419 |
) |
|
|
(6,447 |
) |
10.
|
Movements
in total equity
|
|
|
Year ended
30 June 2009
|
|
|
Year ended
30 June 2008
|
|
|
|
£ million
|
|
|
£ million
|
|
|
|
|
|
|
|
|
Total
equity at beginning of the year
|
|
|
4,175 |
|
|
|
4,170 |
|
|
|
|
|
|
|
|
|
|
Total
recognised income and expense for the year
|
|
|
1,153 |
|
|
|
1,524 |
|
Dividends
paid to equity shareholders
|
|
|
(870 |
) |
|
|
(857 |
) |
Dividends
paid to minority interests
|
|
|
(98 |
) |
|
|
(56 |
) |
New
share capital issued
|
|
|
- |
|
|
|
1 |
|
Share
trust arrangements
|
|
|
59 |
|
|
|
76 |
|
Tax
on share trust arrangements
|
|
|
(6 |
) |
|
|
(7 |
) |
Own
shares repurchased
|
|
|
(354 |
) |
|
|
(1,008 |
) |
Purchase
of own shares for holding as treasury shares for
share
scheme hedging
|
|
|
(63 |
) |
|
|
(124 |
) |
Adjustment
to minority interest
|
|
|
(58 |
) |
|
|
- |
|
(Disposal)/acquisition
of minority interest
|
|
|
(2 |
) |
|
|
456 |
|
Net
movement in total equity
|
|
|
(239 |
) |
|
|
5 |
|
|
|
|
|
|
|
|
|
|
Total
equity at end of the year
|
|
|
3,936 |
|
|
|
4,175 |
|
Total
equity at the end of the year includes gains of £94 million (2008 - £15 million)
in respect of cumulative translation differences and £2,154 million (2008 -
£2,341 million) in respect of own shares held as treasury shares.
In the
year ended 30 June 2009, the acquisition accounting for Ketel One Worldwide BV
was reviewed and an adjustment of £58 million was made to the minority interest,
representing the Nolet Group’s share of a deferred tax liability created on
acquisition of £116 million. Consequently the goodwill recognised on the
acquisition was reduced by £58 million to £108 million.
|
|
Year ended
30 June 2009
£ million
|
|
|
Year ended
30 June 2008
£ million
|
|
Amounts
recognised as distributions to equity holders in the year
|
|
|
|
|
|
|
Final
dividend paid for the year ended 30 June 2008 of 21.15p (2007 - 20.15p)
per share
|
|
|
527 |
|
|
|
523 |
|
Interim
dividend paid for the year ended 30 June 2009 of 13.90p (2008 - 13.20p)
per share
|
|
|
345 |
|
|
|
336 |
|
|
|
|
872 |
|
|
|
859 |
|
Less:
Adjustment in respect of prior year dividends
|
|
|
(2 |
) |
|
|
(2 |
) |
|
|
|
870 |
|
|
|
857 |
|
A final
dividend of 22.20 pence per share for the year ended 30 June 2009 was
recommended by the board on 26 August 2009 for approval by shareholders at the
Annual General Meeting to be held on 14 October 2009. As the approval
will be after the balance sheet date it has not been included as a
liability.
12.
|
Contingent
liabilities and legal proceedings
|
(i) Guarantees In connection
with the disposal of Pillsbury, Diageo has guaranteed the debt of a third party
to the amount of $200 million (£121 million) until November 2009. Including this
guarantee, but net of the amount provided in the consolidated financial
information, at 30 June 2009 the group has given performance guarantees and
indemnities to third parties of £148 million.
There has
been no material change since 30 June 2009 in the group’s performance guarantees
and indemnities.
(ii) Colombian litigation An
action was filed on 8 October 2004 in the United States District Court for the
Eastern District of New York by the Republic of Colombia and a number of its
local government entities against Diageo and other spirits companies. The
complaint alleges several causes of action. Included among the causes of action
is a claim that the defendants allegedly violated the Federal RICO Act by
facilitating money laundering in Colombia through their supposed involvement in
the contraband trade to the detriment of government owned spirits production and
distribution businesses. Diageo is unable to quantify meaningfully the possible
loss or range of loss to which the lawsuit may give rise. Diageo intends to
defend itself vigorously against this lawsuit.
(iii) Turkish customs
litigation In common with other beverage alcohol importers, litigation is
ongoing against Diageo’s Turkish subsidiary in the Turkish Civil Courts in
connection with the methodology used by the Turkish customs authorities in
assessing the importation value of and duty payable on the beverage alcohol
products sold in the domestic channel in Turkey. The matter involves multiple
cases against Diageo’s Turkish subsidiary at various stages of litigation
including a group of cases under correction appeal following an adverse finding
at the Turkish Supreme Court. Diageo is unable to quantify meaningfully the
possible loss or range of loss to which these cases may give rise. Diageo’s
Turkish subsidiary intends to defend its position vigorously.
(iv) SEC investigation As
previously reported, Diageo Korea and several of its current and former
employees have been subject to investigations by Korean authorities regarding
various regulatory and control matters. Convictions for improper payments to a
Korean customs official have been handed down against two former Diageo Korea
employees, and three current and former Diageo Korea employees have been
convicted on various counts of tax evasion. Diageo had previously voluntarily
reported the allegations relating to the convictions for improper payments to
the US Department of Justice and the US Securities and Exchange Commission
(SEC). The SEC has commenced an investigation into these matters, and Diageo is
in the process of responding to the regulators' inquiries. Diageo's own internal
investigation in Korea and elsewhere is ongoing. The US Foreign Corrupt
Practices Act (FCPA) and related statutes and regulations provide for potential
monetary penalties, criminal sanctions and in some cases debarment from doing
business with the US federal government in connection with FCPA violations.
Diageo is unable to quantify meaningfully the possible loss or range of loss to
which these matters may give rise.
(v) Other The group has
extensive international operations and is defendant in a number of legal
proceedings incidental to these operations. There are a number of legal claims
against the group, the outcome of which cannot at present be foreseen and the
possible loss or range of loss of which cannot at present be meaningfully
quantified.
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.
13.
|
Related
party transactions
|
The
group’s significant related parties are its associates, joint ventures, key
management personnel and pension plans, as disclosed in the Annual Report for
the year ended 30 June 2009. There have been no transactions with
these related parties during the year ended 30 June 2009 that have materially
affected the financial position or performance of the group during this
period.
14.
|
Post
balance sheet events
|
On 1 July
2009, the group announced a further restructuring programme which includes
changes to supply operations in Scotland. In the year ending 30 June
2010, the group expects to incur exceptional operating charges of £200 million
before taxation for restructuring activities.
ADDITIONAL
INFORMATION FOR SHAREHOLDERS
EXPLANATORY
NOTES
Definitions
Comparisons
are to year ended 30 June 2008 (2008) unless otherwise stated. Unless otherwise
stated, percentage movements given throughout this announcement for volume,
sales, net sales, marketing spend and operating profit are organic movements
after retranslating prior period reported numbers at current period exchange
rates and after adjusting for the effect of exceptional items, acquisitions and
disposals. For an explanation of organic movements please refer to
‘Reconciliation to GAAP measures’ in this announcement.
Volume
has been 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, and ready
to drink in nine litre cases divide by 10, with certain pre-mixed products that
are classified as ready to drink divide by five.
Net
sales are sales after deducting excise duties.
Price/mix
is the number of percentage points by which the movement in net sales exceeds
the movement in volume. This difference arises because of changes in
the composition of sales between higher and lower priced variants or as price
changes are implemented.
Exceptional
items are those that in management’s judgement need to be disclosed by virtue of
their size or incidence in order for the user to obtain a proper understanding
of the financial information. Such items are included within the income
statement caption to which they relate.
References
to ready to drink include progressive adult beverages in the United States.
References to Smirnoff ready to drink include Smirnoff Ice, Smirnoff Black Ice,
Smirnoff Twisted V, Smirnoff Mule, Smirnoff Spin, Smirnoff Storm, Smirnoff
Caipiroska, Smirnoff Signatures and Smirnoff Cocktails. References to Smirnoff
Black Ice include Smirnoff Ice Triple Black in the United States and Smirnoff
Ice Double Black in Australia.
References
to reserve brands include Johnnie Walker Green Label, Johnnie Walker Gold Label,
Johnnie Walker Blue Label, Johnnie Walker Blue Label King George V, Classic
Malts, The Singleton of Glen Ord, The Singleton of Glendullan, The Singleton of
Dufftown, Tanqueray Ten, Cîroc vodka, Don Julio, Ketel One vodka and Zacapa
rum.
Volume
share is a brand’s volume when compared to the volume of all brands in its
segment. Value share is a brand’s retail sales when compared to the retail sales
of all brands in its segment. Unless otherwise stated, share refers to value
share. Share of voice is the media spend on a particular brand when compared to
all brands in its segment. The share and share of voice data contained in this
announcement is taken from independent industry sources in the markets in which
Diageo operates.
This
announcement contains forward-looking statements that involve risk and
uncertainty. There are a number of factors that could cause actual results and
developments to differ materially from those expressed or implied by these
forward-looking statements, including factors beyond Diageo’s control. Please
refer to page 41 – ‘Risk factors’ and page 46 – ‘Cautionary statement concerning
forward-looking statements’ for more details.
This
announcement includes names of Diageo’s products which constitute trademarks or
trade names which Diageo owns or which others own and license to Diageo for its
use.
Reconciliation
to GAAP measures
Organic
movements in volume, sales, net sales, marketing spend, operating profit and
operating margin are measures not specifically used in the consolidated
financial statements themselves (non-GAAP measures). The performance of the
group is discussed using these measures.
In
the discussion of the performance of the business, organic information is
presented using pounds sterling amounts on a constant currency basis. This
retranslates prior period reported numbers at current period exchange rates and
enables an understanding of the underlying performance of the market that is
most closely influenced by the actions of that market’s management. The risk
from exchange rate movements is managed centrally and is not a factor over which
local managers have any control. Residual exchange impacts are reported within
Corporate.
Acquisitions,
disposals and exceptional items also impact the reported performance and
therefore the reported movement in any period in which they
arise. Management adjusts for the impact of such transactions in
assessing the performance of the underlying business.
The
underlying performance on a constant currency basis and excluding the impact of
exceptional items, acquisitions and disposals is referred to as ‘organic’
performance. Organic movement calculations enable the reader to focus on the
performance of the business which is common to both periods.
Organic movements in volume,
sales, net sales and operating profit
Diageo’s
strategic planning and budgeting process is based on organic movements in
volume, sales, net sales and operating profit and these measures closely reflect
the way in which operating targets are defined and performance is monitored by
the group’s management. Therefore organic movement measures most closely reflect
the way in which the business is managed.
These
measures are chosen for planning, budgeting, reporting and incentive purposes
since they represent those measures which local managers are most directly able
to influence and they enable consideration of the underlying business
performance without the distortion caused by fluctuating exchange rates,
exceptional items and acquisitions and disposals.
The
group’s management believes these measures provide valuable additional
information for users of the financial statements in understanding the group’s
performance since they provide information on those elements of performance
which local managers are most directly able to influence and they focus on that
element of the core brand portfolio which is common to both periods. They should
be viewed as complementary to, and not replacements for, the comparable GAAP
measures and reported movements therein.
The
organic movement calculations for volume, sales, net sales and operating profit
before exceptional items for the year ended 30 June 2009 were as
follows:
Volume
|
|
2008
Reported
units
million
|
|
|
Acquisitions
disposals
and
transfers(2)
units
million
|
|
|
Organic
movement
units
million
|
|
|
2009
Reported
units
million
|
|
|
Organic
movement
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
America
|
|
|
51.1 |
|
|
|
1.8 |
|
|
|
0.1 |
|
|
|
53.0 |
|
|
|
- |
|
Europe
|
|
|
41.6 |
|
|
|
- |
|
|
|
(2.6 |
) |
|
|
39.0 |
|
|
|
(6 |
) |
International
|
|
|
39.1 |
|
|
|
- |
|
|
|
(1.6 |
) |
|
|
37.5 |
|
|
|
(4 |
) |
Asia
Pacific
|
|
|
13.2 |
|
|
|
- |
|
|
|
(1.4 |
) |
|
|
11.8 |
|
|
|
(11 |
) |
Total
|
|
|
145.0 |
|
|
|
1.8 |
|
|
|
(5.5 |
) |
|
|
141.3 |
|
|
|
(4 |
) |
Sales
|
|
2008
Reported
£ million
|
|
|
Exchange(1)
£ million
|
|
|
Acquisitions
disposals
and
transfers(2)
£ million
|
|
|
Organic
movement
£ million
|
|
|
2009
Reported
£ million
|
|
|
Organic
movement
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
America
|
|
|
2,965 |
|
|
|
715 |
|
|
|
149 |
|
|
|
29 |
|
|
|
3,858 |
|
|
|
1 |
|
Europe
|
|
|
4,046 |
|
|
|
353 |
|
|
|
7 |
|
|
|
(127 |
) |
|
|
4,279 |
|
|
|
(3 |
) |
International
|
|
|
2,376 |
|
|
|
192 |
|
|
|
3 |
|
|
|
232 |
|
|
|
2,803 |
|
|
|
9 |
|
Asia
Pacific
|
|
|
1,168 |
|
|
|
99 |
|
|
|
1 |
|
|
|
- |
|
|
|
1,268 |
|
|
|
- |
|
Corporate
|
|
|
88 |
|
|
|
3 |
|
|
|
- |
|
|
|
(16 |
) |
|
|
75 |
|
|
|
(18 |
) |
Total
sales
|
|
|
10,643 |
|
|
|
1,362 |
|
|
|
160 |
|
|
|
118 |
|
|
|
12,283 |
|
|
|
1 |
|
Net sales
|
|
2008
Reported
£ million
|
|
|
Exchange(1)
£ million
|
|
|
Acquisitions
disposals
and
transfers(2)
£ million
|
|
|
Organic
movement
£ million
|
|
|
2009
Reported
£ million
|
|
|
Organic
movement
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
America
|
|
|
2,523 |
|
|
|
602 |
|
|
|
142 |
|
|
|
23 |
|
|
|
3,290 |
|
|
|
1 |
|
Europe
|
|
|
2,630 |
|
|
|
260 |
|
|
|
6 |
|
|
|
(146 |
) |
|
|
2,750 |
|
|
|
(5 |
) |
International
|
|
|
1,971 |
|
|
|
156 |
|
|
|
2 |
|
|
|
157 |
|
|
|
2,286 |
|
|
|
7 |
|
Asia
Pacific
|
|
|
877 |
|
|
|
74 |
|
|
|
1 |
|
|
|
(42 |
) |
|
|
910 |
|
|
|
(4 |
) |
Corporate
|
|
|
89 |
|
|
|
3 |
|
|
|
- |
|
|
|
(17 |
) |
|
|
75 |
|
|
|
(18 |
) |
Total
net sales
|
|
|
8,090 |
|
|
|
1,095 |
|
|
|
151 |
|
|
|
(25 |
) |
|
|
9,311 |
|
|
|
- |
|
Excise
duties
|
|
|
2,553 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,972 |
|
|
|
|
|
Total
sales
|
|
|
10,643 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
12,283 |
|
|
|
|
|
Operating profit
|
|
2008
Reported
£ million
|
|
|
Exchange(1)
£ million
|
|
|
Acquisitions
disposals
and
transfers(2)
£ million
|
|
|
Organic
movement
£ million
|
|
|
2009
Reported
£ million
|
|
|
Organic
movement
%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North
America
|
|
|
907 |
|
|
|
206 |
|
|
|
45 |
|
|
|
(2 |
) |
|
|
1,156 |
|
|
|
- |
|
Europe
|
|
|
798 |
|
|
|
66 |
|
|
|
(2 |
) |
|
|
(6 |
) |
|
|
856 |
|
|
|
(1 |
) |
International
|
|
|
593 |
|
|
|
(5 |
) |
|
|
- |
|
|
|
57 |
|
|
|
645 |
|
|
|
10 |
|
Asia
Pacific
|
|
|
170 |
|
|
|
(6 |
) |
|
|
- |
|
|
|
- |
|
|
|
164 |
|
|
|
- |
|
Corporate
|
|
|
(164 |
) |
|
|
(94 |
) |
|
_-
|
|
|
|
50 |
|
|
|
(208 |
) |
|
|
|
|
Total
before exceptional items
|
|
|
2,304 |
|
|
|
167 |
|
|
|
43 |
|
|
|
99 |
|
|
|
2,613 |
|
|
|
4 |
|
Exceptional
items
|
|
|
(78 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(170 |
) |
|
|
|
|
|
|
|
2,226 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2,443 |
|
|
|
|
|
Notes: Information
relating to the organic movement calculations
(1)
|
The
exchange adjustments for sales, net sales and operating profit are
primarily the retranslation of prior period reported results at current
period exchange rates and are principally in respect of the US dollar and
the euro.
|
(2)
|
The
impacts of acquisitions, disposals and transfers are excluded from the
organic movement percentages. Transfers represent the movement between
operating units of certain activities. In the year ended 30 June
2009:
|
|
a.
|
Acquisitions
in the year ended 30 June 2008 that affected volume, sales, net sales and
operating profit were the acquisition of Ketel One Worldwide BV, Rosenblum
Cellars and the distribution rights for Zacapa
rum
|
|
b.
|
There
were no disposals
|
|
c.
|
There
were no transfers
|
(3)
|
Operating
exceptional items in the year ended 30 June 2009 comprised charges of £166
million in respect of the global restructuring programme and £4 million in
respect of the restructuring of Irish brewing operations. Operating
exceptional items in the year ended 30 June 2008 comprised restructuring
costs for Irish brewing operations of £78
million.
|
Notes:
Organic movement calculations methodology
a)
|
The
organic movement percentage is the amount in the column headed ‘Organic
movement’ in the tables above expressed as a percentage of the aggregate
of the amounts in the columns headed ‘2008 Reported’, the column headed
‘Exchange’ and the amounts, if any, in respect of disposals and transfers
included in the column headed ‘Acquisitions, disposals and transfers’. The
inclusion of the column headed Exchange in the organic movement
calculation reflects the adjustment to recalculate the prior period
results as if they had been generated at the current period’s exchange
rates.
|
b)
|
Where
a business, brand, brand distribution right or agency agreement was
disposed of, or terminated, in the current period, the group, in organic
movement calculations, adjusts the results for the comparable prior period
to exclude the amount the group earned in that period that it could not
have earned in the current period (i.e. the period between the date in the
prior period, equivalent to the date of the disposal in the current
period, and the end of the prior period). As a result, the organic
movement numbers reflect only comparable performance. Similarly, if a
business was disposed of part way through the equivalent prior period then
its contribution would be completely excluded from that prior period’s
performance in the organic movement calculation, since the group
recognised no contribution from that business in the current
period. In the calculation of operating profit the overheads
included in disposals are only those directly attributable to the
businesses disposed, and do not result from subjective judgements of
management. For acquisitions, a similar adjustment is made in the organic
movement calculations. For acquisitions subsequent to the end of the
equivalent prior period, the post acquisition results in the current
period 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 only included from the anniversary of the
acquisition date in the current
period.
|
Underlying movement in
earnings per share
The
group’s management believes basic earnings per share on an underlying movement
basis provides valuable additional information for users of the financial
statements in understanding the group’s overall performance. The
group’s management believes that the comparison of movements on both a reported
and underlying basis provides information as to the individual components of the
movement in basic earnings per share, being the impact of retranslating prior
period reported results at current period exchange rates and the impact of
exceptional items, acquisitions and disposals and the application of an
underlying tax rate for each period. These measures should be viewed
as complementary to, and not a replacement for, the comparable GAAP measures
such as basic earnings per share and reported movements
therein.
The
underlying movement calculation in earnings per share for the year ended 30 June
2009 was as follows:
|
|
Pence
per
share
(6)
|
|
|
|
|
|
Basic
eps for year ended 30 June 2008
|
|
|
59.3 |
|
Exceptional
items and discontinued operations (1)
|
|
|
1.3 |
|
Tax
equalisation (2)
|
|
|
- |
|
Exchange
(3)
|
|
|
3.6 |
|
IAS
21 and IAS 39 (4)
|
|
|
0.2 |
|
Acquisitions
(5)
|
|
|
- |
|
Adjusted
basic eps for year ended 30 June 2008
|
|
|
64.4 |
|
|
|
|
|
|
Basic
eps for year ended 30 June 2009
|
|
|
65.2 |
|
Exceptional
items and discontinued operations (1)
|
|
|
(0.9 |
) |
Tax
equalisation (2)
|
|
|
- |
|
Exchange (3)
|
|
|
- |
|
IAS
21 and IAS 39 (4)
|
|
|
1.8 |
|
Acquisitions
(5)
|
|
|
0.4 |
|
Adjusted
basic eps for year ended 30 June 2009
|
|
|
66.5 |
|
|
|
|
|
|
Basic
eps growth
|
|
|
10 |
% |
Adjusted
basic eps growth - underlying growth
|
|
|
3 |
% |
|
|
|
|
|
Notes: Information
relating to the current period
|
1)
|
In
the year ended 30 June 2009, there were exceptional charges after tax of
£129 million in respect of
the
global restructuring programme and £4 million for restructuring of Irish
brewing operations. There was an exceptional tax credit of £155 million.
The exceptional items after tax in the year ended 30 June 2008 were a
charge of £61 million comprising a charge of £78 million in respect of the
restructuring of Irish brewing operations and related tax credit of £8
million and a gain of £9 million in respect of business
disposals.
|
|
2)
|
Tax
equalisation - the impact of adjusting the reported tax rate for each
period to the underlying tax rate for each period (see 5 – Underlying tax
rate). No adjustment from the reported tax rate to the
underlying tax rate is required in the years ended 30 June 2009 and 30
June 2008 other than the adjustments made in respect of exceptional items
and discontinued operations.
|
|
3)
|
Exchange
- the exchange adjustments for operating profit and net finance charges
are principally in respect of the US dollar and the
euro. Exchange adjustments are taxed at the underlying tax rate
for the period.
|
|
4)
|
Amounts
under IAS 21 and IAS 39 reported in net finance charges after tax at the
underlying tax rate for each period are excluded from adjusted basic
earnings per share.
|
|
5)
|
Acquisitions
impacting the results for the year ended 30 June 2009 were Ketel One
Worldwide BV, Rosenblum Cellars and the distribution rights for Zacapa
rum.
|
|
6)
|
All
amounts are derived from amounts in £ million divided by the weighted
average number of shares in issue for the year ended 30 June 2009 of 2,485
million (2008 – 2,566 million).
|
Notes:
Underlying organic movement calculations methodology
a)
|
Where
a business, brand, brand distribution right or agency agreement or
investment was disposed of, or terminated, in the current period, the
group, in the underlying movement calculations, adjusts the profit for the
period attributable to equity shareholders for the comparable prior period
to exclude the following: (i) the amount the group earned in that period
that it could not have earned in the current period (i.e. the period
between the date in the prior period, equivalent to the date of the
disposal in the current period, and the end of the prior period); (ii) a
capital return in respect of the reduction in interest charge had the
disposal proceeds been used entirely to reduce borrowings; and (iii)
taxation at the underlying tax rate. As a result, the underlying movement
numbers reflect only comparable performance. Similarly, if a business or
investment asset was disposed of part-way through the equivalent prior
period then its impact on the profit for the period attributable to equity
shareholders (i.e. after adjustment for a capital return from use of the
proceeds of the disposal to reduce borrowings and tax at the underlying
tax rate) would be excluded from that prior period’s performance in the
underlying movement calculation, since the group recognised no
contribution from that business in the current
period.
|
b)
|
Where
a business, brand, brand distribution right or agency agreement or
investment was acquired subsequent to the end of the equivalent prior
period, the group in the underlying movement calculations adjusts the
profit for the current period attributable to equity shareholders to
exclude the following: (i) the amount the group earned in the current
period that it could not have earned in the prior period; (ii) a capital
charge in respect of the increase in interest charge had the acquisition
been funded entirely by an increase in borrowings; and (iii) taxation at
the underlying tax rate. As a result, the underlying movement numbers
reflect only comparable performance. Similarly, if a business or
investment asset was acquired part way through the equivalent prior period
then its impact on the profit for the period attributable to equity
shareholders (i.e. after adjustment for a capital charge for the funding
of the acquisition and tax at the underlying tax rate) would be adjusted
only to include the results from the anniversary of the acquisition in the
current period’s performance in the underlying movement
calculation.
|
c)
|
The
exchange effects of IAS 21 in respect of short term inter-company funding
balances and IAS 39 in respect of market value movements as recognised in
net finance charges net of tax at the underlying tax rate are removed from
both the current and prior period as part of the underlying movement
calculation.
|
d)
|
Underlying
movement percentages for basic earnings per share are calculated as the
underlying movement amount in pence, expressed as the percentage of the
prior period results at current period exchange rates, and after making an
adjustment in each period for exceptional items, tax equalisation, the
impacts of IAS 21 and IAS 39 on net finance charges and acquisitions and
disposals.
|
Free
cash flow is a non-GAAP measure that comprises the net cash flow from operating
activities as well as the net purchase and disposal of investments and property,
plant and equipment that form part of net cash flow from investing activities.
The group’s management believes the measure assists users of the financial
statements in understanding the group’s cash generating performance as it
comprises items which arise from the running of the ongoing
business.
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 purchase and disposal
of subsidiaries, associates and businesses. The group’s management regards the
purchase and disposal of property, plant and equipment as ultimately
non-discretionary since ongoing investment in plant and machinery is required to
support the day-to-day operations, whereas acquisitions and disposals of
businesses are discretionary. However, free cash flow does not necessarily
reflect all amounts which the group has either a constructive or legal
obligation to incur. Where appropriate, separate discussion is given for the
impacts of acquisitions
and disposals of businesses, equity 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.
The
free cash flow measure is also used by management for their own planning,
budgeting, reporting and incentive purposes since it provides information on
those elements of performance which local managers are most directly able to
influence.
3.
|
Return
on average total invested capital
|
Return
on average total invested capital is a non-GAAP measure that is used by
management to assess the return obtained from the group’s asset base. This
measure is not specifically used in the consolidated financial statements, but
is calculated to aid comparison of the performance of the business.
The
profit used in assessing the return on total invested capital reflects the
operating performance of the business after applying the underlying tax rate for
the period stated before exceptional items and interest. Average total
invested capital is calculated using the average derived from the consolidated
balance sheets at the beginning, middle and the end of the period. Capital
employed comprises net assets for the period, excluding post employment benefit
net liabilities (net of deferred tax) and net borrowings. This average capital
employed is then aggregated with the restructuring and integration costs net of
tax, and goodwill written off to reserves at 1 July 2004, the date of transition
to IFRS, to obtain the average total invested capital.
Calculations
for the return on average total invested capital for the years ended 30 June
2009 and 30 June 2008 were as follows:
|
|
2009
|
|
|
2008
|
|
|
|
£
million
|
|
|
£
million
|
|
|
|
|
|
|
|
|
Operating
profit
|
|
|
2,443 |
|
|
|
2,226 |
|
Exceptional
items
|
|
|
170 |
|
|
|
78 |
|
Associates’
profits after interest and taxation
|
|
|
164 |
|
|
|
177 |
|
Tax
at the underlying tax rate of 22.2% (2008 – 24.5%)
|
|
|
(616 |
) |
|
|
(608 |
) |
|
|
|
2,161 |
|
|
|
1,873 |
|
|
|
|
|
|
|
|
|
|
Average
net assets (excluding net post employment liabilities)
|
|
|
4,810 |
|
|
|
4,411 |
|
Average
net borrowings
|
|
|
7,427 |
|
|
|
5,672 |
|
Average
integration and restructuring costs (net of tax)
|
|
|
1,049 |
|
|
|
955 |
|
Goodwill
at 1 July 2004
|
|
|
1,562 |
|
|
|
1,562 |
|
Average
total invested capital
|
|
|
14,848 |
|
|
|
12,600 |
|
|
|
|
|
|
|
|
|
|
Return
on average total invested capital
|
|
|
14.6 |
% |
|
|
14.9 |
% |
Economic
profit is a non-GAAP measure that is used by management to assess the group’s
return from its asset base compared to a standard cost of capital charge. The
measure is not specifically used in the consolidated financial statements, but
is calculated to aid comparison of the performance of the business.
The
profit used in assessing the return from the group’s asset base and the asset
base itself are the same as those used in the calculation for the return on
average total invested capital (see 3 above). The standard capital charge
applied to the average total invested capital is currently 9%, being
management’s assessment of a constant minimum level of return that the group
expects to generate from its asset base. Economic profit is calculated as the
difference between the standard capital charge on the average invested assets
and the actual return achieved by the group on those assets.
Calculations
for economic profit for the years ended 30 June 2009 and 30 June 2008 were as
follows:
|
|
2009
|
|
|
2008
|
|
|
|
£
million
|
|
|
£
million
|
|
|
|
|
|
|
|
|
Average
total invested capital (see 3 above)
|
|
|
14,848 |
|
|
|
12,600 |
|
|
|
|
|
|
|
|
|
|
Operating
profit
|
|
|
2,443 |
|
|
|
2,226 |
|
Exceptional
items
|
|
|
170 |
|
|
|
78 |
|
Associates’
profit after interest and taxation
|
|
|
164 |
|
|
|
177 |
|
Tax
at the underlying tax rate of 22.2% (2008 – 24.5%)
|
|
|
(616 |
) |
|
|
(608 |
) |
|
|
|
2,161 |
|
|
|
1,873 |
|
Capital
charge at 9% of average total invested capital
|
|
|
(1,336 |
) |
|
|
(1,134 |
) |
Economic
profit
|
|
|
825 |
|
|
|
739 |
|
The
underlying tax rate is a non-GAAP measure that reflects the adjusted tax charge
on profit from continuing businesses before exceptional items as a percentage of
profit from continuing businesses before exceptional items. The underlying tax
rate is also used by management for their own planning, budgeting, reporting and
incentive purposes since it provides information on those elements of
performance which management is most directly able to influence.
The
group's management believe the measure assists users of the financial statements
in understanding the group's effective tax rate as it reflects the tax arising
on the profits from the ongoing business.
The
components of the reported tax charge which do not form part of the adjusted tax
charge, as defined by the group's management, relate to tax on items reported as
exceptional, movement on deferred tax assets arising from intragroup
reorganisations which are due to changes in estimates in expected future
utilisation, any other tax charge or credit that arises from intra-group
reorganisations and items which are offset by credits or debits in discontinued
operations.
The
group’s reported tax rate for the year ended 30 June 2009 is 14.5% (2008 –
24.9%). Adjusting the reported tax rate to exclude the exceptional tax credit of
£155 million in respect of the impact of settlements agreed with tax authorities
and the net operating exceptional charges of £170 million and the associated tax
credit of £37 million, the group has an underlying tax rate of 22.2% for the
year ended 30 June 2009. Adjusting the reported tax rate for the year ended 30
June 2008 to exclude the net exceptional charges of £69 million and the
associated tax credit of £8 million, the group had an underlying tax rate of
24.5%.
6. Interest
cover
The
income statement interest cover is defined as the number of times that the sum
of operating profit before exceptional items and share of associates’ profits
after tax exceeds net interest payable.
Cash
interest cover is defined as the number of times that the sum of operating
profit before exceptional items, depreciation and amortisation and dividends
from associates exceeds the net interest cash flow.
The
group’s management believe that these measures assist users of the financial
statements in understanding the liquidity position of the ongoing
business.
RISK
FACTORS
Diageo
believes the following to be the principal risks and uncertainties facing the
group. If any of these risks occur, Diageo’s business, financial condition and
results of operations could suffer and the trading price and liquidity of
securities could decline.
In
the current global financial crisis and uncertain economic environment, certain
risks may gain more prominence either individually or when taken together. The
following are examples of ways that any of the risks below may become so
exacerbated. Demand for beverage alcohol products, in particular luxury or super
premium products, may decrease with a reduction in consumer spending levels.
Costs of operations may increase if inflation were to become prevalent in the
economic environment, resulting in an increase in the costs of raw materials.
These factors may also lead to intensified competition for market share, with
consequential potential adverse effects on volumes and prices. The financial and
economic situation may have a negative impact on third parties with whom Diageo
does, or may do, business. Any of these factors may affect the group’s results
of operations, financial condition and liquidity.
If
there is an extended period of constraint in the capital markets, with debt
markets in particular experiencing a lack of liquidity, at a time when cash
flows from Diageo’s business may be under pressure, this may have an impact on
Diageo’s ability to maintain current long term strategies, with a consequent
effect on the group’s growth rate. Such developments may adversely affect
shareholder returns or share price. Additionally, continued volatility in
exchange rates used to translate foreign currencies into pounds sterling may
have a significant impact on Diageo’s reported results. Decreases in the
trustees’ valuations of Diageo’s pension plans may also increase pension funding
requirements.
Diageo faces competition that may
reduce its market share and margins Diageo faces substantial competition
from several international companies as well as local and regional companies in
the countries in which it operates. Diageo competes with drinks companies across
a wide range of consumer drinking occasions. Within a number of categories,
consolidation or realignment is still possible. Consolidation is also taking
place amongst Diageo’s customers in many countries. Increased competition and
unanticipated actions by competitors or customers could lead to downward
pressure on prices and/or a decline in Diageo’s market share in any of these
categories, which would adversely affect Diageo’s results and hinder its growth
potential.
Diageo may not be able to derive the
expected benefits from its strategy to focus on premium drinks or its
cost-saving and restructuring programmes designed to enhance earnings
Diageo’s strategy is to focus on premium drinks to grow its business through
organic sales and operating profit growth and the acquisition of premium drinks
brands that add value for shareholders. There can be no assurance that Diageo’s
strategic focus on premium drinks will result in opportunities for growth and
improved margins. It is possible that the pursuit of this strategic focus on
premium drinks could give rise to further acquisitions (including associated
financing), disposals, joint ventures or partnerships. There can be no guarantee
that any such acquisition, disposal, joint venture or partnership would deliver
the benefits intended. Similarly, there can be no assurance that the
cost-savings or restructuring programmes implemented by Diageo in order to
improve efficiencies and deliver cost-savings will deliver the expected
benefits.
Systems change programmes may not
deliver the benefits intended and systems failures could lead to business
disruption Certain change programmes designed to improve the
effectiveness and efficiency of end-to-end operating, administrative and
financial systems and processes continue to be undertaken. This includes moving
transaction processing from a number of markets to business service centres.
There can be no certainty that these programmes will deliver the expected
operational benefits. There is likely to be disruption caused to production
processes and possibly to administrative and financial systems as further
changes to such processes are effected. They could also lead to adverse customer
or consumer reaction. Any failure of information systems could adversely impact
on Diageo’s ability to operate. As with all large systems, Diageo’s information
systems could be penetrated by outside parties intent on extracting information,
corrupting information or disrupting business processes. Such unauthorised
access could disrupt Diageo’s business and/or lead to loss of assets. The
concentration of processes in business service centres also means that any
disruption arising from system failure or physical plant issues could impact on
a large portion of Diageo’s global business.
Regulatory decisions and changes in
the legal and regulatory environment could increase Diageo’s costs and
liabilities or limit its business activities Diageo’s operations are
subject to extensive regulatory requirements which include those in respect of
production, product liability, distribution, importation, marketing, promotion,
labelling, advertising, labour, pensions and environmental issues. Changes in
laws, regulations or governmental policy could cause Diageo to incur material
additional costs or liabilities that could adversely affect its business. In
particular, governmental bodies in countries where Diageo operates may impose
new labelling, product or production requirements, limitations on the
advertising and/or promotion activities used to market beverage alcohol,
restrictions on retail outlets, other restrictions on marketing, promotion and
distribution or other restrictions on the locations or occasions where beverage
alcohol is sold which directly or indirectly limit the sales of Diageo products.
Regulatory authorities under whose laws Diageo operates may also have
enforcement power that can subject the group to actions such as product recall,
seizure of products or other sanctions, which could have an adverse effect on
its sales or damage its reputation.
In
addition, beverage alcohol products are the subject of national import and
excise duties in most countries around the world. An increase in import or
excise duties could have a significant adverse effect on Diageo’s sales revenue
or margin, both through reducing overall consumption and by encouraging
consumers to switch to lower-taxed categories of beverage alcohol.
Diageo’s
reported after tax income is calculated based on extensive tax and accounting
requirements in each of its relevant jurisdictions of operation. Changes in tax
law (including tax rates), accounting policies and accounting standards could
materially reduce Diageo’s reported after tax income.
Diageo is subject to litigation
directed at the beverage alcohol industry and other litigation Companies
in the beverage alcohol industry are, from time to time, exposed to class action
or other litigation relating to alcohol advertising, product liability, alcohol
abuse problems or health consequences from the misuse of alcohol, and Diageo is
routinely subject to litigation in the ordinary course of its operations. If
such litigation resulted in fines, damages or reputational damage to Diageo or
its brands, Diageo’s business could be materially adversely
affected.
Contamination, counterfeiting or
other circumstances could harm the integrity of or customer support for Diageo’s
brands and adversely affect the sales of those brands The success of
Diageo’s brands depends upon the positive image that consumers have of those
brands, and contamination, whether arising accidentally, or through deliberate
third-party action, or other events that harm the integrity of or consumer
support for those brands, could adversely affect their sales. Diageo purchases
most of the raw materials for the production and packaging of its products from
third-party producers or on the open market. Diageo may be subject to liability
if contaminants in those raw materials or defects in the distillation,
fermentation or bottling process lead to low beverage quality or illness among,
or injury to, Diageo’s consumers. In addition, Diageo may voluntarily
recall products in the event of contamination or damage. A significant product
liability judgment or a widespread product recall may negatively impact sales
and profitability of the affected brand or all Diageo brands for a period of
time depending on product availability, competitive reaction, and consumer
attitudes. Even if a product liability claim is unsuccessful or is not fully
pursued, resulting negative publicity could adversely affect Diageo’s reputation
with existing and potential customers and its corporate and brand
image.
To
the extent that third parties sell products that are either counterfeit versions
of Diageo brands or inferior brands that look like Diageo brands, consumers of
Diageo brands could confuse Diageo products with them. This could cause them to
refrain from purchasing Diageo brands in the future and in turn could impair
brand equity and adversely affect Diageo’s business.
Demand for Diageo’s products may be
adversely affected by changes in consumer preferences and tastes and adverse
impacts of a declining economy Diageo’s collection of brands includes
some of the world’s leading beverage alcohol brands as well as brands of local
prominence. Maintaining Diageo’s competitive position depends on its continued
ability to offer products that have a strong appeal to consumers. Consumer
preferences may shift due to a variety of factors including changes in
demographic and social trends, public health regulations, changes in travel,
vacation or leisure activity patterns, weather effects and a downturn in
economic conditions, which may reduce consumers’ willingness to purchase premium
branded products. In addition, concerns about health effects due to negative
publicity regarding alcohol consumption, negative dietary effects, regulatory
action or any litigation or customer complaints against companies in the
industry may have an adverse effect on Diageo’s profitability.
The
competitive position of Diageo’s brands could also be affected adversely by any
failure to achieve consistent, reliable quality in the product or service levels
to customers.
In
addition, both the launch and ongoing success of new products is inherently
uncertain especially as to their appeal to consumers. The failure to launch a
new product successfully can give rise to inventory write offs and other costs
and can affect consumer perception of an existing brand. Growth in Diageo’s
business has been based on both the launch of new products and the growth of
existing products. Product innovation remains a significant aspect of Diageo’s
plans for growth. There can be no assurance as to Diageo’s continuing ability to
develop and launch successful new products or variants of existing products or
as to the profitable lifespan of newly or recently developed
products.
Any
significant changes in consumer preferences and failure to anticipate and react
to such changes could result in reduced demand for Diageo’s products and erosion
of its competitive and financial position. Continued economic pressures could
lead to consumer selection of products at lower price points, whether Diageo’s
or those of competitors, which may have an adverse effect on Diageo’s
profitability.
If the social acceptability of
Diageo’s products declines, Diageo’s sales volume could decrease and the
business could be materially adversely affected In recent years, there
has been increased social and political attention directed to the beverage
alcohol industry. Diageo believes that this attention is the result of public
concern over problems related to alcohol abuse, including drink driving,
underage drinking and health consequences from the misuse of alcohol. If, as a
result, the general social acceptability of beverage alcohol were to decline
significantly, sales of Diageo’s products could materially
decrease.
Diageo’s operating results may be
adversely affected by increased costs or shortages of labour Diageo’s
operating results could be adversely affected by labour or skill shortages or
increased labour costs due to increased competition for employees, higher
employee turnover or increased employee benefit costs. Diageo’s success is
dependent on the capability of its employees. There is no guarantee that Diageo
will continue to be able to recruit, retain and develop the capabilities that it
requires to deliver its strategy, for example in relation to sales, marketing
and innovation capability within markets or in its senior management. The loss
of senior management or other key personnel or the inability to identify,
attract and retain qualified personnel in the future could make it difficult to
manage the business and could adversely affect operations and financial
results.
Diageo’s operating results may be
adversely affected by disruption to production facilities or business service
centres Diageo would be affected if there were a catastrophic failure of
its major production facilities or business service centres. In addition, the
maintenance and development of information systems may result in systems
failures which may adversely affect business operations.
Diageo
has a substantial inventory of aged product categories, principally scotch
whisky and Canadian whisky, which mature over periods of up to 30 years. The
maturing inventory is stored primarily in Scotland, and the loss through
contamination, fire or other natural disaster of all or a portion of the stock
of any one of those aged product categories could result in a significant
reduction in supply of those products, and consequently, Diageo would not be
able to meet consumer demand for those products as it arises. There can be no
assurance that insurance proceeds would cover the replacement value of Diageo’s
maturing inventory or other assets, were such assets to be lost due to
contamination, fire or natural disasters or destruction resulting from
negligence or the acts of third parties. In addition, there is an inherent risk
of forecasting error in determining the quantity of maturing stock to lay down
in a given year for future consumption. This could lead to an inability to
supply future demand or lead to a future surplus of inventory and consequent
write down in value of maturing stocks.
An increase in the cost of raw
materials or energy could affect Diageo’s profitability The components
that Diageo uses for the production of its beverage products are largely
commodities that are subject to price volatility caused by changes in global
supply and demand, weather conditions, agricultural uncertainty and/or
governmental controls. Commodity price changes may result in unexpected
increases in the cost of raw materials, glass bottles and other packaging
materials and Diageo’s beverage products. Diageo may also be adversely affected
by shortages of raw materials or packaging materials. In addition, energy cost
increases result in higher transportation, freight and other operating costs.
Diageo may not be able to increase its prices to offset these increased costs
without suffering reduced volume, sales and operating profit. Diageo may
experience significant increases in commodity costs and energy
costs.
Diageo’s business may be adversely
impacted by unfavourable economic conditions or political or other developments
and risks in the countries in which it operates Diageo’s business is
dependent on general economic conditions in the United States, Great Britain and
other important markets. A significant deterioration in these conditions,
including a reduction in consumer spending levels, customer de-stocking, the
failure of customer, supplier or financial counterparties or a reduction in the
availability of, or an increase in the cost of financing to, Diageo, could have
a material adverse effect on Diageo’s business and results of operations. In
addition, Diageo may be adversely affected by political and economic
developments or industrial action in any of the countries where Diageo has
distribution networks, production facilities or marketing companies. Diageo’s
operations are also subject to a variety of other risks and uncertainties
related to trading in numerous foreign countries, including political or
economic upheaval and the imposition of any import, investment or currency
restrictions, including tariffs and import quotas or any restrictions on the
repatriation of earnings and capital. Political and/or social unrest, potential
health issues (including pandemic issues) and terrorist threats and/or acts may
also occur in various places around the world, which will have an impact on
trade, tourism and travel. These disruptions can affect Diageo’s ability to
import or export products and to repatriate funds, as well as affecting the
levels of consumer demand (for example in duty free outlets at airports or in on
trade premises in affected regions) and therefore Diageo’s levels of sales or
profitability.
Part
of Diageo’s growth strategy includes expanding its business in certain countries
where consumer spending in general, and spending on Diageo’s products in
particular, has not historically been as great but where there are prospects for
growth. There is no guarantee that this strategy will be successful and some of
the markets represent a higher risk in terms of their changing regulatory
environments and higher degree of uncertainty over levels of consumer
spending.
Diageo
may also be adversely affected by movements in the value of, and returns from,
the investments held by its pension funds.
Diageo
may be adversely affected by fluctuations in exchange rates. The results of
operations of Diageo are accounted for in pounds sterling. Approximately 37% of
sales in the year ended 30 June 2009 were in US dollars, approximately 12% were
in sterling and approximately 18% were in euros. Movements in exchange rates
used to translate foreign currencies into pounds sterling may have a significant
impact on Diageo’s reported results of operations from year to
year.
Diageo
may also be adversely impacted by fluctuations in interest rates, mainly through
an increased interest expense. To partly delay any adverse impact from interest
rate movements, the group’s policy is to maintain fixed rate borrowings within a
band of 40% to 60% of projected net borrowings, and the overall net borrowings
portfolio is managed according to a duration measure.
Diageo’s operations may be adversely
affected by failure to maintain or renegotiate distribution, supply and
manufacturing agreements on favourable terms Diageo’s business has a
number of distribution agreements for brands owned by it or by other companies.
These agreements vary depending on the particular brand, but tend to be for a
fixed number of years. There can be no assurance that Diageo will be able to
renegotiate distribution rights on favourable terms when they expire or that
agreements will not be terminated. Failure to renew distribution agreements on
favourable terms could have an adverse impact on Diageo’s sales and operating
profit. In addition, Diageo’s sales and operating profit may be adversely
affected by any disputes with distributors of its products or suppliers of raw
materials, or a failure to renew supply or manufacturing agreements on
favourable terms.
Diageo may not be able to protect its
intellectual property rights Given the importance of brand recognition to
its business, Diageo has invested considerable effort in protecting its
intellectual property rights, including trademark registration and domain names.
Diageo’s patents cover some of its process technology, including some aspects of
its bottle marking technology. Diageo also uses security measures and agreements
to protect its confidential information. However, Diageo cannot be certain that
the steps it has taken will be sufficient or that third parties will not
infringe on or misappropriate its intellectual property rights. Moreover, some
of the countries in which Diageo operates offer less intellectual property
protection than Europe or North America. Given the attractiveness of Diageo’s
brands to consumers, it is not uncommon for counterfeit products to be
manufactured. Diageo cannot be certain that the steps it takes to prevent,
detect and eliminate counterfeit products will be effective in preventing
material loss of profits or erosion of brand equity resulting from lower quality
or even dangerous counterfeit product reaching the market. If Diageo is unable
to protect its intellectual property rights against infringement or
misappropriation, this could materially harm its future financial results and
ability to develop its business.
It may be difficult to effect service
of US process and enforce US legal process against the directors of
Diageo Diageo is a public limited company incorporated under the laws of
England and Wales. The majority of Diageo’s directors and officers, and some of
the experts named in this document, reside outside of the United States,
principally in the United Kingdom. A substantial portion of Diageo’s assets, and
the assets of such persons, are located outside of the United States. Therefore,
it may not be possible to effect service of process within the United States
upon Diageo or these persons in order to enforce judgements of US courts against
Diageo or these persons based on the civil liability provisions of the US
federal securities laws. There is doubt as to the enforceability in England and
Wales, in original actions or in actions for enforcement of judgements of US
courts, of civil liabilities solely based on the US federal securities
laws.
Cautionary statement concerning
forward-looking statements
This
announcement contains ‘forward-looking statements’. These forward-looking
statements can be identified by the fact that they do not relate only to
historical or current facts. In particular, forward looking statements include
all statements that express forecasts, expectations, plans, outlook and
projections with respect to future matters, including trends in results of
operations, margins, growth rates, overall market trends, the impact of interest
or exchange rates, the availability or cost of financing to Diageo, anticipated
cost savings or synergies, the completion of Diageo’s strategic transactions and
general economic conditions. By their nature, forward-looking statements involve
risk and uncertainty because they relate to events and depend on circumstances
that will occur in the future. There are a number of factors that could cause
actual results and developments to differ materially from those expressed or
implied by these forward-looking statements, including factors that are outside
Diageo’s control.
These
factors include, but are not limited to:
·
|
global economic
downturn;
|
·
|
increased competitive product
and pricing pressures and unanticipated actions by competitors that could
impact on Diageo’s market share, increase expenses and hinder growth
potential;
|
·
|
the effects of business
combinations, partnerships, acquisitions or disposals, existing or future,
and the ability to realise expected synergies and/or cost
savings;
|
·
|
Diageo’s ability to complete
existing or future acquisitions and
disposals;
|
·
|
legal and regulatory
developments, including changes in regulations regarding consumption of,
or advertising for, beverage alcohol, changes in tax law (including tax
rates) or accounting standards, changes in taxation requirements, such as
the impact of excise tax increases with respect to the business, and
changes in environmental laws, health regulations and laws governing
pensions;
|
·
|
developments in any litigation
or other similar proceedings directed at the drinks and spirits industry
generally or at Diageo in particular, or the impact of a product recall or
product liability claim on Diageo’s profitability or
reputation;
|
·
|
developments in the Colombian
litigation, Turkish customs litigation or any similar
proceedings;
|
·
|
changes in consumer
preferences and tastes, demographic trends or perception about health
related issues or contamination, counterfeiting or other circumstances
which could harm the integrity or sales of Diageo’s
brands;
|
·
|
changes in the cost of raw
materials, labour and/or
energy;
|
·
|
changes in economic conditions
in countries and markets in which Diageo operates, including changes in
levels of consumer spending and failure of customer, supplier and
financial counterparties;
|
·
|
levels of marketing,
promotional and innovation expenditure by Diageo and its
competitors;
|
·
|
renewal of distribution or
licence manufacturing rights on favourable terms when they
expire;
|
·
|
termination of existing
distribution or licence manufacturing rights on agency
brands;
|
·
|
systems change programmes,
existing or future, and the ability to derive expected benefits from such
programmes, and systems failure that could lead to business
disruption;
|
·
|
technological developments
that may affect the distribution of products or impede Diageo’s ability to
protect its intellectual property rights;
and
|
·
|
changes in financial and
equity markets, including significant interest rate and foreign currency
exchange rate fluctuations and changes in the cost of capital, which may
reduce or eliminate Diageo’s access to or increase the cost of financing
or which may affect Diageo’s financial
results.
|
All
oral and written forward-looking statements made on or after the date of this
announcement and attributable to Diageo are expressly qualified in their
entirety by the above factors and those listed under ‘Risk factors’ above. Any
forward-looking statements made by or on behalf of Diageo speak only as of the
date they are made. Diageo does not undertake to update forward-looking
statements to reflect any changes in Diageo's expectations or any changes in
events, conditions or circumstances on which any such statement is based. The
reader should, however, consult any additional disclosures that Diageo may make
in any documents which it publishes and/or files with the US Securities and
Exchange Commission. All readers, wherever located, should take note of these
disclosures.
The
content of the company’s website www.diageo.com should
not be considered to form a part of or be incorporated into this
announcement.
The
information in this announcement does not constitute an offer to sell or an
invitation to buy shares in Diageo plc or an invitation or inducement to engage
in any other investment activities.
This
announcement includes information about Diageo’s debt rating. A security rating
is not a recommendation to buy, sell or hold securities and may be subject to
revision or withdrawal at any time by the assigning rating organisation. Each
rating should be evaluated independently of any other rating.
Past
performance cannot be relied upon as a guide to future performance.
Responsibility
statements
The
Annual Report for the year ended 30 June 2009, which will be published on 15
September 2009, complies with the Disclosure and Transparency Rules of the
United Kingdom’s Financial Services Authority in respect of the requirement to
produce an Annual Financial Report. N.C. Rose, Finance Director,
confirmed on behalf of the board that, to the best of his
knowledge:
the
consolidated financial statements contained in the Annual Report for the year
ended 30 June 2009, which have been prepared in accordance with IFRS as adopted
by the EU and as issued by the IASB, give a true and fair view of the assets,
liabilities, financial position and profit of the group; and
the
management report represented by the directors’ report contained in the Annual
Report for the year ended 30 June 2009 includes a fair review of the development
and performance of the business and the position of the group, together with a
description of the principal risks and uncertainties that the group
faces.
For
further information
Preliminary Results
Webcast
At 09.30
(UK time) on Thursday 27 August, Paul Walsh, CEO and Nick Rose, CFO will present
Diageo’s Preliminary Results as a webcast. This will be available to
view at www.diageo.com. The
presentation slides will be available from 08.45 (UK time). The
transcript will be available after 11.00 (UK time) and both will be available
for download at www.diageo.com. An
archived video and podcast of the presentation and Q&A session will also be
made available later that day.
If you
would like to ask a question during the live Q&A session, please use the
following dial-in numbers:
UK Toll
free – 0800 279 9640
North
America Toll free – 1866 850 2201
France
Toll free – 0805 770 152
Germany
Toll free – 0800 673 8355
Ireland
Toll free – 1800 944 322
Italy
Toll free – 800 976 303
Netherlands
Toll free – 0800 265 9174
Spain
Toll free – 800 099 797
Switzerland
Toll free – 0800 000 287
International –
+44 (0)20 7138 0829
Please quote confirmation
code: 3284633
A
transcript of the Q&A session will be available for download at www.diageo.com on 28
August.
US Conference
Call
Paul
Walsh, CEO and Nick Rose, CFO will host a conference call for US analysts and
investors at 10.00 EST, 15.00 UK time) on Thursday 27 August. To
participate, please use the following dial-in numbers:
UK Toll
free – 0800 279 9640
North
America Toll free – 1866 850 2201
France
Toll free – 0805 770 155
Germany
Toll free – 0800 673 8354
Ireland
Toll free – 1800 944 322
Italy
Toll free – 800 088 737
Netherlands
Toll free – 0800 265 9175
Spain
Toll free – 800 099 797
Switzerland
Toll free – 0800 000 287
International –
+44 (0)20 7138 0828
Please quote confirmation
code: 8538724
A
transcript of the Conference Call will be available for download at www.diageo.com on 28
August.
Conference Call
Replay
The
conference call will also be available on instant replay from 17.00 (UK time)
and will be available until 31 December 2009. Please use the
following dial-in numbers:
UK Toll
free – 0800 358 7743
North
America Toll free – 1866 883 4489
France
Toll free – 0800 911 479
Germany
Toll free – 0800 181 4459
Ireland
Toll free – 1800 994 326
Italy
Toll free – 800 088 747
Netherlands
Toll free – 0800 027 0028
Switzerland
Toll free – 0800 000 289
International –
+44 (0)20 7806 1970
Please quote confirmation
code: 8538724
Investor
enquiries to:
|
Stephen
Howe
|
+44
(0) 20 7927 4216
|
|
Nick
Temperley
|
+44
(0) 20 7927 4223
|
|
Kelly
Padgett
|
+1
202 715 1110
|
|
|
|
|
|
|
Media
enquiries to:
|
James
Crampton
|
+44
(0) 20 7927 4613
|
|
Cecilia
Coonan
|
+44
(0) 20 7927 5749
|
|
|
|
Company
|
Diageo PLC
|
TIDM
|
DGE
|
Headline
|
Board
Appointment
|
Released
|
09:04
27-Aug-2009
|
Number
|
0980Y09
|
RNS
Number : 0980Y
Diageo
PLC
27 August
2009
27 August
2009
DIAGEO
ANNOUNCES APPOINTMENT TO ITS BOARD OF DIRECTORS
Diageo
has announced the appointment of Betsy D. Holden to its Board effective 1
September 2009. Her responsibilities will include membership of the Audit, the
Nomination and the Remuneration Committees. Ms Holden has over 25 years of
experience in consumer goods and is currently a Senior Advisor to McKinsey &
Company with a specific focus on strategy, marketing and innovation. She
previously held senior roles at Kraft Foods Inc, including President, Global
Marketing and Category Development, and Co-Chief Executive Officer, Kraft Foods,
Inc.
Commenting
on the appointment, Diageo Chairman Dr Franz Humer said:
""Betsy's
long career as a leader in the consumer goods industry internationally and
in the US will be a great asset to Diageo. I look forward to welcoming
her to the Board."
ENDS
Enquiries
Diageo Investor
Relations
Stephen
Howe
+44 (0)20
7927 4216
Diageo Media
Relations
James
Crampton
+44 (0)20
7927 4613
Notes
to Editor
About Betsy D.
Holden
Betsy D.
Holden is a Senior Advisor to McKinsey & Company. Ms Holden was formerly
Co-CEO of Kraft Foods and CEO of Kraft Foods North America. Kraft Foods is the
largest food company in North America and the second largest in the
world.
She has
over 25 years of experience in consumer goods with expertise in general
management, strategy, marketing and innovation. In addition to her CEO role at
Kraft, Ms Holden also held the positions of President, Global Marketing and
Category Development; Executive Vice President with responsibility for
Operations, Procurement, R&D, and Consumer Insights and Communications;
President of the Kraft Cheese Division; President of the Pizza Division; plus
multiple line brand management assignments.
Betsy
Holden serves on the Boards of Tribune Company, Western Union Company, MediaBank
LLC, the Kellogg School of Management Dean's Advisory Board, and Duke
University's Trinity College Board of Visitors. Betsy also is a Senior Fellow of
the Kellogg Innovation Network, President of the Board of Off the Street Club,
serves on the Board of the Chicago High School for the Arts and the Board of
Trustees of the Museum of Science and Industry. She is a member of the Economic
Club of Chicago, the Commercial Club of Chicago, and the Chicago Network.
About
Diageo
Diageo is
the world's leading premium drinks business with an outstanding collection of
beverage alcohol brands across spirits, wines, and beer categories. These brands
include Johnnie Walker, Guinness, Smirnoff, J&B, Baileys, Cuervo, Tanqueray,
Captain Morgan, Crown Royal, Beaulieu Vineyard and Sterling Vineyards
wines.
Diageo is
a global company, trading in more than 180 countries around the world. The
company is listed on both the New York Stock Exchange (DEO) and the London Stock
Exchange (DGE). For more information about Diageo, its people, brands, and
performance, visit us at Diageo.com. For our global resource that promotes
responsible drinking through the sharing of best practice tools, information and
initiatives, visit DRINKiQ.com.
This
information is provided by RNS
The
company news service from the London Stock Exchange
END
Company
|
Diageo PLC
|
TIDM
|
DGE
|
Headline
|
Transaction
in Own Shares
|
Released
|
14:51
28-Aug-2009
|
Number
|
91450-E9FC
|
TO: Regulatory
Information Service
PR
Newswire
RE: PARAGRAPH
12.6.4 OF THE LISTING RULES
Diageo
plc - Transaction in Own Shares
Diageo
plc (the 'Company') announces that today, it released from treasury 12,898
ordinary shares of 28 101/108 pence each ('Ordinary Shares'), to satisfy
grants
made under employee share plans. The average price at which these Ordinary
Shares were released from treasury was 976.71 pence per share.
Following
this release, the Company holds 254,254,408 Ordinary Shares as treasury
shares and the total number of Ordinary Shares in issue (excluding shares
held as treasury shares) is 2,499,664,701.
28 August
2009
END
Company
|
Diageo PLC
|
TIDM
|
DGE
|
Headline
|
Total
Voting Rights
|
Released
|
14:53
28-Aug-2009
|
Number
|
91452-18A6
|
TO: Regulatory
Information Service
PR
Newswire
RE: Paragraph
5.6.1 of the Disclosure and Transparency Rules
Diageo
plc - Voting Rights and Capital
In
conformity with Paragraph 5.6.1 of the Disclosure and Transparency Rules
Diageo
plc (the 'Company') would like to notify the market of the following:
The
Company's issued capital consists of 2,753,919,109 ordinary shares of 28
101/108
pence each ('Ordinary Shares') with voting rights, which includes 254,254,408
Ordinary Shares held in Treasury.
Therefore,
the total number of voting rights in the Company is 2,499,664,701 and this
figure may be used by shareholders as the denominator for the calculations
by which they will determine if they are required to notify their interest
in, or a change to their interest in, the Company under the FSA's Disclosure
and Transparency Rules.
28 August
2009
END