Blueprint
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
26 July 2018
Commission File Number: 001-10691
DIAGEO plc
(Translation
of registrant’s name into English)
Lakeside Drive, Park Royal, London NW10 7HQ
(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 is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule
101(b)(1):
Indicate
by check mark whether the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule
101(b)(7):
Preliminary results, year ended 30 June 2018
26 July 2018
This document contains inside information
Strong performance reflects consistent and rigorous execution of
our strategy
|
●
Reported net sales (£12.2
billion) and operating profit (£3.7 billion) were up 0.9% and
3.7%, respectively, as organic growth was partially offset by
adverse exchange
●
All regions contributed to
broad based organic growth, with organic net sales up 5.0% and
organic volume up 2.5%
●
Organic operating profit was
up 7.6%, improving organic operating margins by 78 basis points, as
higher marketing investment was more than offset by efficiencies
from our productivity programme
●
Cash flow continued to be
strong, broadly in line with last year, with £3.1 billion net
cash from operating activities and £2.5 billion free cash
flow
●
Basic eps of 121.7 pence was up
14.8%. Pre-exceptional eps was 118.6 pence, up 9.3%, principally
due to higher organic operating profit
●
On 26 July the Board
approved a share buyback programme to return up to £2.0
billion to shareholders during the year ending 30 June
2019
●
The board recommended a
final dividend increase of 5% bringing the full year dividend to
65.3 pence per share
See explanatory notes for explanation of the use
of non-GAAP measures.
Ivan Menezes, Chief Executive, commenting on the results
said:
|
"Diageo
has delivered another year of strong, consistent performance.
Organic volume and net sales growth is broad based across regions
and categories. We have expanded organic operating margin while
increasing investment behind our brands ahead of organic net sales
growth.
These
results reflect the high performance culture we have created in
Diageo, the ongoing rigorous execution of our strategy, our focus
on the consumer and our ability to move swiftly on trends and
insights.
During
the year we returned £1.5 billion to shareholders through a
share buyback. We have delivered another year of strong cash
flow generation in F18. Consequently, the Board has approved an
additional share buyback programme of up to £2.0 billion
during F19.
The
changes we have made in the business and the shifts in culture we
continue to drive, ensure we are well placed to capture
opportunities and deliver sustained growth. Our financial
performance expectations are unchanged and we expect to continue to
invest in the business to deliver our mid-term guidance of
consistent mid-single digit organic net sales growth and 175bps of
organic operating margin expansion for the three years ending 30
June 2019."
Key financial information
For the
year ended 30 June 2018
Summary financial information
|
|
|
2018
|
2017
|
Organic
growth
%
|
Reported growth
%
|
Volume
|
EUm
|
240.4
|
242.2
|
2
|
(1)
|
Net
sales
|
£
million
|
12,163
|
12,050
|
5
|
1
|
Marketing
|
£
million
|
1,882
|
1,798
|
7
|
5
|
Operating
profit before exceptional items
|
£
million
|
3,819
|
3,601
|
8
|
6
|
Exceptional
operating items(i)
|
£
million
|
(128)
|
(42)
|
|
|
Operating
profit
|
£
million
|
3,691
|
3,559
|
|
4
|
Share
of associate and joint venture profit after tax
|
£
million
|
309
|
309
|
|
-
|
Exceptional
non-operating gain(i)
|
£
million
|
-
|
20
|
|
|
Net
finance charges
|
£
million
|
260
|
329
|
|
|
Exceptional
taxation credit(i)
|
£
million
|
203
|
4
|
|
|
Tax
rate including exceptional items
|
%
|
15.9
|
20.6
|
|
(23)
|
Tax
rate before exceptional items
|
%
|
20.7
|
20.6
|
|
-
|
Discontinued
operations (after tax)(i)
|
£
million
|
-
|
(55)
|
|
|
Profit
attributable to parent company's shareholders
|
£
million
|
3,022
|
2,662
|
|
14
|
Basic
earnings per share
|
pence
|
121.7
|
106.0
|
|
15
|
Earnings
per share before exceptional items
|
pence
|
118.6
|
108.5
|
|
9
|
Recommended
full year dividend
|
pence
|
65.3
|
62.2
|
|
5
|
(i)
For further details of exceptional items and discontinued
operations items see Notes 3. Exceptional Items.
Outlook for exchange
Using
exchange rates £1 = $1.33; £1 = €1.13, the exchange
rate movement for the year ending 30 June 2019 is estimated to
adversely impact net sales by approximately £70 million and
operating profit by approximately £10 million.
Outlook for tax
The tax
rate before exceptional items for the year ended 30 June 2018 was
20.7%. Our current expectation is that the tax rate before
exceptional items for the year ending 30 June 2019 will be in the
range of 21% to 22% which reflects changing business mix and the
increased levels of uncertainty in the current tax environment for
most multinationals. For further details on taxation see Additional
Financial Information (d) Taxation.
Share buyback programme
On 26
July 2017 the Board approved a share buyback programme to return up
to £1.5 billion to shareholders during F18. The programme was
completed in February 2018 with 58.9 million shares being
repurchased. On 26 July 2018 the Board approved a new share buyback
programme to return up to £2.0 billion to shareholders during
the year ending 30 June 2019.
Acquisitions and disposals
The
impact of acquisitions and disposals on the reported figures was
primarily attributable to the acquisition of the Casamigos brand
which was completed on 15 August 2017 and to the prior year change
to a franchise model for some popular segment brands in
India.
For
further details on the impact of acquisitions and disposals see
Explanatory Notes.
Net sales (£ million)
|
Reported net sales up 0.9% with organic growth partially offset by
unfavourable exchange
Organic net sales growth of 5.0% driven by 2.5% volume growth and
2.5% positive price/mix
|
Net sales
|
£ million
|
2017
|
12,050
|
Exchange(i)
|
(454)
|
Acquisitions
and disposals
|
(5)
|
Volume
|
288
|
Price/mix
|
284
|
2018
|
12,163
|
(i)
Exchange rate movements reflect the translation of prior year
reported results at current year exchange rates.
Reported
net sales grew 0.9%, driven by organic growth which was partially
offset by unfavourable exchange.
Organic
volume growth of 2.5% and 2.5% of positive price/mix drove 5%
organic net sales growth with organic growth delivered across all
regions.
Operating profit (£ million)
|
Reported operating profit grew 3.7%
Organic operating profit grew 7.6%
|
Reported
operating profit was up 3.7% with organic growth partially offset
by exceptional operating items and adverse exchange. Organic
operating profit grew ahead of net sales at 7.6%.
Operating profit
|
£ million
|
2017
|
3,559
|
Exceptional
operating items
|
(86)
|
Exchange
|
(56)
|
Acquisitions
and disposals
|
4
|
Organic
movement
|
270
|
2018
|
3,691
|
Operating margin (%)
|
Reported operating margin increased 81bps
Organic operating margin increased 78bps
|
Operating margin
|
ppt
|
2017
|
29.5
|
Exceptional
operating items
|
(0.70)
|
Exchange
|
0.69
|
Acquisitions
and disposals
|
0.04
|
Gross
margin
|
(0.43)
|
Marketing
|
(0.27)
|
Other
operating expenses
|
1.48
|
2018
|
30.3
|
Reported
operating margin increased 81bps driven by organic operating margin
improvement and the positive impact on operating margin from
exchange, due to the stronger negative impact of exchange on net
sales relative to operating profit, which more than offset the
impact from exceptional operating items. Organic operating
margin improved 78bps driven primarily by our productivity
programme partially offset by higher marketing spend.
Basic earnings per share (pence)
|
Basic eps epBasic eps increased 14.8% from 106.0 pence to 121.7
pence
Eps before exceptional items increased 9.3% from 108.5 pence to
118.6 pence
|
Basic earnings per share
|
pence
|
2017
|
106.0
|
Exceptional
items after tax
|
3.3
|
Discontinued
operations after tax
|
2.2
|
Exchange
on operating profit
|
(2.3)
|
Acquisitions and
disposals
|
0.2
|
Organic
operating profit growth(i)
|
10.8
|
Net
finance charges
|
3.0
|
Tax
|
(2.6)
|
Share
buyback
|
1.2
|
Non-controlling
interests
|
(0.1)
|
2018
|
121.7
|
(i)
Excluding exchange
Eps
before exceptional items increased 10.1 pence driven by organic
operating profit growth and lower finance charges partially offset
by the negative impact from exchange and higher tax
expense.
Basic
eps increased by 14.8% being impacted by a benefit of exceptional
items after tax and the lapping of discontinued losses in the year
ended 30 June 2017. The net exceptional credit was due to the
balance sheet re-measurement of our deferred tax liabilities in the
US as a result of the headline rate reduction. This was partially
offset by the tax charge as a result of the transfer pricing
agreement reached with HMRC on the UK tax assessment and the
impairment of certain of our assets in Africa Regional
Markets.
Free cash flow (£ million)
|
Net cash from operating activities(i) was £3,084
million, a decrease of £48 million compared to the same period
last year. Free cash flow was £2,523 million, a decrease of
£140 million
|
Free cash flow
|
£ million
|
2017
|
2,663
|
Capex
|
(72)
|
Exchange(ii)
|
(56)
|
Operating
profit(iii)
|
280
|
Working
capital(iv)
|
(310)
|
Tax
|
(19)
|
Interest
|
62
|
Other(v)
|
(25)
|
2018
|
2,523
|
(i)
Net cash from operating activities excludes net capex,
movements in loans and other investments ((£561) million in
2018 - (£469) million in 2017).
(ii)
Exchange on operating profit before exceptional
items.
(iii)
Operating profit excluding exchange, depreciation and amortisation,
post employment charges and non-cash items but including operating
exceptional items.
(iv) Working
capital movement includes maturing inventory.
(v)
Other items include post employment payments, dividends
received from associates and joint ventures, and loans and other
investments.
Free
cash flow continued to be strong at £2.5 billion. Operating
profit growth was largely offset by increased investment in
maturing stock and capex as well as lower operating working capital
improvements year on year. Operating working capital improved but
the benefits on free cash flow were lower than in the prior
year.
Return on average invested capital (%)(i)
|
ROIC improved 48bps
|
Return on average invested capital
|
ppt
|
2017
|
13.8
|
Exchange
|
0.04
|
Acquisitions
and disposals
|
(0.21)
|
Organic
operating profit growth
|
1.24
|
Associates
and joint ventures
|
(0.15)
|
Tax
|
(0.40)
|
Other
|
(0.04)
|
2018
|
14.3
|
(i)
ROIC calculation excludes exceptional items.
ROIC
before exceptional items increased 48bps as organic operating
profit growth was partially offset by the impact from acquisitions
and disposals and higher underlying tax charges.
Reported growth by region
|
|
Volume
|
Net sales
|
Marketing
|
Operating profit(i)
|
|
%
|
EUm
|
%
|
£
million
|
%
|
£
million
|
%
|
£
million
|
North
America
|
2
|
0.8
|
(1)
|
(45)
|
3
|
20
|
(1)
|
(17)
|
Europe
and Turkey
|
4
|
1.9
|
4
|
108
|
7
|
31
|
10
|
92
|
Africa
|
3
|
1.0
|
(4)
|
(65)
|
(5)
|
(8)
|
(12)
|
(27)
|
Latin
America and Caribbean
|
5
|
1.1
|
2
|
25
|
1
|
1
|
23
|
58
|
Asia
Pacific
|
(7)
|
(6.6)
|
3
|
84
|
13
|
45
|
17
|
81
|
Corporate
|
-
|
-
|
13
|
6
|
(56)
|
(5)
|
16
|
31
|
Diageo
|
(1)
|
(1.8)
|
1
|
113
|
5
|
84
|
6
|
218
|
|
Volume
|
Net sales
|
Marketing
|
Operating profit(i)
|
|
%
|
EUm
|
%
|
£
million
|
%
|
£
million
|
%
|
£
million
|
North
America
|
1
|
0.6
|
4
|
142
|
6
|
35
|
2
|
43
|
Europe
and Turkey
|
4
|
1.7
|
4
|
110
|
6
|
28
|
8
|
74
|
Africa
|
3
|
1.0
|
3
|
39
|
2
|
3
|
(5)
|
(9)
|
Latin
America and Caribbean
|
5
|
1.1
|
7
|
66
|
4
|
8
|
19
|
49
|
Asia
Pacific
|
2
|
1.4
|
9
|
210
|
15
|
50
|
19
|
89
|
Corporate
|
-
|
-
|
11
|
5
|
(50)
|
(4)
|
13
|
24
|
Diageo
|
2
|
5.8
|
5
|
572
|
7
|
120
|
8
|
270
|
(i)
Before operating exceptional items.
Notes to the business and financial review
|
Unless otherwise stated:
●
commentary below refers to
organic movements
●
volume is in millions of
equivalent units (EUm)
●
net sales are sales after
deducting excise duties
●
percentage movements are organic
movements
●
share refers to value
share
See
Explanatory Notes for explanation of the calculation and use of
non-GAAP measures.
BUSINESS REVIEW
For the
year ended 30 June 2018
North America delivered net sales growth of 4% with US Spirits
growing 3% and continued growth in both Diageo Beer Company USA
(DBC USA) and Canada. In US Spirits, category share gains were
achieved for all key brands except in vodka. Crown Royal grew 3%
with Crown Royal Deluxe and Crown Royal Regal Apple growth
accelerating, partially offset by Crown Royal Vanilla lapping its
launch last year. Bulleit continued its double digit growth, up
10%. Scotch grew 4% with Johnnie Walker up 6%, driven by Johnnie
Walker Black Label growing 5% and double digit growth in reserve
variants. Baileys growth accelerated while Captain Morgan growth
moderated as it cycled a strong performance last year. Vodka net
sales, while declining 3%, showed some improvement versus last year
driven by Ketel One vodka and Cîroc vodka. Smirnoff net sales
were down 2%. Don Julio growth accelerated with net sales growing
37%. DBC USA net sales grew 5% with ready to drink growing 14% and
beer declining 2%. Net sales in Canada were up 1%. Marketing in
North America increased 6% and grew ahead of net sales as
investment was up-weighted. Operating margin declined 58bps as the
impact of increased marketing, hurricane remediation costs and
logistics inflation more than offset the benefits from productivity
initiatives.
Key financials £ million:
|
|
2017
|
FX
|
Reclassifi-
cation(i)
|
Acquisitions
and
disposals
|
Organic movement
|
2018
|
Reported movement
%
|
Net
sales
|
4,161
|
(228)
|
(8)
|
49
|
142
|
4,116
|
(1)
|
Marketing
|
642
|
(21)
|
(2)
|
8
|
35
|
662
|
3
|
Operating
profit
|
1,899
|
(60)
|
(4)
|
4
|
43
|
1,882
|
(1)
|
(i)
Reclassification comprises changes to a reallocation of the
results of the Travel Retail operations to the geographical
regions.
Markets:
|
|
|
|
|
|
Global giants, local stars and reserve(i):
|
|
Organic
volume
movement
|
Reported
volume
movement
|
Organic
net
sales
movement
|
Reported
net
sales
movement
|
|
|
Organic
volume
movement(ii)
|
Organic
net
sales
movement
|
Reported
net
sales
movement
|
|
%
|
%
|
%
|
%
|
|
|
%
|
%
|
%
|
North
America
|
1
|
2
|
4
|
(1)
|
|
Crown
Royal
|
2
|
3
|
(3)
|
|
|
|
|
|
|
Smirnoff
|
(1)
|
(2)
|
(8)
|
US
Spirits
|
1
|
2
|
3
|
(1)
|
|
Captain
Morgan
|
-
|
(1)
|
(7)
|
DBC
USA
|
5
|
5
|
5
|
(1)
|
|
Johnnie
Walker
|
5
|
8
|
6
|
Canada
|
-
|
-
|
1
|
(1)
|
|
Ketel
One vodka(iii)
|
3
|
(2)
|
(7)
|
|
|
|
|
|
|
Cîroc
vodka
|
(1)
|
(4)
|
(10)
|
Spirits
|
1
|
2
|
3
|
-
|
|
Baileys
|
9
|
11
|
6
|
Beer
|
(2)
|
(2)
|
(1)
|
(6)
|
|
Guinness
|
(1)
|
-
|
(5)
|
Ready
to drink
|
11
|
11
|
12
|
6
|
|
Tanqueray
|
4
|
3
|
(3)
|
|
|
|
|
|
|
Don
Julio
|
36
|
37
|
30
|
|
|
|
|
|
|
Bulleit
|
8
|
10
|
4
|
|
|
|
|
|
|
Buchanan's
|
2
|
-
|
(5)
|
(i)
Spirits brands excluding ready to drink.
(ii)
Organic equals reported volume movement except Johnnie Walker 7%,
Baileys 10% and Buchanan's 3% due to the reallocation of the Travel
Retail operations.
(iii)
Ketel One vodka includes Ketel One Botanicals.
●
Net sales in US
Spirits were up 3%. Net sales were broadly in line with
depletions. Crown Royal and Bulleit continued share gains in the
Canadian whisky and US whiskey categories, respectively. The
Generosity platform is working for Crown Royal, driving gains in
equity and category share. Crown Royal net sales grew 3% with
acceleration in Crown Royal Deluxe and Crown Royal Regal Apple
growth partially offset by Crown Royal Vanilla cycling its launch
last year. Johnnie Walker grew 6% with the successful 'Keep Walking
America' platform being followed up by a new campaign 'Step Right
up', scaled up 'liquid on lips' and continued focus on Johnnie
Walker Blue Label in the gifting occasion. Buchanan's net sales
were broadly flat with depletion performance improving in the
second half and category share gains continuing. Vodka while
declining, showed some improvement versus last year. Ketel One
vodka benefitted from the execution of improved plans, as did the
trademark from the launch of Ketel One Botanicals. Cîroc vodka
saw some improvement in performance with the focus on core
variants. Smirnoff net sales declined 2% with brand equity scores
improving as it continued to remind consumers that it is a quality
vodka at a great price. The 'Live like a Captain' campaign
continues to resonate with consumers, driving category share and
equity gains for Captain Morgan. Baileys growth accelerated versus
last year as it reminded consumers of its indulgent treat
positioning over the holidays. Don Julio net sales grew 37% with
growth and category share gains accelerating versus last
year.
●
DBC USA net
sales increased 5% with ready to drink growing 14%. Ready to drink
growth was driven by continued growth of Smirnoff Ice and Smirnoff
Spiked Sparkling Seltzer, and the launch of Smirnoff Ice Smash.
Beer declined 2% with Guinness declining 1%.
●
Net sales in Canada grew 1% driven by growth in
Johnnie Walker, Baileys, Guinness and ready to drink. Johnnie
Walker benefitted from a focus on Johnnie Walker Black Label
highlighting its credentials to consumers through mentoring events,
media and in-store activation. Guinness benefitted from the growth
in the on-trade and the launch of Hop House 13 Lager.
●
Marketing grew
6% with the upweighting of marketing investment funded largely from
productivity initiatives.
The region delivered 4% net sales growth, reflecting another year
of consistent performance in Europe where net sales were up 4% and
a strong performance in Turkey growing net sales by 11%. Europe
growth was largely driven by Great Britain, Ireland and Continental
Europe, with continued share gains in spirits, up 50bps across
Western Europe. Performance was led by strong growth in gin, where
Tanqueray gained share in the fastest growing category and Gordon's
benefitted from the launch of its Pink variant. Guinness was up 6%
driven by a good performance for Guinness Draught supported by
double digit growth in Hop House 13 Lager. Net sales of Captain
Morgan grew 7%. Johnnie Walker grew 2% despite lapping a strong
performance last year. Smirnoff declined 4% driven by Iberia and
Great Britain, in line with the vodka category. In Turkey net sales
were up 11% driven by volume growth of 5% and price increases
across all categories. Operating margin improved 126bps as
up-weighting in marketing investment was more than offset by
ongoing productivity initiatives and lapping other one-off
operating costs.
Key financials £ million:
|
|
2017
|
FX
|
Reclassifi-
cation(i)
|
Acquisitions
and
disposals
|
Organic movement
|
2018
|
Reported movement
%
|
Net
sales
|
2,824
|
(15)
|
16
|
(3)
|
110
|
2,932
|
4
|
Marketing
|
443
|
2
|
1
|
-
|
28
|
474
|
7
|
Operating
profit before exceptional items
|
936
|
7
|
11
|
-
|
74
|
1,028
|
10
|
Exceptional
operating items(ii)
|
(33)
|
|
|
|
|
-
|
|
Operating
profit
|
903
|
|
|
|
|
1,028
|
|
(i)
Reclassification comprises changes to a reallocation of the results
of the Travel Retail operations to the geographical
regions.
(ii) For
further details of exceptional operating items see Notes 3.
Exceptional Items.
Markets:
|
|
|
|
|
|
Global giants and local stars(ii):
|
|
Organic
volume
movement
|
Reported
volume
movement
|
Organic
net
sales
movement
|
Reported
net
sales
movement
|
|
|
Organic
volume
movement(iii)
|
Organic
net
sales
movement
|
Reported
net
sales
movement
|
|
%
|
%
|
%
|
%
|
|
|
%
|
%
|
%
|
Europe
|
|
|
|
|
|
Guinness
|
5
|
6
|
8
|
and
Turkey
|
4
|
4
|
4
|
4
|
|
Johnnie
Walker
|
2
|
-
|
8
|
|
|
|
|
|
|
Smirnoff
|
(4)
|
(4)
|
(4)
|
Europe(i)
|
5
|
7
|
4
|
8
|
|
Baileys
|
8
|
6
|
7
|
Turkey
|
5
|
5
|
11
|
(7)
|
|
Yenì
Raki
|
-
|
10
|
(9)
|
|
|
|
|
|
|
Captain
Morgan
|
5
|
6
|
10
|
Spirits
|
4
|
4
|
4
|
4
|
|
JeB
|
(5)
|
(10)
|
(7)
|
Beer
|
4
|
4
|
4
|
6
|
|
Tanqueray
|
18
|
18
|
22
|
Ready
to drink
|
12
|
12
|
11
|
11
|
|
|
|
|
|
(i)
Following a change in management responsibilities the Europe
market, from 1 July 2017, includes Russia and the Algeria, Iraq,
Jordan, Lebanon and Morocco markets.
(ii)
Spirits brands excluding ready to drink.
(iii)
Organic equals reported volume movement except Johnnie Walker 5%
due to the reallocation of the Travel Retail
operations.
●
In Europe, net sales were up
4%:
●
In Great
Britain, net sales grew 8%. Tanqueray delivered strong
double digit net sales growth and gained 30bps share in the fastest
growing category across Western Europe and Gordon's benefitted from
the successful launch of its Pink variant. Guinness net sales
increased 8% and gained 30bps of share in the beer category, driven
by a strong performance in Guinness Draught and Hop House 13 Lager.
Scotch net sales were up 6% mainly driven by scotch malts and
Johnnie Walker supported by incremental media activation, "liquid
on lips" and additional off trade visibility. Smirnoff declined 2%
in line with the vodka category. Reserve brands continued to
deliver double digit growth, with strong performance led by our
scotch portfolio.
●
Net sales in Ireland were up by 3%. Guinness grew 2%
driven by the continued success of Hop House 13 Lager and the
launch of the 'Behind every town' campaign across the country. In
spirits, net sales were up 14% largely driven by strong performance
in Gordon's and Tanqueray.
●
In Continental
Europe, net sales were up 1%:
●
Iberia net
sales declined 6% due to JeB driven by category decline and an
increased competitive pricing environment.
●
In Central
Europe, net sales declined 1%. Double digit growth in
Tanqueray and good performance from Johnnie Walker in Poland were
offset by a soft performance in Baileys as it lapped a strong
performance in the prior year, a weaker performance of Captain
Morgan and Smirnoff.
●
In Northern Europe net sales were flat as
net sales growth in the Nordics was offset by a decline in Benelux
as the spirits category slowly began to recover following a prior
year excise increase.
●
In the Mediterranean Hub, net sales were up 4%
largely driven by Italy with broad growth across the spirits
categories.
●
Europe Partner
Markets grew net sales 8% driven by strong activations,
innovation and performance improvement in Johnnie Walker and
Guinness.
●
Russia net sales grew 14% with 5pps of
positive price/mix driven by price increases in the previous year.
Growth was largely driven by scotch led by Johnnie Walker and
strong growth in Captain Morgan.
●
In France, net sales were up 1%. Continued
strong performance in Captain Morgan and Zacapa was partially
offset by weakness in JeB.
●
In Turkey, net sales grew 11% with volume growth of 5% and
excise led price increases as well as good raki and vodka
performance.
●
Marketing investment increased 6% focused on key growth
opportunities for the region in Guinness, Johnnie Walker, reserve
brands and gin. Productivity initiatives continued to improve the
efficiency and effectiveness of the investment.
Africa net sales grew 3% with growth in Nigeria and with East
Africa recovering from the first half impact of the uncertainty
following the presidential election in Kenya. This was partially
offset by weakness in Africa Regional Markets due to challenging
conditions in Cameroon and Ethiopia, and a competitive environment
in South Africa. Across Africa, beer net sales were up 5%, with
strong growth of Dubic in Nigeria and the successful launch of
Serengeti Lite in Tanzania. Guinness and Malta Guinness grew 7% and
4% respectively, while Senator Keg declined in Kenya. Mainstream
spirits saw continued double digit growth in East Africa and
Nigeria partially offset by soft performance of Smirnoff 1818 and
primary scotch whiskies in South Africa. Scotch net sales declined
6%. Operating margin declined by 96bps driven by input cost
inflation, adverse mix and one-off charges, partially offset by
productivity savings in supply, lower indirect spend as well as
organisational effectiveness benefits.
Key financials £ million:
|
|
2017
|
FX
|
Reclassifi-
cation(i)
|
Acquisitions
and
disposals
|
Organic movement
|
2018
|
Reported movement
%
|
Net
sales
|
1,556
|
(105)
|
1
|
-
|
39
|
1,491
|
(4)
|
Marketing
|
166
|
(11)
|
-
|
-
|
3
|
158
|
(5)
|
Operating
profit before exceptional items
|
218
|
(20)
|
2
|
-
|
(9)
|
191
|
(12)
|
Exceptional
operating items(ii)
|
-
|
|
|
|
|
(128)
|
|
Operating
profit
|
218
|
|
|
|
|
63
|
(71)
|
(i)
Reclassification comprises changes to a reallocation of the results
of the Travel Retail operations to the geographical regions and the
results of North African countries which were formerly reported in
the Africa geographical regions now being included in Europe and
Turkey.
(ii) For
further details of exceptional operating items see Notes 3.
Exceptional Items.
Markets:
|
|
|
|
|
|
Global giants and local stars(i):
|
|
Organic
volume
movement
|
Reported
volume
movement
|
Organic
net
sales
movement
|
Reported
net
sales
movement
|
|
|
Organic
volume
movement(ii)
|
Organic
net
sales
movement
|
Reported
net
sales
movement
|
|
%
|
%
|
%
|
%
|
|
|
%
|
%
|
%
|
Africa
|
3
|
3
|
3
|
(4)
|
|
Guinness
|
2
|
7
|
-
|
|
|
|
|
|
|
Johnnie
Walker
|
(5)
|
(4)
|
(5)
|
East
Africa
|
7
|
7
|
4
|
(2)
|
|
Smirnoff
|
-
|
(10)
|
(12)
|
Africa
Regional
Markets
|
(5)
|
(5)
|
(2)
|
(7)
|
|
|
|
|
|
Nigeria
|
10
|
10
|
13
|
(4)
|
|
Other beer:
|
South
Africa
|
(1)
|
(1)
|
(3)
|
(4)
|
|
|
|
|
|
|
|
|
|
|
|
Malta
Guinness
|
(4)
|
4
|
(10)
|
Spirits
|
10
|
10
|
2
|
(1)
|
|
Tusker
|
1
|
-
|
(6)
|
Beer
|
-
|
-
|
5
|
(4)
|
|
Senator
|
(12)
|
(12)
|
(17)
|
Ready
to drink
|
(2)
|
(2)
|
(1)
|
(7)
|
|
Satzenbrau
|
(28)
|
(22)
|
(34)
|
(i)
Spirits brands excluding ready to drink.
(ii)
Organic equals reported volume movement except Johnnie Walker (4)%
due to the reallocation of the Travel Retail
operations.
● In East Africa, net sales grew 4% with a stronger second half
performance, with conditions normalising after the political
uncertainty in the first half. Beer net sales grew 4% as a
decline in Senator Keg in Kenya was more than offset by the
successful launch of Serengeti Lite in Tanzania and Guinness net
sales growing 8%. Mainstream spirits continued to deliver strong
performance driven by improved distribution, consumer promotions
and new launches.
● In Africa Regional
Markets, net sales declined 2%
with growth in Ghana more than offset by weakness in Cameroon, due
to third party distributor challenges in the first half and social
unrest, and in Ethiopia due to political instability, high
inflation driven by currency devaluation and competitive pressures.
This resulted in a double digit decline in
scotch.
Beer net sales were flat with double
digit growth in Malta Guinness offset by a decline in Guinness in
Cameroon. In Ghana net sales increased 7% with net sales growth in
Malta Guinness and Guinness offsetting decline in ready to drink
where Orijin faced increased competitive
pressure.
● Net sales in South Africa
declined 3% largely driven by decline
in mainstream spirits, Smirnoff 1818 and primary scotch whiskies,
which were impacted by price increases and an increased competitive
environment.
● In Nigeria, net sales grew 13%. Beer grew 15% with continued
strong growth from Dubic post-launch in the prior year and
Guinness, up 24%, as it benefitted from the on premise activation
against football, leveraging the English Premier League and the
football World Cup. In spirits, net sales were up 28% as a result
of strong double digit growth in mainstream spirits driven by
innovation launches and new formats.
● Marketing
investment increased
2%. In Nigeria, marketing was focused on key campaigns including
Malta Guinness "Fuel Your Greatness" and Satz "Smart Choice". In
East Africa, the focus of marketing investment was on the Guinness
campaign "Meet The Legend", the Tusker "Here is to Us" campaign and
the launch of Serengeti Lite.
Latin America and Caribbean
|
In Latin America and Caribbean net sales grew 7% with strong
performances in Mexico, PUB, and PEBAC partially offset by weakness
in the export channels and declines in the domestic markets of
Caribbean and Central America. Growth in the region was broad based
across categories. In scotch, net sales were up 3% with continued
strong performance of Black & White in Brazil, Mexico and
Colombia and Johnnie Walker was up 3% across the region. This was
partially offset by a decline in Old Parr in Colombia and the
export channels and in Buchanan's in Mexico. Don Julio delivered
double digit growth. Gin also performed strongly with Tanqueray
more than doubling its net sales with strong growth across the
region driven by Brazil and Mexico. Smirnoff grew double digit
driven by Argentina, Mexico and Brazil. Operating margin in the
region increased 299bps as organisational effectiveness benefits,
productivity savings and the lapping of one-off tax charges more
than offset adverse mix.
Key financials £ million:
|
|
2017
|
FX
|
Reclassifi-
cation(i)
|
Acquisitions
and
disposals
|
Organic movement
|
2018
|
Reported movement
%
|
Net
sales
|
1,044
|
(43)
|
2
|
-
|
66
|
1,069
|
2
|
Marketing
|
195
|
(8)
|
1
|
-
|
8
|
196
|
1
|
Operating
profit
|
250
|
10
|
(1)
|
-
|
49
|
308
|
23
|
(i)
Reclassification comprises changes to a reallocation of the results
of the Travel Retail operations to the geographical
regions
Markets:
|
|
|
|
|
|
Global giants and local stars(i):
|
|
Organic
volume
movement
|
Reported
volume
movement
|
Organic
net
sales
movement
|
Reported
net
sales
movement
|
|
|
Organic
volume
movement(ii)
|
Organic
net
sales
movement
|
Reported
net
sales
movement
|
|
%
|
%
|
%
|
%
|
|
|
%
|
%
|
%
|
Latin
America and
|
|
|
|
|
|
Johnnie
Walker
|
3
|
3
|
(3)
|
Caribbean
|
5
|
5
|
7
|
2
|
|
Buchanan's
|
(5)
|
(4)
|
(8)
|
|
|
|
|
|
|
Smirnoff
|
15
|
16
|
5
|
PUB
|
6
|
6
|
11
|
3
|
|
Old
Parr
|
(4)
|
(11)
|
(12)
|
Mexico
|
8
|
8
|
12
|
9
|
|
Baileys
|
(3)
|
(4)
|
(9)
|
CCA
|
(1)
|
(1)
|
(4)
|
(3)
|
|
Ypióca
|
2
|
2
|
(6)
|
Andean
|
(5)
|
(6)
|
(2)
|
(14)
|
|
Black
& White
|
38
|
56
|
47
|
PEBAC
|
24
|
24
|
15
|
12
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spirits
|
6
|
5
|
7
|
1
|
|
|
|
|
|
Beer
|
3
|
3
|
4
|
5
|
|
|
|
|
|
Ready
to drink
|
(15)
|
(15)
|
(4)
|
(12)
|
|
|
|
|
|
(i)
Spirits brands excluding ready to drink.
(ii)
Organic equals reported volume movement except for Johnnie Walker
2%, Baileys (5)% and Old Parr (5)% due to the reallocation of the
Travel Retail operations.
●
In PUB (Paraguay, Uruguay
and Brazil) net sales increased 11%. In Brazil growth was
broad based across spirits categories. Scotch net sales were up 11%
driven by Black & White. In gin, Tanqueray net sales more than
doubled through increased activation and distribution. Smirnoff net
sales increased 4% through new formats to increase accessibility
and the amplification of the cocktail culture through sponsorship
of "The Best Caipiroska in Brazil" event. In Paraguay net sales
increased double digit driven by scotch, Tanqueray and Cîroc
underpinned by domestic market growth.
●
In Mexico net
sales increased 12%. Growth was broad based but led by Don Julio
which gained 1.8pps of share of the tequila category with
increasing premiumisation from new innovations, Barricas and
Reposado Claro. Scotch was flat with growth in Black & White
offset by declines in Buchanan's whose performance was impacted by
price increases. Smirnoff returned to growth, with improved
performance on Smirnoff 21 and the launch of Smirnoff
X1.
●
In CCA (Caribbean and
Central America) net sales declined 4%. Hurricanes Irma and
Maria impacted performance in the domestic markets where net sales
declined 3%. Export channels net sales declined 5% as market
conditions remained challenging with continuing currency weakness
against the US dollar.
●
In Andean (Colombia
and Venezuela) net sales declined 2% primarily driven by
Colombia as last year's tax regulations resulted in higher retail
selling prices for premium imported whisky, impacting the
performance of Old Parr. As consumers traded down, Black &
White was the biggest beneficiary supported by up-weighted media
campaigns. In Venezuela volume declined 18% driven by locally
produced brands as economic conditions continued to
deteriorate.
●
PEBAC (Peru, Ecuador,
Bolivia, Argentina and Chile) delivered net sales growth of
15% driven by Argentina and Chile as well as Ecuador where economic
conditions improved. Growth was driven by scotch which gained
share, and by increased distribution of
Smirnoff.
●
Marketing
investment increased by 4%, driven by up weighted investment across
the scotch portfolio focused on Johnnie Walker and Black &
White.
In Asia Pacific net sales grew by 9% with strong growth in Greater
China, India, and Travel Retail Asia and Middle East. This was
partially offset by the continued contraction of the scotch
category in Korea. Growth was broad based across the majority of
spirits categories. Chinese white spirits continued to grow strong
double digit. Net sales in India grew by 9% with strong second half
growth as the impact of the Supreme Court ruling prohibiting the
sale of alcohol in certain outlets near state highways was lapped.
In scotch, net sales were up 4% as strong performance of Johnnie
Walker in Travel Retail Asia and Middle East, South East Asia, and
China Mainland was partially offset by the decline of Windsor in
Korea. Net sales of reserve brands were up 29% driven by Chinese
white spirits and Johnnie Walker Super Deluxe in Travel Retail Asia
and Middle East and premium scotch in South East Asia. Operating
margin in the region improved by 181bps as savings from both
indirect spend and organisational effectiveness programmes more
than offset the up-weighted marketing investment.
Key financials £ million:
|
|
2017
|
FX
|
Reclassifi-
cation(i)
|
Acquisitions
and
disposals
|
Organic movement
|
2018
|
Reported movement
%
|
Net
sales
|
2,419
|
(64)
|
(11)
|
(51)
|
210
|
2,503
|
3
|
Marketing
|
343
|
(5)
|
-
|
-
|
50
|
388
|
13
|
Operating
profit before exceptional items
|
487
|
1
|
(8)
|
(1)
|
89
|
568
|
17
|
Exceptional
operating items(ii)
|
(9)
|
|
|
|
|
-
|
|
Operating
profit
|
478
|
|
|
|
|
568
|
19
|
(i)
Reclassification comprises changes to a reallocation of the results
of the Travel Retail operations to the geographical
regions.
(ii) For
further details of exceptional operating items see Notes 3.
Exceptional Items.
Markets:
|
|
|
|
|
|
Global giants and local stars(ii):
|
|
Organic
volume
movement(i)
|
Reported
volume
movement
|
Organic
net
sales
movement
|
Reported
net
sales
movement
|
|
|
Organic
volume
movement(iii)
|
Organic
net
sales
movement
|
Reported
net
sales
movement
|
|
%
|
%
|
%
|
%
|
|
|
%
|
%
|
%
|
Asia
Pacific
|
2
|
(7)
|
9
|
3
|
|
Johnnie
Walker
|
7
|
12
|
11
|
|
|
|
|
|
|
McDowell's
|
-
|
8
|
(3)
|
India
|
1
|
(9)
|
9
|
(1)
|
|
Windsor
|
(12)
|
(19)
|
(20)
|
Greater
China
|
15
|
15
|
27
|
25
|
|
Smirnoff
|
6
|
2
|
1
|
Australia
|
(2)
|
(2)
|
-
|
(4)
|
|
Guinness
|
5
|
4
|
-
|
South
East Asia
|
10
|
8
|
5
|
2
|
|
Bundaberg
|
(3)
|
(4)
|
(7)
|
North
Asia
|
1
|
1
|
(6)
|
(9)
|
|
Shui
Jing Fang(iv)
|
50
|
63
|
61
|
Travel
Retail Asia
and
Middle East
|
11
|
5
|
22
|
20
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spirits
|
2
|
(7)
|
10
|
5
|
|
|
|
|
|
Beer
|
4
|
4
|
3
|
(1)
|
|
|
|
|
|
Ready
to drink
|
(5)
|
(5)
|
(4)
|
(6)
|
|
|
|
|
|
(i)
Difference between organic and reported volume for Asia Pacific is
driven by the move to a franchise model for some popular segment
brands in India.
(ii) Spirits
brands excluding ready to drink.
(iii) Organic
equals reported volume movement except for Johnnie Walker 5% and
McDowell's (9)% due to the reallocation of the Travel Retail
operations, the change from an owned to a franchise model for some
popular segment brands in India and the disposal of a subsidiary in
Nepal.
(iv)
Organic growth figures represent total Chinese white spirits of
which Shui Jing Fang is the predominant brand.tl Chinese white
spirits of which Shui Jing Fang is the predominant
brand.
●
In India
net sales increased 9% reflecting a strong acceleration in the
second half as the business lapped the implementation of the
Supreme Court ruling prohibiting the sale of alcohol in certain
outlets near state highways. Prestige and above net sales grew 12%
driven by McDowell's No. 1 supported by the launch of its "Never
Drink and Drive" campaign, Royal Challenge which leveraged a
partnership with T20 cricket through Royal Challengers Bangalore
and celebrity endorsement of Signature. Scotch net sales were up
11% supported by up-weighted marketing investment. Rum net sales
were up 3% driven by the national launch of Captain Morgan. The
popular brand segment recovered in the second half following a
focus on key states and brands, resulting in full year net sales
growth of 4%.
●
In Greater China net sales increased 27%
driven by Chinese white spirits which grew strong double digit
through improved execution, expanded distribution and increased
marketing investment. Scotch net sales declined 5% as strong double
digit growth in mainland China in Johnnie Walker and The Singleton
was more than offset by declines in Taiwan where scotch net sales
declined by 15% as a result of commercial challenges and category
contraction.
●
Net sales in Australia were flat. Growth in Guinness
and Tanqueray, with the latter gaining 1.1pps of share, was offset
by declines in Smirnoff and Bundaberg in the ready to drink
category.
●
In South East
Asia net sales increased 5% driven by double digit growth in
Key Accounts where Johnnie Walker was supported by continued focus
on route to consumer and seasonal gifting. Scotch net sales grew
11% with growth in all markets except Vietnam and
Thailand.
●
In North
Asia net sales declined 6% as scotch led growth in Japan
driven by Johnnie Walker was more than offset by continued weakness
in Korea. In Korea net sales declined 11% driven by Windsor as the
scotch category continued to contract as consumers switched to
lower alcohol content alternatives. This was partially offset by
growth in the W range by Windsor, in the lower ABV segment, and
Guinness, which both delivered double digit net sales
gains.
●
Travel
Retail Asia and Middle East net sales grew 22% with growth
driven by scotch, particularly Johnnie Walker, as the Middle East
lapped weak performance in the prior year along with expanded
distribution and improved commercial activations.
●
Marketing investment increased 15%
driven by investment in China and India.
CATEGORY AND BRAND REVIEW
Year
ended 30 June 2018
Key categories:
|
|
Organic
volume
movement(iv)
%
|
Organic
net
sales
movement
%
|
Reported
net
sales
movement
%
|
Spirits(i)
|
3
|
5
|
2
|
Scotch
|
3
|
2
|
1
|
Vodka(ii)(iii)
|
1
|
(1)
|
(6)
|
US whiskey
|
2
|
7
|
1
|
Canadian whisky
|
-
|
2
|
(4)
|
Rum(ii)
|
(3)
|
1
|
(4)
|
Indian-Made Foreign Liquor (IMFL) whisky
|
4
|
8
|
(1)
|
Liqueurs
|
6
|
6
|
4
|
Gin(ii)
|
17
|
16
|
14
|
Tequila
|
35
|
40
|
56
|
Beer
|
1
|
4
|
(1)
|
Ready to drink
|
2
|
4
|
-
|
(i)
Spirits brands excluding ready to drink.
(ii)
Vodka, rum, gin including IMFL brands.
(iii)
Vodka includes Ketel One Botanicals.
(iv) Organic
equals reported volume movement except for spirits (1)%, rum (10)%,
IMFL whisky (3)%, vodka flat, tequila 58% and gin 12%.
IMFL
whisky was impacted by the move from an owned to a franchise model
for some popular segment brands in certain states in India and the
disposal of a subsidiary in Nepal, Tequila reported volume benefits
from the Casamigos acquisition and other categories were impacted
by the reallocation of the Travel Retail operations.
●
Scotch represents 25%
of Diageo's net sales and was up 2% with growth in North America,
Asia Pacific and Latin America and Caribbean partially offset by
decline in Africa and Europe. Scotch growth was driven by Johnnie
Walker, which delivered a strong performance with net sales up 5%,
and primary scotch brands net sales increased 7% largely driven by
Black & White in Latin America and Caribbean and Asia Pacific.
Africa was impacted by South Africa's decline in primary scotch and
the soft economic environment in Cameroon. In Europe performance
was impacted by weakness in JeB. Elsewhere Windsor net sales were
down double digit as it continued to suffer from the category
decline in Korea and Old Parr performance was impacted by tax
changes in Colombia. Net sales in scotch malts were up 1% with
growth primarily in Great Britain and China Mainland partially
offset by weakness of The Singleton in Taiwan.
●
Vodka represents 11%
of Diageo's net sales and declined 1%, an improvement against the
4% decline last year. The net sales decline was driven
predominantly by Smirnoff in US Spirits and Europe as well as
Smirnoff 1818 in South Africa which continued to be impacted by the
competitive pressure in the mainstream segment. This more than
offset the good performance of Smirnoff in Latin America and
Caribbean. Cîroc vodka and Ketel One vodka also declined with
growth in Europe and Latin America and Caribbean more than offset
by declines in US Spirits despite improved performance on both
brands compared to last year.
●
US whiskey represents
2% of Diageo's net sales and grew 7% largely driven by Bulleit
continuing to win share in the US whiskey category.
●
Canadian whisky
represents 7% of Diageo's net sales and grew 2%. Net sales in Crown
Royal grew 3% and continued to gain share in the Canadian whisky
category of the US market.
●
Rum represents
7% of Diageo's net sales and grew 1% with broad based growth across
all regions except North America where we continue to gain share
despite category headwinds. Rum overall performance was largely
driven by Captain Morgan, up 2%, as well as Zacapa that grew 8%.
Captain Morgan and Zacapa performance more than offset declines in
Parrot Bay, Bundaberg and Cacique.
●
IMFL whisky
represents 5% of Diageo's net sales and grew 8% driven by strong
performance of McDowell's No.1 and Royal Challenge.
●
Liqueurs represents
5% of Diageo's net sales and grew 6% driven by double digit growth
of Baileys in US Spirits as the brand benefited from a new media
campaign and 'liquid on lips' sampling activations and good
performance in Europe due to Baileys Original, up 2%, strong
recruitment via Baileys Almande and launch of time limited flavour
Baileys Strawberries and Cream.
●
Gin represents 4% of
Diageo's net sales and grew 16% with broad based growth across all
regions. Tanqueray and Gordon's in Europe were the largest
contributors to growth as both brands grew double
digit.
●
Tequila
represents 3% of Diageo's net sales and grew 40%. The performance
was driven by strong double digit growth of Don Julio in US Spirits
and Mexico.
●
Beer represents
16% of Diageo's net sales and grew 4%. Growth was largely driven by
Guinness, Dubic and Serengeti Lite. Guinness net sales were up 5%
with strong performance in Europe driven by Hop House 13 Lager and
Guinness Draught. Nigeria also had a strong performance with
Guinness growing 24%. In East Africa, performance of Senator was
impacted by excise driven price increase and political
instability.
●
Ready to drink
represents 6% of Diageo's net sales and grew 4% driven by good
performance in North America and Europe.
Global giants, local stars and reserve(i):
|
|
Organic
volume
movement(ii)
%
|
Organic
net
sales
movement
%
|
Reported
net
sales
movement
%
|
|
Global giants
|
|
|
|
|
Johnnie
Walker
|
3
|
5
|
5
|
|
Smirnoff
|
-
|
(2)
|
(5)
|
|
Baileys
|
6
|
6
|
5
|
|
Captain
Morgan
|
6
|
2
|
(1)
|
|
Tanqueray
|
14
|
15
|
12
|
|
Guinness
|
3
|
5
|
2
|
|
Local stars
|
|
|
|
|
Crown
Royal
|
1
|
3
|
(3)
|
|
Yenì
Raki
|
-
|
10
|
(9)
|
|
Buchanan's
|
(3)
|
(2)
|
(6)
|
|
JeB
|
(5)
|
(9)
|
(7)
|
|
Windsor
|
(13)
|
(19)
|
(20)
|
|
Old
Parr
|
(3)
|
(9)
|
(10)
|
|
Bundaberg
|
(3)
|
(4)
|
(7)
|
|
Black
& White
|
26
|
33
|
28
|
|
Ypióca
|
2
|
2
|
(7)
|
|
McDowell's(ii)
|
-
|
8
|
(3)
|
|
Shui
Jing Fang(iii)
|
50
|
63
|
61
|
|
Reserve
|
|
|
|
|
Scotch
malts(ii)
|
1
|
1
|
4
|
|
Cîroc
vodka
|
1
|
(2)
|
(6)
|
|
Ketel
One vodka
|
3
|
(1)
|
(7)
|
|
Don
Julio
|
34
|
39
|
32
|
|
Bulleit
|
9
|
11
|
5
|
|
(i)
Spirits brands excluding ready to drink.
(ii) Organic
equals reported volume movement except for McDowell's (9)% and
Scotch malts 2% which were impacted by the move from an owned to a
franchise model in India.
(iii) Organic
growth figures represent total Chinese white spirits of which Shui
Jing Fang is the predominant brand.
●
Global giants
represent 41% of Diageo's net sales and grew 4%. Growth was broad
based across all brands with the exception of Smirnoff whose net
sales declined 2%.
●
Local stars
represent 20% of Diageo's net sales and grew 6%, largely driven by
strong growth of Chinese white spirits, IMFL whisky, Crown Royal in
US Spirits and Black & White in Latin America and Caribbean.
This was partially offset by declines of Windsor in Korea, JeB in
Iberia and Old Parr in Colombia.
●
Reserve brands
represent 18% of Diageo's net sales and grew 14% largely driven by
strong double digit growth in Chinese white spirits and Don Julio.
Net sales of Johnnie Walker reserve variants were up 8%.
Double-digit growth in Tanqueray No. TEN and Bulleit more than
offset declines in Ketel One vodka and Cîroc
vodka.
ADDITIONAL FINANCIAL INFORMATION
Year
ended 30 June 2018
|
2017
|
Exchange
(a)
|
Acquisitions
and disposals
(b)
|
Organic
movement(ii)
|
2018
|
|
£
million
|
£
million
|
£
million
|
£
million
|
£ million
|
Sales
|
18,114
|
(724)
|
(147)
|
1,189
|
18,432
|
Excise
duties
|
(6,064)
|
270
|
142
|
(617)
|
(6,269)
|
Net sales
|
12,050
|
(454)
|
(5)
|
572
|
12,163
|
Cost of
sales
|
(4,680)
|
286
|
29
|
(269)
|
(4,634)
|
Gross profit
|
7,370
|
(168)
|
24
|
303
|
7,529
|
Marketing
|
(1,798)
|
44
|
(8)
|
(120)
|
(1,882)
|
Other
operating expenses(i)
|
(1,971)
|
68
|
(12)
|
87
|
(1,828)
|
Operating profit before exceptional items
|
3,601
|
(56)
|
4
|
270
|
3,819
|
Exceptional
operating items (c)
|
(42)
|
|
|
|
(128)
|
Operating profit
|
3,559
|
|
|
|
3,691
|
Non-operating
items (c)
|
20
|
|
|
|
-
|
Net
finance charges
|
(329)
|
|
|
|
(260)
|
Share
of after tax results of associates and joint ventures
|
309
|
|
|
|
309
|
Profit before taxation
|
3,559
|
|
|
|
3,740
|
Taxation
(d)
|
(732)
|
|
|
|
(596)
|
Profit from continuing operations
|
2,827
|
|
|
|
3,144
|
Discontinued
operations (c)
|
(55)
|
|
|
|
-
|
Profit for the year
|
2,772
|
|
|
|
3,144
|
(i)
Before exceptional operating items, see Notes 3. Exceptional
Items.
(ii)
For the definition of organic movement see Explanatory
Notes.
(a) Exchange
The impact of movements in exchange rates on reported figures is
principally in respect of strengthening of sterling against the US
dollar, the Turkish lira and the Kenyan shilling, partially offset
by weakening of sterling against the euro.
The effect of movements in exchange rates and other movements on
profit before exceptional items and taxation for the year ended 30
June 2018 is set out in the table below.
|
|
Gains/(losses)
|
|
|
£ million
|
Translation impact
|
|
(117)
|
Transaction impact
|
|
61
|
Operating profit before exceptional items
|
(56)
|
Net finance charges - translation impact
|
|
1
|
Impact of IAS 21 and IFRS 9 on net other finance
charges
|
(8)
|
Net
finance charges
|
|
(7)
|
Associates
- translation impact
|
|
8
|
Profit before exceptional items and taxation
|
(55)
|
|
|
|
|
Year ended
30 June 2018
|
Year
ended
30
June 2017
|
Exchange
rates
|
|
1
|
Translation £1 =
|
$1.35
|
$1.27
|
Transaction £1 =
|
$1.36
|
$1.45
|
Translation £1 =
|
€1.13
|
€1.16
|
Transaction £1 =
|
€1.16
|
€1.22
|
(b) Acquisitions and disposals
The
impact of acquisitions and disposals on the reported figures was
primarily attributable to the acquisition of the Casamigos brand
which was completed on 15 August 2017 and to the prior year move to
a franchise model for some popular segment brands in
India.
(c) Exceptional items
Exceptional operating charges in the year ended 30 June 2018
were £128 million before tax, an increase of £86 million
against last year.
In the
year ended 30 June 2018, an impairment charge of £128 million
in respect of the Meta brand, Ethiopian tangible fixed assets,
associated spare parts included in inventories and goodwill
allocated to the Africa Regional Markets cash-generating unit has
been recognised in other operating exceptional expenses. The
£115 million net exceptional charge includes the reversal of
deferred tax liabilities of £13 million. Forecast cash flow
assumptions were reduced principally due to the devaluation of the
Ethiopian birr increasing costs of imported raw materials and
products, an increased competitive environment and political unrest
in Ethiopia.
Operating
items of £42 million in the year ended 30 June 2017
comprised:
●
a loss of £33 million in
respect of a Turkish Competition Authority investigation into
certain of Mey İçki's trading practices in
Turkey.
●
a loss of £32 million in
respect of a customer claim in India.
●
a gain of £23 million in
respect of a settlement with Dr Vijay Mallya.
There
were no non-operating items
in the year ended 30 June 2018.
Non-operating
items in the year ended 30 June 2017 comprised a net gain of
£20 million in respect of the sale of Diageo's wines interests
in the United States and its UK based Percy Fox
business.
See
Explanatory Notes for the definition of exceptional
items.
Discontinued operations in the year ended 30 June 2017
comprised £55 million (net of deferred tax of £9 million)
of additional amounts payable to the UK Thalidomide
Trust.
(d) Taxation
The
reported tax rate for the year ended 30 June 2018 was 15.9%
compared with 20.6% for the year ended 30 June 2017. The tax rate
before exceptional items for the year ended 30 June 2018 was 20.7%
compared with 20.6% in the prior year.
Included in the tax
charge of £596 million is a net exceptional tax credit of
£203 million comprising the favourable impact of applying the
Tax Cuts and Jobs Act, enacted on 22 December 2017, in the United
States of £354 million, which was partially offset by the
additional exceptional tax charge in respect of the transfer
pricing agreement in the United Kingdom of £143 million and
other net exceptional charges of £8 million.
In its
interim announcement for the six months ended 31 December 2017,
Diageo reported that discussions were being held with HMRC to seek
clarity on Diageo's transfer pricing and related issues, and that a
preliminary assessment for diverted profits tax notice had been
issued. Final charging notices were issued in August 2017 and
Diageo paid £107 million in respect of the two years ended 30
June 2016. Diageo agreed in June 2018 with HMRC that diverted
profits tax does not apply and at the same time has reached
resolution on the transfer pricing issues being discussed. The
agreement in respect of transfer pricing covers the period from 1
July 2014 to 30 June 2017 and has resulted in an additional UK tax
charge of £143 million. In the year ended 30 June 2018 an
additional tax charge of £47 million has been recognised in
current tax which is based on the approach agreed with
HMRC.
As for
most multinationals the current tax environment is creating
increased levels of uncertainty. The current expectation is that
the tax rate before exceptional items for the year ending 30 June
2019 will be approximately 21% to 22%.
(e) Dividend
The group aims to increase the dividend each year and the decision
in respect of the dividend increase is made with reference to
dividend cover as well as current performance trends including
sales and profit after tax together with cash generation. Diageo
targets dividend cover (the ratio of basic earnings per share
before exceptional items to dividend per share) within the range of
1.8-2.2 times. For the year ended 30 June 2017 dividend cover was
1.7 times. The recommended final dividend for the year ended 30
June 2018 is 40.4 pence, an increase of 5% consistent with the
interim dividend increase. This brings the full year dividend to
65.3 pence per share and dividend cover to 1.8
times. It is expected that a mid-single digit increase
in the dividend will be maintained until the cover is comfortably
back in the policy range.
Subject
to approval by shareholders, the final dividend will be paid to
holders of ordinary shares and ADRs on the register as of 10 August
2018. The ex-dividend date both for the holders of the ordinary
shares and for US ADR holders is 9 August 2018. The final dividend
will be paid to shareholders on 4 October 2018. Payment to US ADR
holders will be made on 10 October 2018. A dividend reinvestment
plan is available to holders of ordinary shares in respect of the
final dividend and the plan notice date is 13 September
2018.
(f) Share buybacks
In the
year ended 30 June 2018 the group completed a share buyback
programme and repurchased and cancelled 58.9 million ordinary
shares (representing 2.1% of the issued ordinary share capital) at
an average price of £25.43 per share, and an aggregate cost of
£1,507 million (including £9 million of transaction
costs).
On 26
July 2018 the Board approved a new share buyback programme to
return up to £2.0 billion to shareholders during the year
ending 30 June 2019.
MOVEMENT IN NET BORROWINGS AND EQUITY
|
Movement in net borrowings
|
2018
|
2017
|
|
£ million
|
£ million
|
Net borrowings at the beginning of the year
|
(7,892)
|
(8,635)
|
Free cash flow (a)
|
2,523
|
2,663
|
Acquisition and sale of businesses (b)
|
(590)
|
(83)
|
Share buyback programme
|
(1,507)
|
-
|
Proceeds from issue of share capital
|
1
|
1
|
Net sale/(purchase) of own shares for share schemes
(c)
|
8
|
(41)
|
Dividends paid to non-controlling interests
|
(80)
|
(83)
|
Rights issue proceeds from non-controlling interests of subsidiary
company
|
26
|
-
|
Net movements in bonds (d)
|
1,041
|
(1,234)
|
Net movements in other borrowings
|
(26)
|
414
|
Equity dividends paid
|
(1,581)
|
(1,515)
|
Net (decrease)/increase in cash and cash equivalents
|
(185)
|
122
|
Net (increase)/decrease in bonds and other borrowings
|
(1,015)
|
820
|
Exchange differences (e)
|
80
|
(205)
|
Other non-cash items
|
(79)
|
6
|
Net borrowings at the end of the year
|
(9,091)
|
(7,892)
|
(a) See free cash flow for the analysis of free cash
flow.
(b) In the year ended 30 June 2018 acquisitions and sale of
businesses included $706 million (£549 million) in respect of
the acquisition of Casamigos. In addition, the group is expected to
pay contingent consideration of $300 million (£233 million) in
tranches over the next ten years subject to Casamigos achieving
certain performance targets.
In
the year ended 30 June 2017 acquisitions and sale of businesses
included part of the settlement of the guarantee in respect of the
US wines disposal partially offset by the working capital
settlement received from Treasury Wine Estates.
(c) Net purchase of own shares comprised purchase of treasury
shares for the future settlement of obligations under the employee
share option schemes of £68 million (2017 - £102 million)
less receipts from employees on the exercise of share options of
£76 million (2017 - £61 million).
(d) In the year ended 30 June 2018, the group issued bonds of
€1,275 million (£1,136 million) and $2,000 million
(£1,476 million) and repaid bonds of $2,100 million
(£1,571 million). In the comparable period the group repaid
bonds of $1,600 million (£1,234 million).
(e) Decrease in net borrowings of £80 million is primarily
driven by the favourable exchange differences on US dollar
denominated borrowings and foreign exchange swaps and
forwards.
Movement in equity
|
2018
|
2017
|
|
£ million
|
£ million
|
Equity at the beginning of the year
|
12,028
|
10,180
|
Profit for the year
|
3,144
|
2,772
|
Exchange adjustments (a)
|
(609)
|
36
|
Remeasurement of post employment plans net of taxation
|
368
|
522
|
Rights issue proceeds from non-controlling interests of subsidiary
company (b)
|
26
|
-
|
Dividends to non-controlling interests
|
(101)
|
(83)
|
Equity dividends paid
|
(1,581)
|
(1,515)
|
Share buyback programme
|
(1,507)
|
-
|
Other reserve movements
|
(55)
|
116
|
Equity at the end of the year
|
11,713
|
12,028
|
(a) Movement in the year ended 30 June 2018 primarily arose from
exchange losses in respect of the Indian rupee and the Turkish lira
partially offset by gains on the US dollar.
(b) In the year ended 30
June 2018 a rights issue was completed by Guinness Nigeria
(GN) where Diageo's controlling equity share in GN increased from
54.32% to 58.02%. The transaction resulted in a credit of £31
million to non-controlling interests and a charge of £5
million to reserves.
Post employment plans
The net
position of the group's post employment benefit plans improved by
£554 million from a deficit of £491 million at 30 June
2017 to a surplus of £63 million at 30 June 2018. The change
primarily arose due to an increase in the market value of the
assets held by the post employment schemes, the contributions paid
into the post employment plans being in excess of the income
statement charge and an increase in returns from 'AA' rated
corporate bonds used to calculate the discount rates on the
liabilities of the post employment plans.
The
operating profit charge decreased by £25 million from
£109 million for the year ended 30 June 2017 to £84
million for the year ended 30 June 2018 primarily due to changes in
pension obligations to members of the UK and Ireland pension
plans.
Total
cash contributions by the group to all post employment plans in the
year ending 30 June 2019 are estimated to be approximately
£200 million.
DIAGEO CONDENSED CONSOLIDATED INCOME STATEMENT
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
30 June 2018
|
|
Year ended
30 June 2017
|
|
Notes
|
|
£ million
|
|
£ million
|
|
|
|
|
|
|
Sales
|
2
|
|
18,432
|
|
18,114
|
Excise duties
|
|
|
(6,269)
|
|
(6,064)
|
Net sales
|
2
|
|
12,163
|
|
12,050
|
Cost of sales
|
|
|
(4,634)
|
|
(4,680)
|
Gross profit
|
|
|
7,529
|
|
7,370
|
Marketing
|
|
|
(1,882)
|
|
(1,798)
|
Other operating expenses
|
|
|
(1,956)
|
|
(2,013)
|
Operating profit
|
2
|
|
3,691
|
|
3,559
|
Non-operating items
|
|
|
-
|
|
20
|
Finance income
|
4
|
|
243
|
|
235
|
Finance charges
|
4
|
|
(503)
|
|
(564)
|
Share of after tax results of associates and joint
ventures
|
|
|
309
|
|
309
|
Profit before taxation
|
|
|
3,740
|
|
3,559
|
Taxation
|
5
|
|
(596)
|
|
(732)
|
Profit from continuing operations
|
|
|
3,144
|
|
2,827
|
Discontinued operations
|
|
|
-
|
|
(55)
|
Profit for the year
|
|
|
3,144
|
|
2,772
|
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
|
Equity shareholders of the parent company - continuing
operations
|
|
|
3,022
|
|
2,717
|
Equity shareholders of the parent company - discontinued
operations
|
|
|
-
|
|
(55)
|
Non-controlling interests
|
|
|
122
|
|
110
|
|
|
|
3,144
|
|
2,772
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average number of shares
|
|
|
million
|
|
million
|
Shares in issue excluding own shares
|
|
|
2,484
|
|
2,512
|
Dilutive potential ordinary shares
|
|
|
11
|
|
11
|
|
|
|
2,495
|
|
2,523
|
|
|
|
|
|
|
|
|
|
pence
|
|
pence
|
Basic earnings per share
|
|
|
|
|
|
Continuing operations
|
|
|
121.7
|
|
108.2
|
Discontinued operations
|
|
|
-
|
|
(2.2)
|
|
|
|
121.7
|
|
106.0
|
|
|
|
|
|
|
Diluted earnings per share
|
|
|
|
|
|
Continuing operations
|
|
|
121.1
|
|
107.7
|
Discontinued operations
|
|
|
-
|
|
(2.2)
|
|
|
|
121.1
|
|
105.5
|
DIAGEO CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
30 June 2018
|
|
Year ended
30 June 2017
|
|
|
£ million
|
|
£ million
|
Other comprehensive income
|
|
|
|
|
Items that will not be recycled subsequently to the
income
statement
|
|
|
|
|
Net remeasurement of post employment plans
|
|
|
|
|
- group
|
|
456
|
|
649
|
- associates and joint
ventures
|
|
2
|
|
(8)
|
- non-controlling interests
|
|
1
|
|
3
|
Tax on post employment plans
|
|
(91)
|
|
(122)
|
|
|
368
|
|
522
|
Items that may be recycled subsequently to the
income
statement
|
|
|
|
|
Exchange differences on translation of foreign
operations
|
|
|
|
|
- group
|
|
(631)
|
|
105
|
- associates and joint
ventures
|
|
3
|
|
120
|
- non-controlling interests
|
|
(72)
|
|
35
|
Net investment hedges
|
|
91
|
|
(224)
|
Tax on exchange differences - group
|
|
7
|
|
(2)
|
Tax on exchange differences - non-controlling
interests
|
|
2
|
|
-
|
Effective portion of changes in fair value of cash flow
hedges
|
|
|
|
|
- hedge of foreign currency debt of the
group
|
|
(64)
|
|
(8)
|
- transaction exposure hedging of the
group
|
|
22
|
|
(26)
|
- hedges by associates and joint
ventures
|
|
(15)
|
|
5
|
- recycled to income statement - hedge of
foreign currency debt of the group
|
|
6
|
|
(42)
|
- recycled to income statement -
transaction exposure hedging of the group
|
|
(7)
|
|
142
|
- recycled to income statement - commodity
price risk of the group
|
|
-
|
|
1
|
Tax on effective portion of changes in fair value of cash
flow hedges
|
|
14
|
|
(3)
|
Hyperinflation adjustment
|
|
11
|
|
47
|
Tax on hyperinflation adjustment
|
|
(11)
|
|
(21)
|
|
|
(644)
|
|
129
|
Other comprehensive (loss)/profit, net of tax, for the
year
|
|
(276)
|
|
651
|
Profit for the year
|
|
3,144
|
|
2,772
|
Total comprehensive income for the year
|
|
2,868
|
|
3,423
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
Equity shareholders of the parent company - continuing
operations
|
|
2,815
|
|
3,330
|
Equity shareholders of the parent company - discontinued
operations
|
|
-
|
|
(55)
|
Non-controlling interests
|
|
53
|
|
148
|
Total comprehensive income for the year
|
|
2,868
|
|
3,423
|
|
|
|
|
|
DIAGEO CONDENSED CONSOLIDATED BALANCE SHEET
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
30 June 2018
|
|
30 June 2017
|
|
|
Notes
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
|
|
Intangible assets
|
|
|
12,572
|
|
|
|
12,566
|
|
|
|
Property, plant and equipment
|
|
|
4,089
|
|
|
|
4,014
|
|
|
|
Biological assets
|
|
|
23
|
|
|
|
21
|
|
|
|
Investments in associates and joint ventures
|
|
|
3,009
|
|
|
|
2,824
|
|
|
|
Other investments
|
|
|
46
|
|
|
|
31
|
|
|
|
Other receivables
|
|
|
46
|
|
|
|
58
|
|
|
|
Other financial assets
|
9
|
|
182
|
|
|
|
267
|
|
|
|
Deferred tax assets
|
|
|
122
|
|
|
|
134
|
|
|
|
Post employment benefit assets
|
|
|
935
|
|
|
|
281
|
|
|
|
|
|
|
|
|
21,024
|
|
|
|
20,196
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
6
|
|
5,015
|
|
|
|
4,788
|
|
|
|
Trade and other receivables
|
|
|
2,678
|
|
|
|
2,592
|
|
|
|
Assets held for sale
|
|
|
24
|
|
|
|
|
|
-
|
|
Corporate tax receivable
|
|
|
65
|
|
|
|
-
|
|
|
|
Other financial assets
|
9
|
|
35
|
|
|
|
81
|
|
|
|
Cash and cash equivalents
|
7
|
|
874
|
|
|
|
1,191
|
|
|
|
|
|
|
|
|
8,691
|
|
|
|
8,652
|
|
Total assets
|
|
|
|
|
29,715
|
|
|
|
28,848
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
Borrowings and bank overdrafts
|
7
|
|
(1,828)
|
|
|
|
(2,459)
|
|
|
|
Other financial liabilities
|
9
|
|
(230)
|
|
|
|
(215)
|
|
|
|
Trade and other payables
|
|
|
(3,950)
|
|
|
|
(3,563)
|
|
|
|
Corporate tax payable
|
|
|
(243)
|
|
|
|
(294)
|
|
|
|
Provisions
|
|
|
(109)
|
|
|
|
(129)
|
|
|
|
|
|
|
|
|
(6,360)
|
|
|
|
(6,660)
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
|
|
Borrowings
|
7
|
|
(8,074)
|
|
|
|
(6,583)
|
|
|
|
Other financial liabilities
|
9
|
|
(212)
|
|
|
|
(383)
|
|
|
|
Other payables
|
|
|
(209)
|
|
|
|
(24)
|
|
|
|
Provisions
|
|
|
(288)
|
|
|
|
(286)
|
|
|
|
Deferred tax liabilities
|
|
|
(1,987)
|
|
|
|
(2,112)
|
|
|
|
Post employment benefit liabilities
|
|
|
(872)
|
|
|
|
(772)
|
|
|
|
|
|
|
|
|
(11,642)
|
|
|
|
(10,160)
|
|
Total liabilities
|
|
|
|
|
(18,002)
|
|
|
|
(16,820)
|
|
Net assets
|
|
|
|
|
11,713
|
|
|
|
12,028
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
Share capital
|
|
|
780
|
|
|
|
797
|
|
|
|
Share premium
|
|
|
1,349
|
|
|
|
1,348
|
|
|
|
Other reserves
|
|
|
2,133
|
|
|
|
2,693
|
|
|
|
Retained earnings
|
|
|
5,686
|
|
|
|
5,475
|
|
|
|
Equity attributable to equity
shareholders of the parent company
|
|
|
|
|
9,948
|
|
|
|
10,313
|
|
Non-controlling interests
|
|
|
|
|
1,765
|
|
|
|
1,715
|
|
Total equity
|
|
|
|
|
11,713
|
|
|
|
12,028
|
|
|
|
|
|
|
|
|
|
|
|
|
DIAGEO CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
attributable
to parent
company
shareholders
|
|
|
|
|
|
|
|
|
|
|
|
Retained earnings/(deficit)
|
|
|
|
|
|
|
Share
capital
|
|
Share
premium
|
|
Other
reserves
|
|
Own
shares
|
|
Other
retained
earnings
|
|
Total
|
|
|
Non-
controlling
interests
|
|
Total
equity
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 30 June 2016
|
797
|
|
1,347
|
|
2,625
|
|
(2,189)
|
|
5,950
|
|
3,761
|
|
8,530
|
|
1,650
|
|
10,180
|
Profit for the year
|
-
|
|
-
|
|
-
|
|
-
|
|
2,662
|
|
2,662
|
|
2,662
|
|
110
|
|
2,772
|
Other comprehensive income
|
-
|
|
-
|
|
68
|
|
-
|
|
545
|
|
545
|
|
613
|
|
38
|
|
651
|
Employee share schemes
|
-
|
|
-
|
|
-
|
|
13
|
|
(23)
|
|
(10)
|
|
(10)
|
|
-
|
|
(10)
|
Share-based incentive plans
|
-
|
|
-
|
|
-
|
|
-
|
|
34
|
|
34
|
|
34
|
|
-
|
|
34
|
Share-based incentive plans
in respect of associates
|
-
|
|
-
|
|
-
|
|
-
|
|
3
|
|
3
|
|
3
|
|
-
|
|
3
|
Tax on share-based
incentive plans
|
-
|
|
-
|
|
-
|
|
-
|
|
12
|
|
12
|
|
12
|
|
-
|
|
12
|
Shares issued
|
-
|
|
1
|
|
-
|
|
-
|
|
-
|
|
-
|
|
1
|
|
-
|
|
1
|
Purchase of non-controlling
interests by associates
|
-
|
|
-
|
|
-
|
|
-
|
|
(5)
|
|
(5)
|
|
(5)
|
|
-
|
|
(5)
|
Change in fair value of put options
|
-
|
|
-
|
|
-
|
|
-
|
|
(12)
|
|
(12)
|
|
(12)
|
|
-
|
|
(12)
|
Dividends paid
|
-
|
|
-
|
|
-
|
|
-
|
|
(1,515)
|
|
(1,515)
|
|
(1,515)
|
|
(83)
|
|
(1,598)
|
At 30 June 2017
|
797
|
|
1,348
|
|
2,693
|
|
(2,176)
|
|
7,651
|
|
5,475
|
|
10,313
|
|
1,715
|
|
12,028
|
Adoption of IFRS 15 (note 1)
|
-
|
|
-
|
|
-
|
|
-
|
|
(89)
|
|
(89)
|
|
(89)
|
|
(2)
|
|
(91)
|
Adoption of IFRS 9 by associate
|
-
|
|
-
|
|
(3)
|
|
-
|
|
3
|
|
3
|
|
-
|
|
-
|
|
-
|
Profit for the year
|
-
|
|
-
|
|
-
|
|
-
|
|
3,022
|
|
3,022
|
|
3,022
|
|
122
|
|
3,144
|
Other comprehensive (loss)/income
|
-
|
|
-
|
|
(574)
|
|
-
|
|
367
|
|
367
|
|
(207)
|
|
(69)
|
|
(276)
|
Employee share schemes
|
-
|
|
-
|
|
-
|
|
32
|
|
(7)
|
|
25
|
|
25
|
|
-
|
|
25
|
Share-based incentive plans
|
-
|
|
-
|
|
-
|
|
-
|
|
39
|
|
39
|
|
39
|
|
-
|
|
39
|
Share-based incentive plans
in respect of associates
|
-
|
|
-
|
|
-
|
|
-
|
|
4
|
|
4
|
|
4
|
|
-
|
|
4
|
Tax on share-based
incentive plans
|
-
|
|
-
|
|
-
|
|
-
|
|
(2)
|
|
(2)
|
|
(2)
|
|
-
|
|
(2)
|
Shares issued
|
-
|
|
1
|
|
-
|
|
-
|
|
-
|
|
-
|
|
1
|
|
-
|
|
1
|
Disposal of non-controlling interests
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(1)
|
|
(1)
|
Purchase of non-controlling
interests
|
-
|
|
-
|
|
-
|
|
-
|
|
(72)
|
|
(72)
|
|
(72)
|
|
70
|
|
(2)
|
Purchase of rights issue of
non-controlling interests
|
-
|
|
-
|
|
-
|
|
-
|
|
(5)
|
|
(5)
|
|
(5)
|
|
31
|
|
26
|
Change in fair value of put
option
|
-
|
|
-
|
|
-
|
|
-
|
|
7
|
|
7
|
|
7
|
|
-
|
|
7
|
Share buyback programme
|
(17)
|
|
-
|
|
17
|
|
-
|
|
(1,507)
|
|
(1,507)
|
|
(1,507)
|
|
-
|
|
(1,507)
|
Dividends declared
|
-
|
|
-
|
|
-
|
|
-
|
|
(1,581)
|
|
(1,581)
|
|
(1,581)
|
|
(101)
|
|
(1,682)
|
At 30 June 2018
|
780
|
|
1,349
|
|
2,133
|
|
(2,144)
|
|
7,830
|
|
5,686
|
|
9,948
|
|
1,765
|
|
11,713
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIAGEO CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Year ended
30 June 2018
|
|
Year ended
30 June 2017
|
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
Cash flows from operating activities
|
|
|
|
|
|
|
|
|
Profit for the year
|
|
3,144
|
|
|
|
2,772
|
|
|
Discontinued operations
|
|
-
|
|
|
|
55
|
|
|
Taxation
|
|
596
|
|
|
|
732
|
|
|
Share of after tax results of associates and joint
ventures
|
|
(309)
|
|
|
|
(309)
|
|
|
Net finance charges
|
|
260
|
|
|
|
329
|
|
|
Non-operating items
|
|
-
|
|
|
|
(20)
|
|
|
Operating profit
|
|
|
|
3,691
|
|
|
|
3,559
|
Increase in inventories
|
|
(271)
|
|
|
|
(159)
|
|
|
(Increase)/decrease in trade and other receivables
|
|
(202)
|
|
|
|
89
|
|
|
Increase in trade and other payables and provisions
|
|
314
|
|
|
|
221
|
|
|
Net (increase)/decrease in working capital
|
|
|
|
(159)
|
|
|
|
151
|
Depreciation, amortisation and impairment
|
|
493
|
|
|
|
361
|
|
|
Dividends received
|
|
159
|
|
|
|
223
|
|
|
Post employment payments less amounts included in operating
profit
|
|
(108)
|
|
|
|
(111)
|
|
|
Other items
|
|
10
|
|
|
|
(6)
|
|
|
|
|
|
|
554
|
|
|
|
467
|
Cash generated from operations
|
|
|
|
4,086
|
|
|
|
4,177
|
Interest received
|
|
167
|
|
|
|
180
|
|
|
Interest paid
|
|
(418)
|
|
|
|
(493)
|
|
|
Taxation paid
|
|
(751)
|
|
|
|
(732)
|
|
|
|
|
|
|
(1,002)
|
|
|
|
(1,045)
|
Net cash from operating activities
|
|
|
|
3,084
|
|
|
|
3,132
|
Cash flows from investing activities
|
|
|
|
|
|
|
|
|
Disposal of property, plant and equipment and computer
software
|
|
40
|
|
|
|
46
|
|
|
Purchase of property, plant and equipment and computer
software
|
|
(584)
|
|
|
|
(518)
|
|
|
Movements in loans and other investments
|
|
(17)
|
|
|
|
3
|
|
|
Sale of businesses
|
|
4
|
|
|
|
(52)
|
|
|
Acquisition of businesses
|
|
(594)
|
|
|
|
(31)
|
|
|
Net cash outflow from investing activities
|
|
|
|
(1,151)
|
|
|
|
(552)
|
Cash flows from financing activities
|
|
|
|
|
|
|
|
|
Share buyback programme
|
|
(1,507)
|
|
|
|
-
|
|
|
Proceeds from issue of share capital
|
|
1
|
|
|
|
1
|
|
|
Net sale/(purchase) of own shares for share schemes
|
|
8
|
|
|
|
(41)
|
|
|
Dividends paid to non-controlling interests
|
|
(80)
|
|
|
|
(83)
|
|
|
Rights issue proceeds from non-controlling interests
|
|
26
|
|
|
|
-
|
|
|
Proceeds from bonds
|
|
2,612
|
|
|
|
-
|
|
|
Repayment of bonds
|
|
(1,571)
|
|
|
|
(1,234)
|
|
|
Net movements on other borrowings
|
|
(26)
|
|
|
|
414
|
|
|
Equity dividends paid
|
|
(1,581)
|
|
|
|
(1,515)
|
|
|
Net cash outflow from financing activities
|
|
|
|
(2,118)
|
|
|
|
(2,458)
|
|
|
|
|
|
|
|
|
|
Net (decrease)/increase in net cash and cash
equivalents
|
|
|
|
(185)
|
|
|
|
122
|
Exchange differences
|
|
|
|
(39)
|
|
|
|
(14)
|
Net cash and cash equivalents at beginning of the year
|
|
|
|
917
|
|
|
|
809
|
Net cash and cash equivalents at end of the year
|
|
|
|
693
|
|
|
|
917
|
|
|
|
|
|
|
|
|
|
Net cash and cash equivalents consist of:
|
|
|
|
|
|
|
|
|
Cash and cash equivalents
|
|
|
|
874
|
|
|
|
1,191
|
Bank overdrafts
|
|
|
|
(181)
|
|
|
|
(274)
|
|
|
|
|
693
|
|
|
|
917
|
NOTES
1. Basis of preparation
The condensed financial information of the group are prepared in
accordance with International Financial Reporting Standards (IFRSs)
as issued by the IASB and as adopted by the EU. As required by the
Disclosure and Transparency Rules of the Financial Conduct
Authority, the condensed set of financial statements has been
prepared applying the accounting policies and presentation that
were applied in the preparation of the company's published
consolidated financial statements for the year ended 30 June 2017
except for the impact of the adoption of new accounting standards
and amendments explained below. IFRS is subject to ongoing review
and endorsement by the EU or possible amendment by interpretative
guidance and the issuance of new standards by the IASB. In
preparing these condensed financial information, the significant
judgements made by management when applying the group's accounting
policies and the significant areas where estimates were required
were the same as those that applied to the consolidated financial
statements for the year ended 30 June 2017, with the exception of
the adoption of IFRS 9 and IFRS 15 and interpretations of
accounting standards, as described below, and changes in estimates
disclosed in note 12 - Contingent liabilities and legal
proceedings.
Having
reassessed the principal risks the directors considered it
appropriate to adopt the going concern basis of accounting in
preparing the condensed consolidated financial
statements.
New accounting standards and interpretations
The
following amendments to the accounting standards, issued by the
IASB which have been endorsed by the EU, have been adopted by the
group from 1 July 2017 with no impact on the group's consolidated
results, financial position or disclosures:
●
Amendments to IAS 7 - Disclosure
initiative
●
Amendment to IAS 12 - Recognition of deferred
tax assets for unrealised losses
●
Amendment to IFRS 12 - Disclosure of interests
in other entities
The
following standards issued by the IASB and endorsed by the EU have
been early adopted by the group from 1 July 2017:
IFRS 9 - Financial instruments replaces IAS 39
(Financial instruments - Recognition and measurement) and addresses
the classification and measurement of financial instruments,
introduces new principles for hedge accounting and a new
forward-looking impairment model for financial assets.
The
adoption of IFRS 9 hedge accounting principles did not result in a
restatement of the group's results and the impact on the year ended
30 June 2018 is not material. The adoption of IFRS 9 did not result
in any changes in the measurement or classification of financial
instruments as at 1 July 2017. All classes of financial
assets and financial liabilities had as at 1 July 2017 the same
carrying values under IFRS 9 as they had under IAS 39.
Diageo's principal
associate, Moët Hennessy has adopted IFRS 9. This has no
impact on Diageo's share of the net assets of Moët Hennessy
but resulted in a decrease in the group's hedging reserve of
£3 million with a corresponding increase in retained earnings.
This change has been disclosed as a movement in the year ended 30
June 2018.
IFRS 15 - Revenue from contracts with
customers provides enhanced detail on the principle of
recognising revenue to reflect the concept that revenue should be
recognised when the control of goods or services is transferred to
the customer at a value that the company is expected to receive. It
replaces the separate models for goods, services and construction
contracts under previous IFRS (IAS 11, IAS 18 and related
interpretations) which was based on the concept of the transfer of
risks and rewards. It also provides further guidance on the initial
measurement of sales on contracts which have discounts, rebates and
consignment inventories by identifying separate performance
obligations that may apply.
During
the year ended 30 June 2017 the group carried out a detailed review
of the recognition criteria for revenue applying the requirements
of IFRS 15 to ensure that the same principles were being applied
consistently across the group. This review in particular examined
promotional and marketing support payments made to customers post
the initial sale of product, the timing of the recognition of sales
made where a third party manufactures or modifies a product on
behalf of Diageo and consignment inventories. On application of
IFRS 15 some changes in accounting policy resulted, principally in
respect of variable consideration receivable where the criteria
applied for deducting future promotional payments from the initial
revenue recognition was more stringent than under the former
accounting policy. Management have also ensured that this policy is
being adopted consistently across the group. The revised accounting policy
establishes that revenue is recognised to the extent that it is
highly probable that a reversal in the amount of revenue recognised
will not occur when the uncertainty associated with the variable
consideration is subsequently settled. This means that Diageo,
under the revised accounting policy, deducts from the initial
revenue recognised any future promotional payments to direct and
indirect customers unless it is highly probable that they will not
be incurred.
Diageo
has adopted the modified retrospective transition method,
recognising the cumulative effect of initially applying IFRS15 as
an adjustment to the balance of retained earnings as at 1 July
2017.
Retained
earnings at 1 July 2017 has been debited by £89 million. The
adjustment comprised an increase in creditors of £116 million,
a decrease in debtors of £9 million, an increase in
inventories of £8 million, a decrease in non-controlling
interests of £2 million and an increase in deferred tax assets
of £26 million. The changes in accounting policy that resulted
in these adjustments are principally in respect of variable
consideration where the criteria for deducting future promotional
payments from the initial revenue recognition is more stringent
than under the former accounting policy. The revised accounting
policy establishes that revenue is recognised to the extent that it
is highly probable that a reversal in the amount of cumulative
revenue recognised will not occur when the uncertainty associated
with the variable consideration is subsequently settled. This means
that Diageo, under the new accounting policy, deducts from the
initial revenue recognised any future promotional payments unless
it is highly probable that they will not be incurred.
For the
year ended 30 June 2018, as a result of applying the new accounting
policy, sales increased by £11 million, operating profit
increased by £12 million, taxation was £3 million higher
and profit for the year increased by £9 million.
The
operating profit benefit in the year was more than offset by the
impact to sales and profit of working capital efficiencies,
including inventory reductions, delivered by Diageo's
customers.
Consideration was
also given to the disclosure of revenue into different
categories. It was determined that all revenue would be disclosed
as 'sale of goods' as revenue from other sources was
immaterial.
IFRIC agenda decision - In October 2017 the IFRIC clarified
that interest and penalties in respect of corporate taxes should
generally be accounted for under IAS 37 rather than IAS 12 and
therefore not be disclosed in the income statement within
'Taxation'. For comparative years Diageo disclosed interest and
penalties in respect of corporate taxes as part of 'Taxation' in
the consolidated income statement and consolidated balance sheet.
As a result of the clarification by the IFRIC Diageo has changed
its accounting policy from 1 July 2017. In addition, for
consistency, Diageo has changed its treatment of interest arising
on indirect tax. For the year ended 30 June 2018, £10 million
of interest and £2 million of penalties in respect of
corporate tax and indirect taxes was charged to other finance
charges and operating profit, respectively. At 30 June 2017, the
cumulative interest and penalties in respect of corporate
tax included in 'Corporate tax payable' in the consolidated
balance sheet was £37 million. At 30 June 2018 the cumulative
interest in respect of corporate taxes is included in interest
payable (£34 million) and penalties within other payables
(£2 million). Interest and penalties in respect of indirect
taxes in the consolidated balance sheet are immaterial.
Comparatives have not been restated as the amounts are
immaterial.
The
following standard issued by the IASB and endorsed by the EU, has
not yet been adopted by the group:
IFRS 16 - Leases (effective in the year ending 30 June 2020)
sets out the principles for the recognition, measurement,
presentation and disclosure of leases for both the lessee and the
lessor. It eliminates the classification of leases as either
operating leases or finance leases currently required under IAS 17
and introduces a single lessee accounting model where the lessee is
required to recognise assets and liabilities for all material
leases. All material leases will be recognised on the balance sheet
as right of use assets and depreciated on a straight line basis.
The liability, recognised as part of net borrowings, will be
measured at a discounted value and any interest will be charged to
finance charges in the income statement. Therefore, the charge to
the income statement for the operating lease payment will be
replaced with depreciation on the right of use asset and the
interest charge inherent in the lease.
The
group will implement IFRS 16 from 1 July 2019 by applying the
modified retrospective method, meaning that the comparative figures
in the financial statements for the year ending 30 June 2020 will
not be restated to show the impact of IFRS 16. The operating leases
which will be recorded on the balance sheet following
implementation of IFRS 16 are principally in respect of warehouses,
office buildings, plant and machinery, cars and distribution
vehicles. The group has decided to reduce the complexity of
implementation to take advantage of a number of practical
expedients on transition on 1 July 2019 namely:
(i) to
measure the right of use asset at the same value as the lease
liability
(ii) to
apply the short term and low value exemptions
(iii)
to treat, wherever possible, services provided as an income
statement item and only capitalise the lease payment amounts in
respect of the asset
The
anticipated impact of the standard on the group is not yet known
though is not expected to be material on the income statement or
net assets though assets and liabilities will be grossed up for the
net present value of the outstanding operating lease liabilities as
at 1 July 2019.
The
following standard, issued by the IASB has not been endorsed by the
EU and has not been adopted by the group:
IFRS 17 - Insurance contracts (effective in the year ending
30 June 2022) is ultimately intended to replace IFRS
4.
Based
on a preliminary assessment the group believes that the adoption of
IFRS 17 will not have a significant impact on its consolidated
results or financial position.
There
are a number of other amendments and clarifications to IFRS,
effective in future years, which are not expected to significantly
impact the group's consolidated results or financial
position.
The
comparative figures for the financial year ended 30 June 2017 are
not the company's statutory accounts for that financial year. Those
accounts have been reported on by the company's auditor,
PricewaterhouseCoopers LLP and delivered to the registrar of
companies. The report of the auditor (i) was unqualified, (ii) did
not include a reference to any matters to which the auditor drew
attention by way of emphasis without qualifying their report and
(iii) did not contain a statement under section 498 (2) or (3) of
the Companies Act 2006.
2. Segmental information
The
segmental information presented is consistent with management
reporting provided to the Executive Committee (the chief operating
decision maker).
The
Executive Committee considers the business principally from a
geographical perspective based on the location of third party sales
and the business analysis is presented by geographical segment. In
addition to these geographical selling segments, a further segment
reviewed by the Executive Committee is the International Supply
Centre (ISC), which manufactures products for other group companies
and includes the production sites in the United Kingdom, Ireland,
Italy and Guatemala.
Continuing
operations also include the Corporate function. Corporate revenues
and costs are in respect of central costs, including finance,
marketing, corporate relations, human resources and legal, as well
as certain information systems, facilities and employee costs that
are not allocable to the geographical segments or to the ISC. They
also include rents receivable and payable in respect of properties
not used by the group in the manufacture, sale or distribution of
premium drinks.
Diageo
uses shared services operations, including captive and outsourced
centres, to deliver transaction processing activities for markets
and operational entities. These centres are located in Hungary,
Kenya, Colombia, the Philippines and India. The captive business
service centre in Budapest also performs certain central finance
activities, including elements of financial planning and reporting
and treasury. The results of shared service operations are
recharged to the regions.
The
segmental information for net sales and operating profit before the
impact of acquisitions and disposals, ISC allocation and
exceptional items is reported at budgeted exchange rates in line
with management reporting. For management reporting purposes the
group measures the current year at, and restates the prior year net
sales and operating profit to, the current year's budgeted exchange
rates. These exchange rates are set prior to the financial year as
part of the financial planning process and provide a consistent
exchange rate to measure the performance of the business throughout
the year. The adjustments required to retranslate the segmental
information to actual exchange rates and to reconcile it to the
group's reported results are shown in the tables below. The
comparative segmental information, prior to retranslation, has not
been restated at the current year's budgeted exchange rates but is
presented at the budgeted rates for the year ended 30 June
2017.
In
addition, for management reporting purposes Diageo presents
separately the result of acquisitions and disposals completed in
the current and prior year from the results of the geographical
segments. The impact of acquisitions and disposals on net sales and
operating profit is disclosed under the appropriate geographical
segments in the tables below at budgeted exchange
rates.
Year ended
|
North America
|
|
Europe and Turkey(ii)
|
|
Africa
|
|
Latin America and Caribbean
|
|
Asia
Pacific
|
|
ISC
|
|
Eliminate
inter-
segment
sales
|
|
Total
operating
segments
|
|
Corporate
and other
|
|
Total
|
30 June 2018
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
Sales
|
4,671
|
|
5,232
|
|
2,083
|
|
1,352
|
|
5,042
|
|
1,457
|
|
(1,457)
|
|
18,380
|
|
52
|
|
18,432
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At budgeted exchange rates(i)
|
4,138
|
|
2,821
|
|
1,467
|
|
1,064
|
|
2,555
|
|
1,512
|
|
(1,425)
|
|
12,132
|
|
48
|
|
12,180
|
Acquisitions and disposals
|
50
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
50
|
|
-
|
|
50
|
ISC allocation
|
11
|
|
53
|
|
4
|
|
11
|
|
8
|
|
(87)
|
|
-
|
|
-
|
|
-
|
|
-
|
Retranslation to actual
exchange rates
|
(83)
|
|
58
|
|
20
|
|
(6)
|
|
(60)
|
|
32
|
|
(32)
|
|
(71)
|
|
4
|
|
(67)
|
Net sales
|
4,116
|
|
2,932
|
|
1,491
|
|
1,069
|
|
2,503
|
|
1,457
|
|
(1,457)
|
|
12,111
|
|
52
|
|
12,163
|
Operating profit/(loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At budgeted exchange rates(i)
|
1,925
|
|
941
|
|
180
|
|
298
|
|
588
|
|
112
|
|
-
|
|
4,044
|
|
(160)
|
|
3,884
|
Acquisitions and disposals
|
4
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
4
|
|
-
|
|
4
|
ISC allocation
|
14
|
|
67
|
|
5
|
|
14
|
|
12
|
|
(112)
|
|
-
|
|
-
|
|
-
|
|
-
|
Retranslation to actual
exchange rates
|
(61)
|
|
20
|
|
6
|
|
(4)
|
|
(32)
|
|
-
|
|
-
|
|
(71)
|
|
2
|
|
(69)
|
Operating profit/(loss)
before exceptional items
|
1,882
|
|
1,028
|
|
191
|
|
308
|
|
568
|
|
-
|
|
-
|
|
3,977
|
|
(158)
|
|
3,819
|
Exceptional items
|
-
|
|
-
|
|
(128)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(128)
|
|
-
|
|
(128)
|
Operating profit/(loss)
|
1,882
|
|
1,028
|
|
63
|
|
308
|
|
568
|
|
-
|
|
-
|
|
3,849
|
|
(158)
|
|
3,691
|
Non-operating items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
-
|
Net finance charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(260)
|
Share of after tax results of
associates and joint ventures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
309
|
Profit before taxation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,740
|
Year ended
|
North America
|
|
Europe and Turkey(ii)
|
|
Africa
|
|
Latin America and Caribbean
|
|
Asia
Pacific
|
|
ISC
|
|
Eliminate
inter-
segment
sales
|
|
Total
operating
segments
|
|
Corporate
and other
|
|
Total
|
30 June 2017
|
|
|
|
|
|
|
|
|
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Sales
|
4,725
|
|
4,985
|
|
2,132
|
|
1,303
|
|
4,923
|
|
1,390
|
|
(1,390)
|
|
18,068
|
|
46
|
|
18,114
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At budgeted exchange rates(i)
|
3,523
|
|
2,474
|
|
1,240
|
|
873
|
|
1,977
|
|
1,418
|
|
(1,324)
|
|
10,181
|
|
39
|
|
10,220
|
Acquisitions and disposals
|
-
|
|
2
|
|
15
|
|
7
|
|
41
|
|
-
|
|
-
|
|
65
|
|
-
|
|
65
|
ISC allocation
|
11
|
|
60
|
|
4
|
|
11
|
|
8
|
|
(94)
|
|
-
|
|
-
|
|
-
|
|
-
|
Retranslation to actual
exchange rates
|
627
|
|
288
|
|
297
|
|
153
|
|
393
|
|
66
|
|
(66)
|
|
1,758
|
|
7
|
|
1,765
|
Net sales
|
4,161
|
|
2,824
|
|
1,556
|
|
1,044
|
|
2,419
|
|
1,390
|
|
(1,390)
|
|
12,004
|
|
46
|
|
12,050
|
Operating profit/(loss)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At budgeted exchange rates(i)
|
1,648
|
|
741
|
|
159
|
|
195
|
|
375
|
|
116
|
|
-
|
|
3,234
|
|
(169)
|
|
3,065
|
Acquisitions and disposals
|
-
|
|
-
|
|
(8)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(8)
|
|
(1)
|
|
(9)
|
ISC allocation
|
14
|
|
72
|
|
5
|
|
13
|
|
12
|
|
(116)
|
|
-
|
|
-
|
|
-
|
|
-
|
Retranslation to actual
exchange rates
|
237
|
|
123
|
|
62
|
|
42
|
|
100
|
|
-
|
|
-
|
|
564
|
|
(19)
|
|
545
|
Operating profit/(loss)
before exceptional items
|
1,899
|
|
936
|
|
218
|
|
250
|
|
487
|
|
-
|
|
-
|
|
3,790
|
|
(189)
|
|
3,601
|
Exceptional items
|
-
|
|
(33)
|
|
-
|
|
-
|
|
(9)
|
|
-
|
|
-
|
|
(42)
|
|
-
|
|
(42)
|
Operating profit/(loss)
|
1,899
|
|
903
|
|
218
|
|
250
|
|
478
|
|
-
|
|
-
|
|
3,748
|
|
(189)
|
|
3,559
|
Non-operating items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
20
|
Net finance charges
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(329)
|
Share of after tax results of associates and joint
ventures
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
309
|
Profit before taxation
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
3,559
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(i) These items represent the IFRS 8 performance measures for the
geographical and ISC segments.
|
(ii) The Europe and Turkey region was formerly named 'Europe,
Russia and Turkey'. Countries included in the region have not
changed.
|
(1) The
net sales figures for ISC reported to the Executive Committee
primarily comprise inter-segment sales and these are eliminated in
a separate column in the above segmental analysis. Apart from sales
by the ISC segment to the other operating segments, inter-segmental
sales are not material.
(2) The
group's net finance charges are managed centrally and are not
attributable to individual operating segments.
(3)
Approximately 40% of annual net sales occur in the last four months
of each calendar year.
Weighted
average exchange rates used in the translation of income statements
were US dollar - £1 = $1.35 (2017 - £1 = $1.27) and euro
- £1 = €1.13 (2017 - £1 = €1.16). Exchange
rates used to translate assets and liabilities at the balance sheet
date were US dollar - £1 = $1.32 (30 June 2017 - £1 =
$1.30) and euro - £1 = €1.13 (30 June 2017- £1 =
€1.14). The group uses foreign exchange transaction hedges to
mitigate the effect of exchange rate movements.
3. Exceptional items
Exceptional
items are those which, in management's judgement, need to be
disclosed by virtue of their size or nature in order for the user
to obtain a proper understanding of the financial information. See
Explanatory Notes for the criteria used to determine whether an
exceptional item is accounted for as operating or
non-operating.
|
Year ended
30 June 2018
|
Year ended
30 June 2017
|
|
|
£ million
|
|
£ million
|
Items included in operating profit
|
|
|
|
|
Impairment of the Meta brand, goodwill, tangible and other
assets
|
|
(128)
|
|
-
|
Competition authority investigation in Turkey
|
|
-
|
|
(33)
|
Customer claim in India
|
|
-
|
|
(32)
|
Disengagement agreements relating to United Spirits
Limited
|
|
-
|
|
23
|
|
|
(128)
|
|
(42)
|
Non-operating items
|
|
|
|
|
Sale of businesses
|
|
|
|
|
Wines in the United States and Percy Fox
|
|
-
|
|
20
|
|
|
-
|
|
20
|
|
|
|
|
|
Exceptional items before taxation
|
|
(128)
|
|
(22)
|
|
|
|
|
|
Items included in taxation
|
|
|
|
|
Tax on exceptional operating items
|
|
13
|
|
11
|
Tax on exceptional non-operating items
|
|
-
|
|
(7)
|
Exceptional taxation
|
|
190
|
|
-
|
|
|
203
|
|
4
|
|
|
|
|
|
Exceptional items in continuing operations
|
|
75
|
|
(18)
|
|
|
|
|
|
Discontinued operations net of taxation
|
|
|
|
|
Thalidomide
|
|
-
|
|
(55)
|
|
|
|
|
|
Total exceptional items
|
|
75
|
|
(73)
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
Equity shareholders of the parent company
|
|
75
|
|
(64)
|
Non-controlling interests
|
|
-
|
|
(9)
|
Total exceptional items
|
|
75
|
|
(73)
|
4. Finance income and charges
|
Year ended
30 June 2018
|
Year ended
30 June 2017
|
|
|
£ million
|
|
£ million
|
|
|
|
|
|
Interest income
|
|
155
|
|
148
|
Fair value gain on financial instruments
|
|
61
|
|
76
|
Total interest income
|
|
216
|
|
224
|
Interest charges
|
|
(395)
|
|
(451)
|
Fair value loss on financial instruments
|
|
(62)
|
|
(67)
|
Total interest charges
|
|
(457)
|
|
(518)
|
Net interest charges
|
|
(241)
|
|
(294)
|
|
|
|
|
|
Net finance income in respect of post employment plans in
surplus
|
|
9
|
|
2
|
Hyperinflation adjustment in respect of Venezuela (a)
|
|
18
|
|
9
|
Total other finance income
|
|
27
|
|
11
|
Net finance charge in respect of post employment plans in
deficit
|
|
(20)
|
|
(27)
|
Unwinding of discounts
|
|
(14)
|
|
(8)
|
Change in financial liability (Level 3)
|
|
-
|
|
(8)
|
Other finance charges
|
|
(12)
|
|
(3)
|
Total other finance charges
|
|
(46)
|
|
(46)
|
Net other finance charges
|
|
(19)
|
|
(35)
|
(a) Hyperinflation adjustment in respect of Venezuela
Venezuela is a hyper-inflationary economy where the government
maintains a regime of strict currency controls with multiple
foreign currency rate systems. Access to US dollars on these
exchange systems is very limited. The foreign currency denominated
transactions and balances of the group's Venezuelan operations are
translated into the local functional currency (VEF) at the rate
they are expected to be settled, applying the most appropriate
official exchange rate. For the group consolidation the group
converts its Venezuelan operations using management's estimate of
the exchange rate considering the inflation forecast and the most
appropriate official exchange rate (DICOM). The exchange rate used
to translate the results of the group's Venezuelan operations is
VEF/GBP 3,858,826 for the year ended 30 June 2018 (2017 - VEF/GBP
6,110).
The
following table presents the contribution of the group's Venezuelan
operations to the consolidated income statement, cash flow
statement and net assets for the year ended 30 June 2018 and the
amounts that would have resulted if the DICOM exchange rate had
been applied in the group consolidation.
|
At estimated exchange rate
|
At DICOM exchange rate
|
|
3,858,826 VEF/GBP
|
151,800 VEF/GBP
|
|
£ million
|
£ million
|
|
|
|
Net sales
|
1
|
27
|
Operating profit
|
-
|
16
|
Other finance income - hyperinflation adjustment
|
18
|
458
|
Net cash inflow from operating activities
|
1
|
12
|
Net assets
|
69
|
1,744
|
5. Taxation
For the
year ended 30 June 2018, the £596 million taxation charge
(2017 - £732 million) comprises a UK tax
charge of £326 million (2017 -
£112 million) and a foreign tax charge of £270 million (2017 - £620
million).
6. Inventories
|
|
30 June 2018
|
|
30 June 2017
|
|
|
£ million
|
|
£ million
|
|
|
|
|
|
Raw materials and consumables
|
|
321
|
|
327
|
Work in progress
|
|
44
|
|
45
|
Maturing inventories
|
|
4,028
|
|
3,820
|
Finished goods and goods for resale
|
|
622
|
|
596
|
|
|
5,015
|
|
4,788
|
7. Net borrowings
|
|
|
30 June 2018
|
|
30 June 2017
|
|
|
|
£ million
|
|
£ million
|
|
|
|
|
|
|
Borrowings due within one year and bank overdrafts
|
|
|
(1,828)
|
|
(2,459)
|
Borrowings due after one year
|
|
|
(8,074)
|
|
(6,583)
|
Fair value of foreign currency forwards and swaps
|
|
|
107
|
|
144
|
Fair value of interest rate hedging instruments
|
|
|
(15)
|
|
(2)
|
Finance lease liabilities
|
|
|
(155)
|
|
(183)
|
|
|
|
(9,965)
|
|
(9,083)
|
Cash and cash equivalents
|
|
|
874
|
|
1,191
|
|
|
|
(9,091)
|
|
(7,892)
|
8. Reconciliation of movement in net borrowings
|
Year ended
30 June 2018
|
Year ended
30 June 2017
|
|
|
£ million
|
|
£ million
|
|
|
|
|
|
Net (decrease)/increase in cash and cash equivalents before
exchange
|
|
(185)
|
|
122
|
Net (increase)/decrease in bonds and other borrowings
|
|
(1,015)
|
|
820
|
(Increase)/decrease in net borrowings from cash flows
|
|
(1,200)
|
|
942
|
Exchange differences on net borrowings
|
|
80
|
|
(205)
|
Other non-cash items
|
|
(79)
|
|
6
|
Net borrowings at beginning of the year
|
|
(7,892)
|
|
(8,635)
|
Net borrowings at end of the year
|
|
(9,091)
|
|
(7,892)
|
In the year ended 30 June 2018, the group issued bonds of
€1,275 million (£1,136 million) and $2,000 (£1,476
million) and repaid bonds of $2,100 million (£1,571
million) (2017 - repaid bonds of $1,600 million (£1,234
million)).
All bonds, medium term notes and commercial paper
issued on an unsecured basis by the group's 100% owned subsidiaries
are fully and unconditionally guaranteed on an unsecured
basis by Diageo plc.
9. Financial instruments
Fair
value measurements of financial instruments are presented through
the use of a three-level fair value hierarchy that prioritises the
valuation techniques used in fair value calculations.
The
group maintains policies and procedures to value instruments using
the most relevant data available. If multiple inputs that fall into
different levels of the hierarchy are used in the valuation of an
instrument, the instrument is categorised on the basis of the most
subjective input.
Foreign
currency forwards and swaps, cross currency swaps and interest rate
swaps are valued using discounted cash flow techniques. These
techniques incorporate inputs at levels 1 and 2, such as foreign
exchange rates and interest rates. These market inputs are used in
the discounted cash flow calculation incorporating the instrument's
term, notional amount and discount rate, and taking credit risk
into account. As significant inputs to the valuation are observable
in active markets, these instruments are categorised as level 2 in
the hierarchy.
Other
financial liabilities include a put option, which does not expire,
held by Industrias Licoreras de Guatemala (ILG) to sell the
remaining 50% equity stake in Rum Creations & Products Inc, the
owner of the Zacapa rum brand, to Diageo. The liability is fair
valued and as at 30 June 2018 an amount of £164 million (30
June 2017 - £183 million) is recognised with changes in fair
value included in retained earnings. As the valuation of this
option uses assumptions not observable in the market, it is
categorised as level 3 in the hierarchy. As at 30 June 2018 because
it is unknown when or if ILG will exercise the option the liability
is measured as if the exercise date is on the last day of the next
financial year considering forecast future performance (in prior
years the potential liability also assumed a possible exercise
date).
The
option is sensitive to reasonably possible changes in assumptions.
If the option were to be exercised two years later, the fair value
of the liability would increase by approximately £30
million.
Apart
from the change to the method used to estimate the potential
liability of the option held by ILG there were no significant
changes in the measurement and valuation techniques, or significant
transfers between the levels of the financial assets and
liabilities in the year ended 30 June 2018.
The
group's financial assets and liabilities measured at fair value are
categorised as follows:
|
|
30 June 2018
|
|
30 June 2017
(restated(i))
|
|
|
£ million
|
|
£ million
|
|
|
|
|
|
Derivative assets
|
|
217
|
|
348
|
Derivative liabilities
|
|
(123)
|
|
(232)
|
Valuation techniques based on observable market input (Level
2)
|
|
94
|
|
116
|
Financial assets - other
|
|
89
|
|
39
|
Financial liabilities - other
|
|
(164)
|
|
(183)
|
Valuation techniques based on unobservable market input (Level
3)
|
|
(75)
|
|
(144)
|
(i) Restated to include loans and advances to associates and third
parties.
|
|
|
|
|
Finance
lease liabilities were £155 million at 30 June 2018 (2017 -
£183 million).
The
carrying amount of the group's financial assets and liabilities is
generally the same as their fair value apart from borrowings. At 30
June 2018 the fair value of gross borrowings (excluding finance
lease liabilities and the fair value of derivative instruments) was
£10,304 million and the carrying value was £9,902 million
(2017 - £9,641 million and £9,042 million,
respectively).
10. Dividends and other reserves
|
|
|
|
|
|
|
|
|
Year ended
30 June 2018
|
|
Year ended
30 June 2017
|
|
|
|
£ million
|
|
|
£ million
|
Amounts recognised as distributions to equity
shareholders in the year
|
|
|
|
|
|
|
Final dividend for the year ended 30 June 2017
of
38.5 pence per share (2016 - 36.6 pence)
|
|
|
968
|
|
|
920
|
Interim dividend paid for the year ended 30 June 2018
of
24.9 pence per share (2017 - 23.7 pence)
|
|
|
613
|
|
|
595
|
|
|
|
1,581
|
|
|
1,515
|
A final
dividend of 40.4 pence per share was recommended by the Board of
Directors on 25 July 2018 for approval by shareholders at the
Annual General Meeting to be held on 20 September 2018 bringing the
full year dividend to 65.3 pence per share for the year ended 30
June 2018. As the approval was after the balance sheet date, the
final dividend has not been included as a liability.
Other
reserves of £2,133 million at 30 June 2018 (2017 -
£2,693
million) comprise a
capital redemption reserve of £3,163 million (2017 -
£3,146 million), a hedging reserve of £68 million deficit (2017 -
£21 million deficit) and an exchange reserve of £962
million deficit (2017 - £432 million deficit).
11. Acquisition of businesses
The
fair value of assets and liabilities acquired and cash
consideration paid in respect of acquisition of businesses in the
year ended 30 June 2018 were as follows:
|
|
|
|
|
|
|
Casamigos
|
|
Other
|
|
Total
|
|
£ million
|
|
£ million
|
£ million
|
Brands
|
469
|
|
9
|
|
478
|
Inventories
|
4
|
|
-
|
|
4
|
Other working capital
|
5
|
|
(3)
|
|
2
|
Cash
|
6
|
|
-
|
|
6
|
Fair value of assets and liabilities
|
484
|
|
6
|
|
490
|
Goodwill arising on acquisition
|
237
|
|
12
|
|
249
|
Consideration payable
|
721
|
|
18
|
|
739
|
Satisfied by:
|
|
|
|
|
|
Cash consideration paid
|
549
|
|
6
|
|
555
|
Contingent consideration payable
|
172
|
|
12
|
|
184
|
|
721
|
|
18
|
|
739
|
|
|
|
|
|
|
Cash consideration paid for Casamigos
|
549
|
|
-
|
|
549
|
Cash consideration paid for other subsidiaries
|
-
|
|
6
|
|
6
|
Cash consideration paid for investments in associates
|
-
|
|
12
|
|
12
|
Cash acquired
|
(6)
|
|
-
|
|
(6)
|
Capital injection to associates
|
-
|
|
11
|
|
11
|
Cash consideration paid in respect of prior year
acquisitions
|
-
|
|
22
|
|
22
|
Net cash outflow on acquisition of business
|
543
|
|
51
|
|
594
|
|
|
|
|
|
|
|
|
|
|
|
|
Casamigos
On 15
August 2017 Diageo completed the purchase of 100% of the share
capital of Casamigos Tequila, LLC (Casamigos), a super premium
tequila based in the United States, for $1,000 million (£777
million) of which $300 million (£233 million) was contingent
on Casamigos achieving certain performance targets. Casamigos
contributed £55 million to sales, £49 million to net
sales, £4 million to operating profit (net of transaction
costs of £4 million) and £3 million profit after tax in
the year ended 30 June 2018.
It is
expected that the goodwill will be deductible for tax purposes. The
net present value of the contingent consideration payable was $221
million (£172 million) at the date of acquisition and is
expected to be paid in tranches over the next ten years. The
goodwill arising on the acquisition of Casamigos represents
expected revenue and cost synergies and the acquired
workforce.
Other
On 14 March 2018 Diageo completed the acquisition of Belsazar GmbH,
a premium aperitif from Germany's Black Forest.
On
2 May 2018 Diageo acquired 100% of the intellectual property of
Pierde Almas, an ultra premium mezcal.
12. Contingent liabilities and legal proceedings
(a) Guarantees and related matters
As of
30 June 2018, the group has no material unprovided guarantees or
indemnities in respect of liabilities of third
parties.
(b) Acquisition of USL shares from UBHL, winding-up petitions
against UBHL and other proceedings in relation to the USL
transaction
On 4
July 2013, Diageo completed its acquisition, under a share purchase
agreement with United Breweries (Holdings) Limited (UBHL) and
various other sellers (the SPA), of 21,767,749 shares (14.98%) in
United Spirits Limited (USL) for a total consideration of INR 31.3
billion (£349 million), including 10,141,437 shares (6.98%)
from UBHL. The SPA was signed on 9 November 2012 and was part of
the transaction announced by Diageo in relation to USL on that day
(the Original USL Transaction). Through a series of further
transactions, as of 2 July 2014, Diageo had a 54.78% investment in
USL (excluding 2.38% owned by the USL Benefit Trust).
Prior
to the acquisition from UBHL on 4 July 2013, the High Court of
Karnataka (High Court) had granted leave to UBHL under sections 536
and 537 of the Indian Companies Act 1956 (the Leave Order) to
enable the sale by UBHL to Diageo to take place (the UBHL Share
Sale) notwithstanding the continued existence of five winding-up
petitions that were pending against UBHL on 9 November 2012, being
the date of the SPA. Additional winding-up petitions have been
brought against UBHL since 9 November 2012, and the Leave Order did
not extend to them. At the time of the completion of the UBHL Share
Sale, the Leave Order remained subject to review on appeal.
However, as stated by Diageo at the time of closing on 4 July 2013,
it was considered unlikely that any appeal process in respect of
the Leave Order would definitively conclude on a timely basis and,
accordingly, Diageo waived the conditionality under the SPA
relating to the absence of insolvency proceedings in relation to
UBHL and acquired the 10,141,437 USL shares from UBHL at that
time.
Following closing
of the UBHL Share Sale, appeals were filed by various petitioners
in respect of the Leave Order. On 20 December 2013, the division
bench of the High Court set aside the Leave Order (the December
2013 Order). Following the December 2013 Order, Diageo filed
special leave petitions (SLPs) in the Supreme Court of India
against the December 2013 Order.
On 10
February 2014, the Supreme Court of India issued an order giving
notice in respect of the SLPs and ordering that the status quo be
maintained with regard to the UBHL Share Sale pending a hearing on
the matter in the Supreme Court. Following a number of
adjournments, the next firm hearing date for the SLPs (in respect
of which leave has since been granted and which have been converted
to civil appeals) is yet to be fixed.
In
separate proceedings, the High Court passed a winding-up order
against UBHL on 7 February 2017. On 4 March 2017, UBHL appealed
against this order before a division bench of the High Court. This
appeal is currently pending.
Diageo
continues to believe that the acquisition price of INR 1,440 per
share paid to UBHL for the USL shares is fair and reasonable as
regards UBHL, UBHL's shareholders and UBHL's secured and unsecured
creditors. However, adverse results for Diageo in the proceedings
referred to above could, absent leave or relief in other
proceedings, ultimately result in Diageo losing title to the
10,141,437 USL shares acquired from UBHL. Diageo believes it would
remain in control of USL and be able to consolidate USL as a
subsidiary regardless of the outcome of this litigation. There can
be no certainty as to the outcome of the existing or any further
related legal proceedings or the timeframe within which they would
be concluded.
Diageo
also has the benefit of certain contractual undertakings and
commitments from the relevant sellers in relation to potential
challenges to its unencumbered title to the USL shares acquired on
4 July 2013, including relating to the winding-up petitions
described above and/or certain losses and costs that may be
incurred in the event of third party actions relating to the
acquisition of the USL shares.
(c) Continuing matters relating to the resignation of Dr
Vijay Mallya from USL and USL internal inquiries
On 25
February 2016, Diageo and USL each announced that they had entered
into arrangements with Dr Mallya under which he had agreed to
resign from his position as a director and as chairman of USL and
from his positions in USL's subsidiaries. As specified by Diageo in
its announcement at that time, these arrangements ended its prior
agreement with Dr Mallya regarding his position at USL, therefore
bringing to an end the uncertainty relating to the governance of
USL, and put in place a five-year global non-compete (excluding the
United Kingdom), non-interference, non-solicitation and standstill
arrangement with Dr Mallya. As part of those arrangements, USL,
Diageo and Dr Mallya agreed a mutual release in relation to matters
arising out of an inquiry into certain matters referred to in USL's
financial statements and the qualified auditor's report for the
year ended 31 March 2014 (the Initial Inquiry) which had revealed,
among other things, certain diversions of USL funds. Dr Mallya also
agreed not to pursue any claims against Diageo, USL and their
affiliates (including under the prior agreement with Diageo). In
evaluating entering into such arrangements, Diageo considered the
impact of the arrangements on USL and all of USL's shareholders,
and came to the view that the arrangements were in the best
interests of USL and its shareholders.
Diageo's agreement
with Dr Mallya (the February 2016 Agreement) provided for a payment
of $75 million (£53 million)
to Dr Mallya over a five year period in consideration for the
five-year global non-compete, non-interference, non-solicitation
and standstill commitments referred to above, his resignation from
USL and the termination of his USL-related appointment and
governance rights, the relinquishing of rights and benefits
attached to his position at USL, and his agreement not to pursue
claims against Diageo and USL. The February 2016 Agreement also
provided for the release of Dr Mallya's personal obligations to
indemnify (i) Diageo Holdings Netherlands B.V. (DHN) in respect of
its earlier liability ($141 million (£96 million)) under a
backstop guarantee of certain borrowings of Watson Limited (Watson)
(a company affiliated with Dr Mallya), and (ii) Diageo Finance plc
in respect of its earlier liability (£30 million) under a
guarantee of certain borrowings of United Breweries Overseas
Limited. $40 million (£28 million) of the $75 million
(£53 million) amount was paid on signing of the February 2016
Agreement with the balance being payable in equal instalments of $7
million (£5 million) a year over five years, subject to and
conditional on Dr Mallya's compliance with certain terms of the
agreement. While the first two instalments of $7 million (£5
million) each would have become due on 25 February 2017 and 25
February 2018, respectively, owing to various reasons (including
breaches committed by Dr Mallya and certain persons connected with
him of several provisions of the February 2016 Agreement and
agreements of the same date between Dr Mallya and USL), Diageo
believes that it was not liable to pay such amount, and is very
unlikely to become liable to pay any future instalments, to Dr
Mallya. By notice to Dr Mallya and certain persons connected with
him on 24 February 2017, 3 November 2017 and 23 February 2018,
Diageo and other group companies have demanded from Dr Mallya the
repayment of $40 million (£28 million) which was paid by
Diageo on 25 February 2016, and also sought compensation from him
for various losses incurred by the relevant members of the Diageo
group on account of the breaches committed by him and certain
persons connected with him. On 16 November 2017, Diageo and other
relevant members of the Diageo group commenced claims in the High
Court of Justice in England and Wales (the English High Court)
against Dr Mallya in relation to certain of the matters specified
in the notices of 24 February 2017 and 3 November 2017. At the same
time DHN also commenced claims in the English High Court against Dr
Mallya, his son Sidhartha Mallya and two companies affiliated with
Dr Mallya (Watson and Continental Administration Services Limited
(CASL)) for in excess of $142 million (£105 million) (plus
interest) in relation to Watson's liability to DHN in respect of
its borrowings referred to above and the breach of associated
security documents. These additional claims are described in
paragraph (d) below. Dr Mallya, Sidhartha Mallya and the relevant
affiliated companies filed a defence to such claims and the
additional claims on 12 March 2018, and Dr Mallya also filed a
counterclaim for payment of the two $7 million (£5 million)
instalment payments withheld by Diageo as described above. Diageo
intends to continue to prosecute its claims and to defend the
counterclaims.
As
previously announced by USL, the Initial Inquiry identified certain
additional parties and matters indicating the possible existence of
other improper transactions. These transactions could not be fully
analysed during the Initial Inquiry and, accordingly, USL, as
previously announced, mandated that its Managing Director and Chief
Executive Officer conduct a further inquiry into the transactions
involving the additional parties and the additional matters to
determine whether they also suffered from improprieties (the
Additional Inquiry). USL announced the results of the Additional
Inquiry in a notice to the Indian Stock Exchange dated 9 July 2016.
The mutual release in relation to the Initial Inquiry agreed by
Diageo and USL with Dr Mallya announced on 25 February 2016 does
not extend to matters arising out of the Additional
Inquiry.
As
stated in USL's previous announcement, the Additional Inquiry
revealed further instances of actual or potential fund diversions
from USL and its Indian and overseas subsidiaries to, in most
cases, Indian and overseas entities in which Dr Mallya appears to
have a material direct or indirect interest, as well as other
potentially improper transactions involving USL and its Indian and
overseas subsidiaries.
In
connection with the matters identified by the Additional Inquiry,
USL has, pursuant to a detailed review of each case of such fund
diversion and after obtaining expert legal advice, where
appropriate, filed civil suits for recovery of funds from certain
parties, including Dr Mallya, before the relevant courts in
India.
The
amounts identified in the Additional Inquiry have been previously
provided for or expensed in the financial statements of USL or its
subsidiaries for prior periods. Further, at this stage, it is not
possible for the management of USL to estimate the financial impact
on USL, if any, arising out of potential non-compliance with
applicable laws in relation to such fund diversions.
(d) Other continuing matters relating to Dr Mallya and
affiliates
DHN
issued a conditional backstop guarantee on 2 August 2013 to
Standard Chartered Bank (Standard Chartered) pursuant to a
guarantee commitment agreement (the Guarantee Agreement). The
guarantee was in respect of the liabilities of Watson, a company
affiliated with Dr Mallya, under a $135 million (£92 million)
facility from Standard Chartered (the Facility Agreement). The
Guarantee Agreement was entered into as part of the arrangements
put in place and announced at the closing of the USL transaction on
4 July 2013.
DHN's
provision of the Guarantee Agreement enabled the refinancing of
certain existing borrowings of Watson from a third party bank and
facilitated the release by that bank of rights over certain USL
shares that were to be acquired by Diageo as part of the USL
transaction. The facility matured and entered into default in May
2015. In aggregate DHN paid Standard Chartered $141 million
(£96 million) under this guarantee, i.e. including payments of
default interest and various fees and expenses.
Watson
remains liable for all amounts paid by DHN under the guarantee.
Under the guarantee documentation with Standard Chartered, DHN is
entitled to the benefit of the underlying security package for the
loan, including: (a) certain shares in United Breweries Limited
(UBL) held solely by Dr Mallya and certain other shares in UBL held
by Dr Mallya jointly with his son Sidhartha Mallya, (b) Watson's
interest in Orange India Holdings S.a.r.l. (Orange), the joint
venture that owns the Force India Formula One (F1) team, and (c)
the shareholding in Watson.
Aspects
of the security package are the subject of various proceedings in
India in which third parties are alleging and asserting prior
rights to certain assets comprised in the security package or
otherwise seeking to restrain enforcement against certain assets by
Standard Chartered and/or DHN. These proceedings are ongoing and
DHN will continue to vigorously pursue these matters as part of its
efforts for enforcement of the underlying security and recovery of
outstanding amounts. Diageo believes that the existence of any
prior rights or dispute in relation to the security would be in
breach of representations and warranties given by Dr Mallya to
Standard Chartered at the time the security was granted and further
believes that certain actions taken by Dr Mallya in relation to the
proceedings described above also breached his obligations to
Standard Chartered.
Under
the terms of the guarantee and as a matter of law, there are
arrangements to pass on to DHN the benefit of the security package
upon payment under the guarantee of all amounts owed to Standard
Chartered. Payment under the guarantee has now occurred as
described above. To the extent possible in the context of the
proceedings described above, Standard Chartered has taken certain
recovery steps and is working with DHN in relation to these
proceedings. DHN is actively monitoring the security package and is
discussing with Standard Chartered steps to continue enforcement
against the background of the proceedings described above, as well
as enforcement steps in relation to elements of the security
package that are unaffected by those proceedings. DHN's ability to
assume or enforce security over some elements of the security
package is also subject to regulatory consent. It is not at this
stage possible to determine whether such consent would be
forthcoming.
In
addition to the Indian proceedings just described, certain of the
assets comprised in the security package may also be affected by a
worldwide freezing order of the English High Court granted on 24
November 2017 and continued on 8 December 2017 and 8 May 2018 in
respect of the assets of Dr Mallya. The agreement with Dr Mallya
referenced in paragraph (c) above does not impact the security
package, which, as described above, includes shares in UBL and
Watson's interest in Orange, the joint venture that owns the Force
India F1 team. Watson remains liable for all amounts paid pursuant
to the guarantee and DHN has the benefit of a counter-indemnity
from Watson in respect of payments in connection with the
guarantee. The various security providers, including Dr Mallya and
Watson, acknowledged in the February 2016 Agreement referred to in
paragraph (c) above that DHN is entitled to the benefit of the
security package underlying the Standard Chartered facility and
have also undertaken to take all necessary actions in that regard.
Further, Diageo believes that the existence of any prior rights or
disputes in relation to the security package would be in breach of
certain confirmations given to Diageo and DHN pursuant to that
agreement by Dr Mallya, Watson and certain connected
persons.
On 16
November 2017, DHN commenced various claims in the English High
Court for, in aggregate, in excess of $142 million (£105
million) (plus interest) in relation to these matters, including
the following: (i) a claim against Watson for $141 million
(£96 million) (plus interest) under Watson's counter-indemnity
to DHN in respect of payments made by DHN to Standard Chartered
under the guarantee referred to above; (ii) a claim against Dr
Mallya and Sidhartha Mallya under various agreements creating or
relating to the security package referred to above for (A) not less
than $1.8 million (£1 million), being the costs incurred to
date in the various Indian proceedings referred to above (plus
interest), and (B) damages of $141 million (£96 million),
being DHN's loss as a result of those Indian proceedings which
currently prevent enforcement of the security over shares in UBL
(plus interest); and (iii) a claim against CASL, as a co-surety
with DHN of Watson's obligations under the Facility Agreement, for
50% of the difference between the amount claimed under (i) above
and the amount (if any) that DHN is in fact able to recover from
Watson, Dr Mallya and/or Sidhartha Mallya. As noted in paragraph
(c), Dr Mallya, Sidhartha Mallya and the relevant affiliated
companies filed a defence to these claims on 12 March 2018. As
stated in paragraph (c), DHN and Diageo intends to continue to
prosecute these claims.
(e) Regulatory
notices in relation to USL
Following USL's
earlier updates concerning the Initial Inquiry as well as in
relation to the arrangements with Dr Mallya that were the subject
of the 25 February 2016 announcement, USL and Diageo have received
various notices from Indian regulatory authorities, including the
Ministry of Corporate Affairs, Serious Fraud Investigation Office,
National Stock Exchange, Income Tax Department, Enforcement
Directorate, Securities and Exchange Board of India (SEBI),
Bangalore police, Central Excise Intelligence and the Institute of
Chartered Accountants of India. Diageo and USL are cooperating
fully with the authorities in relation to these
matters.
Diageo
and USL have also received notices from SEBI requesting information
in relation to, and explanation of the reasons for, the
arrangements with Dr Mallya that were the subject of the 25
February 2016 announcement as well as, in the case of USL, in
relation to the Initial Inquiry and the Additional Inquiry, and, in
the case of Diageo, whether such arrangements with Dr Mallya or the
Watson backstop guarantee arrangements referred to in paragraphs
(c) and (d) above were part of agreements previously made with Dr
Mallya at the time of the Original USL Transaction announced on 9
November 2012 and the open offer made as part of the Original USL
Transaction. Diageo and USL have complied with such information
requests and Diageo has confirmed that, consistent with prior
disclosures, the Watson backstop guarantee arrangements and the
matters described in the 25 February 2016 announcement were not the
subject of any earlier agreement with Dr Mallya. In respect of the
Watson backstop guarantee arrangements, SEBI issued a further
notice to Diageo on 16 June 2016 that if there is any net liability
incurred by Diageo (after any recovery under relevant security or
other arrangements, which matters remain pending) on account of the
Watson backstop guarantee, such liability, if any, would be
considered to be part of the price paid for the acquisition of USL
shares under the SPA which formed part of the Original USL
Transaction and that, in that case, additional equivalent payments
would be required to be made to those shareholders (representing
0.04% of the shares in USL) who tendered in the open offer made as
part of the Original USL Transaction. Diageo is clear that the
Watson backstop guarantee arrangements were not part of the price
paid or agreed to be paid for any USL shares under the Original USL
Transaction and therefore believes the decision in the SEBI notice
to be misconceived and wrong in law and appealed against it before
the Securities Appellate Tribunal, Mumbai (SAT). On 1 November
2017, SAT issued an order in respect of Diageo's appeal in which,
amongst other things, it observed that the relevant officer at SEBI
had neither considered Diageo's earlier reply nor provided Diageo
with an opportunity to be heard, and accordingly directed SEBI to
pass a fresh order after giving Diageo an opportunity to be heard.
Following SAT's order, Diageo has made its further submissions in
the matter, including at a personal hearing before a Deputy General
Manager of SEBI.
Diageo
has also responded to a show cause notice dated 12 May 2017 from
SEBI arising out of the correspondence in relation to the matters
described in the 25 February 2016 announcement and made its further
submissions in the matter, including at a personal hearing before a
Whole Time Member of SEBI.
Diageo
is unable to assess if the notices or enquiries referred to above
will result in enforcement action or, if this were to transpire, to
quantify meaningfully the possible loss or range of loss, if any,
to which any such action might give rise if determined against
Diageo or USL.
(f) SEC Inquiry
Diageo
has received requests for information from the US Securities and
Exchange Commission (SEC) regarding its distribution in and public
disclosures regarding the United States and its distribution in
certain other Diageo markets as well as additional context about
the Diageo group globally. Diageo is currently responding to the
SEC's requests for information in this matter. Diageo is unable to
assess if the inquiry will evolve into further information requests
or an enforcement action or, if this were to transpire, to quantify
meaningfully the possible loss or range of loss, if any, to which
any such action might give rise.
(g) Tax
The
international tax environment has received increased attention and
seen rapid change over recent years, both at a US and European
level, and by international bodies such as the Organisation for
Economic Cooperation and Development (OECD). Against this backdrop,
Diageo has been monitoring developments and continue to engage
transparently with the tax authorities in the countries where
Diageo operates to ensure that the group manages its arrangements
on a sustainable basis.
In
October 2017, the European Commission opened a state aid
investigation into the Group Financing Exemption in the UK
controlled foreign company rules. The Group Financing Exemption was
introduced in legislation by the British government in 2013. In
common with other UK-based international companies whose
arrangements are in line with current UK CFC legislation, Diageo
may be affected by the outcome of this investigation. Diageo is
monitoring developments. If the preliminary findings of the
European Commission's investigation into the UK legislation are
upheld, Diageo calculates its maximum potential liability to be
approximately £250 million. Based on its current assessment,
Diageo believes that no provision is required in respect of this
issue.
During
the year ended 30 June 2018, Diageo reached agreement with HM
Revenue & Customs in the United Kingdom in respect of transfer
pricing and related issues. See Additional Financial Information,
Taxation - note (d) for further information.
Diageo
has also been in discussions with the French Tax Authorities over
the deductibility of certain interest costs. During the year the
French Tax Authorities issued assessments denying tax relief for
interest costs incurred in the periods ended 30 June 2011 to 30
June 2017. Diageo believes that the interest costs are
deductible and accordingly is challenging the assessments from the
French Tax Authorities. Including interest and penalties, the
exposure for the periods ended 30 June 2011 to 30 June 2018 is
approximately €241 million (£214 million). Based on
its current assessment, Diageo believes that no provision is
required in respect of this issue.
(h) Other
The
group has extensive international operations and is a defendant in
a number of legal, customs and tax proceedings incidental to these
operations, the outcome of which cannot at present be foreseen. In
particular, the group is currently a defendant in various customs
proceedings that challenge the declared customs value of products
imported by certain Diageo companies. Diageo continues to defend
its position vigorously in these proceedings.
Save as
disclosed above, neither Diageo, nor any member of the Diageo
group, is or has been engaged in, nor (so far as Diageo is aware)
is there pending or threatened by or against it, any legal or
arbitration proceedings which may have a significant effect on the
financial position of the Diageo group.
13. Related party transactions
The
group's significant related parties are its associates, joint
ventures, key management personnel and pension plans. There have
been no transactions with these related parties during the year
ended 30 June 2018 on terms other than those that prevail in arm's
length transactions.
14. Post balance sheet events
Offer for shares in Sichuan Shuijingfang Company Limited
(SJF)
On 10 July 2018 Diageo launched a partial tender offer to increase
its aggregate equity stake in SJF from 39.71% to up to a maximum of
60%. The price per share offered is RMB62.00 per share (adjusted
for any dividend distribution by SJF during the tender offer
period) and gives all non Diageo shareholders the opportunity to
elect to sell their shares in SJF to Diageo up to 11 August 2018.
The maximum possible consideration to reach 60% of the equity in
SJF is RMB6,146 million (£703 million), of which RMB1,229
million (£141 million) was deposited in escrow with the
Chinese regulatory authorities on 3 July 2018. $900 million
(£682 million) of the $3.5 billion (£2,652 million)
available undrawn committed bank facilities have been ring-fenced,
as a backstop to Diageo's normal funding sources, for the cost of
acquiring the shares in SJF until settlement is
completed.
Share buyback
On 26 July 2018 the Board approved a share buyback programme of up
to £2.0 billion for the year ending 30 June 2019.
ADDITIONAL INFORMATION FOR SHAREHOLDERS
EXPLANATORY NOTES
Comparisons
are to the year ended 30 June 2017 (2017) unless otherwise stated.
Unless otherwise stated, percentage movements given throughout this
announcement for volume, sales, net sales, marketing spend,
operating profit and operating margin are organic movements after
retranslating prior year reported numbers at current year exchange
rates and after adjusting for the effect of operating exceptional
items and acquisitions and disposals.
This
announcement contains forward-looking statements that involve risk
and uncertainty. There are a number of factors that could cause
actual results and developments to differ materially from those
expressed or implied by these forward-looking statements, including
factors beyond Diageo's control. Please refer to Risk Factors -
'Cautionary statement concerning forward-looking statements' for
more details.
This
announcement includes names of Diageo's products which constitute
trademarks or trade names which Diageo owns or which others own and
license to Diageo for use.
Definitions and reconciliation of non-GAAP measures to GAAP
measures
Diageo's
strategic planning process is based on the following non-GAAP
measures. They are chosen for planning and reporting, and some of
them are used for incentive purposes. The group's management
believes these measures provide valuable additional information for
users of the financial statements in understanding the group's
performance. These non-GAAP measures should be viewed as
complementary to, and not replacements for, the comparable GAAP
measures and reported movements therein.
It is
not possible to reconcile the forecast tax rate before exceptional
items and forecast organic operating margin improvement to the most
comparable GAAP measures as it is not possible to predict, with
reasonable certainty, the future impact of changes in exchange
rates, acquisitions and disposals and potential exceptional
items.
Volume
Volume
is a non-GAAP measure that is measured on an equivalent units basis
to nine-litre cases of spirits. An equivalent unit represents one
nine-litre case of spirits, which is approximately 272 servings. A
serving comprises 33ml of spirits, 165ml of wine, or 330ml of ready
to drink or beer. Therefore, to convert volume of products other
than spirits to equivalent units, the following guide has been
used: beer in hectolitres, divide by 0.9; wine in nine-litre cases,
divide by five; ready to drink in nine-litre cases, divide by 10;
and certain pre-mixed products that are classified as ready to
drink in nine-litre cases, divide by five.
Organic movements
In the
discussion of the performance of the business, 'organic'
information is presented using pounds sterling amounts on a
constant currency basis excluding the impact of exceptional items
and acquisitions and disposals. Organic measures enable users to
focus on the performance of the business which is common to both
years and which represents those measures that local managers are
most directly able to influence.
Calculation of organic movements
The
organic movement percentage is the amount in the row titled
'Organic movement' in the tables below, expressed as a percentage
of the amount in the row titled '2017 adjusted'. Organic operating
margin is calculated by dividing operating profit before
exceptional items by net sales after excluding the impact of
exchange rate movements and acquisitions and
disposals.
(a)
Exchange rates
'Exchange'
in the organic movement calculation reflects the adjustment to
recalculate the prior year results as if they had been generated at
the current year's exchange rates.
Exchange impacts in
respect of the external hedging of intergroup sales of products and
the intergroup recharging of third party services are allocated to
the geographical segment to which they relate. Residual exchange
impacts are reported in Corporate.
(b)
Acquisitions and disposals
For
acquisitions in the current year, the post acquisition results are
excluded from the organic movement calculations. For acquisitions
in the prior year, post acquisition results are included in full in
the prior year but are included in the organic movement
calculation from the anniversary of the acquisition date in the
current year. The acquisition row also eliminates the impact of
transaction costs that have been charged to operating profit in the
current or prior year in respect of acquisitions that, in
management's judgement, are expected to be completed.
Where a
business, brand, brand distribution right or agency agreement was
disposed of, or terminated, in the period up to the date of the
external results announcement, the group, in the organic movement
calculations, excludes the results for that business from the
current and prior year. In the calculation of operating profit, the
overheads included in disposals are only those directly
attributable to the businesses disposed of, and do not result from
subjective judgements of management. In addition, disposals include
the elimination of the results (for volume, sales and net sales
only) of operations in India where United Spirits Limited (USL)
previously fully consolidated the results but which are now
operated on a royalty or franchise model where USL now only
receives royalties for sales made by that operation.
(c)
Exceptional items
Exceptional
items are those which, in management's judgement, need to be
disclosed by virtue of their size or nature. Such items are
included within the income statement caption to which they relate,
and are separately disclosed in the notes to the consolidated
financial statements, and are excluded from the organic movement
calculations.
Exceptional
operating items are those that are considered to be material and
are part of the operating activities of the group such as
impairments of intangible and fixed assets, duty settlements,
property disposals and changes in post employment
plans.
Gains
and losses on the sale of businesses, brands or distribution
rights, step up gains and losses that arise when an investment
becomes an associate or an associate becomes a subsidiary and other
material, unusual non-recurring items, that are not in respect of
the production, marketing and distribution of premium drinks, are
disclosed as non-operating exceptional items below operating profit
in the consolidated income statement.
Exceptional tax
items comprise the direct tax consequences in respect of operating
and non-operating exceptional items, material settlements with the
tax authorities and material changes in tax rates.
It is
believed that separate disclosure of exceptional items and the
classification between operating and non-operating further helps
investors to understand the performance of the group.
Organic
movement calculations for the year ended 30 June 2018 were as
follows:
|
|
North America
million
|
|
Europe and Turkey(iii)
million
|
|
Africa
million
|
|
Latin America
and Caribbean
million
|
|
Asia
Pacific
million
|
|
Corporate
million
|
|
Total
million
|
Volume (equivalent units)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 reported
|
|
47.4
|
|
44.4
|
|
32.2
|
|
21.1
|
|
97.1
|
|
-
|
|
242.2
|
Reclassification(ii)
|
|
(0.1)
|
|
0.2
|
|
-
|
|
-
|
|
(0.1)
|
|
-
|
|
-
|
Disposals(iv)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(8.0)
|
|
-
|
|
(8.0)
|
2017 adjusted
|
|
47.3
|
|
44.6
|
|
32.2
|
|
21.1
|
|
89.0
|
|
-
|
|
234.2
|
Acquisitions and
disposals(iv)
|
|
0.3
|
|
-
|
|
-
|
|
-
|
|
0.1
|
|
-
|
|
0.4
|
Organic movement
|
|
0.6
|
|
1.7
|
|
1.0
|
|
1.1
|
|
1.4
|
|
-
|
|
5.8
|
2018 reported
|
|
48.2
|
|
46.3
|
|
33.2
|
|
22.2
|
|
90.5
|
|
-
|
|
240.4
|
Organic movement %
|
|
1
|
|
4
|
|
3
|
|
5
|
|
2
|
|
-
|
|
2
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
£ million
|
|
Europe and Turkey(iii)
£ million
|
|
Africa
£ million
|
|
Latin America
and Caribbean
£ million
|
|
Asia
Pacific
£ million
|
|
Corporate
£ million
|
|
Total
£ million
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 reported
|
|
4,725
|
|
4,985
|
|
2,132
|
|
1,303
|
|
4,923
|
|
46
|
|
18,114
|
Exchange(i)
|
|
(261)
|
|
(113)
|
|
(130)
|
|
(61)
|
|
(160)
|
|
1
|
|
(724)
|
Reclassification(ii)
|
|
(8)
|
|
16
|
|
1
|
|
2
|
|
(11)
|
|
-
|
|
-
|
Disposals(iv)
|
|
-
|
|
(3)
|
|
-
|
|
-
|
|
(207)
|
|
-
|
|
(210)
|
2017 adjusted
|
|
4,456
|
|
4,885
|
|
2,003
|
|
1,244
|
|
4,545
|
|
47
|
|
17,180
|
Acquisitions and
disposals(iv)
|
|
55
|
|
-
|
|
-
|
|
-
|
|
8
|
|
-
|
|
63
|
Organic movement
|
|
160
|
|
347
|
|
80
|
|
108
|
|
489
|
|
5
|
|
1,189
|
2018 reported
|
|
4,671
|
|
5,232
|
|
2,083
|
|
1,352
|
|
5,042
|
|
52
|
|
18,432
|
Organic movement %
|
|
4
|
|
7
|
|
4
|
|
9
|
|
11
|
|
11
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
£ million
|
|
Europe and Turkey(iii)
£ million
|
|
Africa
£ million
|
|
Latin America
and Caribbean
£ million
|
|
Asia
Pacific
£ million
|
|
Corporate
£ million
|
|
Total
£ million
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 reported
|
|
4,161
|
|
2,824
|
|
1,556
|
|
1,044
|
|
2,419
|
|
46
|
|
12,050
|
Exchange(i)
|
|
(228)
|
|
(15)
|
|
(105)
|
|
(43)
|
|
(64)
|
|
1
|
|
(454)
|
Reclassification(ii)
|
|
(8)
|
|
16
|
|
1
|
|
2
|
|
(11)
|
|
-
|
|
-
|
Disposals(iv)
|
|
-
|
|
(3)
|
|
-
|
|
-
|
|
(55)
|
|
-
|
|
(58)
|
2017 adjusted
|
|
3,925
|
|
2,822
|
|
1,452
|
|
1,003
|
|
2,289
|
|
47
|
|
11,538
|
Acquisitions and
disposals(iv)
|
|
49
|
|
-
|
|
-
|
|
-
|
|
4
|
|
-
|
|
53
|
Organic movement
|
|
142
|
|
110
|
|
39
|
|
66
|
|
210
|
|
5
|
|
572
|
2018 reported
|
|
4,116
|
|
2,932
|
|
1,491
|
|
1,069
|
|
2,503
|
|
52
|
|
12,163
|
Organic movement %
|
|
4
|
|
4
|
|
3
|
|
7
|
|
9
|
|
11
|
|
5
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 reported
|
|
642
|
|
443
|
|
166
|
|
195
|
|
343
|
|
9
|
|
1,798
|
Exchange(i)
|
|
(21)
|
|
2
|
|
(11)
|
|
(8)
|
|
(5)
|
|
(1)
|
|
(44)
|
Reclassification(ii)
|
|
(2)
|
|
1
|
|
-
|
|
1
|
|
-
|
|
-
|
|
-
|
Disposals(iv)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
2017 adjusted
|
|
619
|
|
446
|
|
155
|
|
188
|
|
338
|
|
8
|
|
1,754
|
Acquisitions and
disposals(iv)
|
|
8
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
8
|
Organic movement
|
|
35
|
|
28
|
|
3
|
|
8
|
|
50
|
|
(4)
|
|
120
|
2018 reported
|
|
662
|
|
474
|
|
158
|
|
196
|
|
388
|
|
4
|
|
1,882
|
Organic movement %
|
|
6
|
|
6
|
|
2
|
|
4
|
|
15
|
|
(50)
|
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit before exceptional items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2017 reported
|
|
1,899
|
|
936
|
|
218
|
|
250
|
|
487
|
|
(189)
|
|
3,601
|
Exchange(i)
|
|
(60)
|
|
7
|
|
(20)
|
|
10
|
|
1
|
|
6
|
|
(56)
|
Reclassification(ii)
|
|
(4)
|
|
11
|
|
2
|
|
(1)
|
|
(8)
|
|
-
|
|
-
|
Acquisitions and disposals(iv)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(2)
|
|
1
|
|
(1)
|
2017 adjusted
|
|
1,835
|
|
954
|
|
200
|
|
259
|
|
478
|
|
(182)
|
|
3,544
|
Acquisitions and
disposals(iv)
|
|
4
|
|
-
|
|
-
|
|
-
|
|
1
|
|
-
|
|
5
|
Organic movement
|
|
43
|
|
74
|
|
(9)
|
|
49
|
|
89
|
|
24
|
|
270
|
2018 reported
|
|
1,882
|
|
1,028
|
|
191
|
|
308
|
|
568
|
|
(158)
|
|
3,819
|
Organic movement %
|
|
2
|
|
8
|
|
(5)
|
|
19
|
|
19
|
|
13
|
|
8
|
Organic operating margin %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2018
|
|
46.2%
|
|
35.1%
|
|
12.8%
|
|
28.8%
|
|
22.7%
|
|
n/a
|
|
31.5%
|
2017
|
|
46.8%
|
|
33.8%
|
|
13.8%
|
|
25.8%
|
|
20.9%
|
|
n/a
|
|
30.7%
|
Margin (decline) / improvement (bps)
|
|
(58)
|
|
126
|
|
(96)
|
|
299
|
|
181
|
|
n/a
|
|
78
|
(1)
For the reconciliation of sales to net sales see Additional
Financial Information and Notes.
(2)
Percentages and margin improvement are calculated on rounded
figures.
Notes:
Information in respect of the organic movement
calculations
(i)
The exchange adjustments for sales, net sales, marketing and
operating profit are principally in respect of strengthening of
sterling against the US dollar, the Turkish lira and the Kenyan
shilling, partially offset by weakening of sterling against the
euro.
(ii)
Reclassification comprised a change to a reallocation of the
results of the Travel Retail operations to the appropriate
geographical regions.
(iii)
The Europe and Turkey region was formerly named 'Europe, Russia and
Turkey'. Countries included in the region have not
changed.
(iv)
In the year ended 30 June 2018 the acquisitions and disposals that
affected volume, sales, net sales, marketing and operating profit
were as follows:
|
Volume
|
|
Sales
|
|
Net sales
|
|
Marketing
|
|
Operating
profit
|
|
equ. units million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
Year ended 30 June 2017
|
|
|
|
|
|
|
|
|
|
Acquisitions
|
|
|
|
|
|
|
|
|
|
Transaction costs
|
-
|
|
-
|
|
-
|
|
-
|
|
1
|
|
-
|
|
-
|
|
-
|
|
-
|
|
1
|
Disposals
|
|
|
|
|
|
|
|
|
|
USL
owned to franchise
|
(7.8)
|
|
(188)
|
|
(46)
|
|
-
|
|
-
|
Nepal
|
(0.2)
|
|
(19)
|
|
(9)
|
|
-
|
|
(2)
|
Yellow
tail
|
-
|
|
(3)
|
|
(3)
|
|
-
|
|
-
|
|
(8.0)
|
|
(210)
|
|
(58)
|
|
-
|
|
(2)
|
|
|
|
|
|
|
|
|
|
|
Acquisitions and disposals
|
(8.0)
|
|
(210)
|
|
(58)
|
|
-
|
|
(1)
|
|
|
|
|
|
|
|
|
|
|
Year ended 30 June 2018
|
|
|
|
|
|
|
|
|
|
Acquisitions
|
|
|
|
|
|
|
|
|
|
Casamigos
|
0.3
|
|
55
|
|
49
|
|
8
|
|
8
|
Transaction
costs
|
-
|
|
-
|
|
-
|
|
-
|
|
(4)
|
|
0.3
|
|
55
|
|
49
|
|
8
|
|
4
|
Disposals
|
|
|
|
|
|
|
|
|
|
Nepal
|
0.1
|
|
8
|
|
4
|
|
-
|
|
1
|
|
0.1
|
|
8
|
|
4
|
|
-
|
|
1
|
|
|
|
|
|
|
|
|
|
|
Acquisitions and disposals
|
0.4
|
|
63
|
|
53
|
|
8
|
|
5
|
|
|
|
|
|
|
|
|
|
|
Earnings per share before exceptional
items
Earnings
per share before exceptional items is calculated by dividing profit
attributable to equity shareholders of the parent company before
exceptional items by the weighted average number of shares in
issue.
Earnings per share
before exceptional items for the year ended 30 June 2018 and 30
June 2017 are set out in the table below.
|
2018
|
|
2017
|
|
£ million
|
|
£ million
|
|
|
|
|
Profit attributable to equity shareholders of the parent company -
continuing operations
|
3,022
|
|
2,717
|
Exceptional operating items attributable to equity shareholders of
the parent company
|
128
|
|
28
|
Non-operating items attributable to equity shareholders of the
parent company
|
-
|
|
(20)
|
Tax on exceptional operating and non-operating items for equity
shareholders
|
(13)
|
|
1
|
Net exceptional taxation credit
|
(190)
|
|
-
|
|
2,947
|
|
2,726
|
|
|
|
|
Weighted average number of shares
|
million
|
|
million
|
Shares in issue excluding own shares
|
2,484
|
|
2,512
|
Dilutive potential ordinary shares
|
11
|
|
11
|
|
2,495
|
|
2,523
|
|
|
|
|
|
pence
|
|
pence
|
Basic earnings per share before exceptional items
|
118.6
|
|
108.5
|
|
|
|
|
Diluted earnings per share before exceptional items
|
118.1
|
|
108.0
|
Free cash flow
Free
cash flow comprises the net cash flow from operating activities
aggregated with the net cash received/paid for working capital
loans receivable, cash paid or received for investments and the net
cash cost paid for property, plant and equipment and computer
software that are included in net cash flow from investing
activities.
The
remaining components of net cash flow from investing activities
that do not form part of free cash flow, as defined by the group's
management, are in respect of the acquisition and sale of
businesses and non-working capital loans to and from
associates.
The
group's management regards the purchase and disposal of property,
plant and equipment and computer software as ultimately
non-discretionary since ongoing investment in plant, machinery and
technology is required to support the day-to-day operations,
whereas acquisitions and sales of businesses are
discretionary.
Where
appropriate, separate explanations are given for the impacts of
acquisitions and sale of businesses, dividends paid and the
purchase of own shares, each of which arises from decisions that
are independent from the running of the ongoing underlying
business.
Free
cash flow reconciliations for the years ended 30 June 2018 and 30
June 2017 are set out in the table below.
|
2018
|
|
2017(i)
|
|
£ million
|
|
£ million
|
|
|
|
|
Net cash from operating activities
|
3,084
|
|
3,132
|
Disposal of property, plant and equipment and computer
software
|
40
|
|
46
|
Purchase of property, plant and equipment and computer
software
|
(584)
|
|
(518)
|
Movements in working capital loans and other
investments
|
(17)
|
|
3
|
Free cash flow
|
2,523
|
|
2,663
|
(i)
For the year ended 30 June 2018 loans made to associates where
management believe the loan will convert to equity at some point in
the future are not included in free cash flow. For the year ended
30 June 2017 such loans were £1 million and the comparative
has not been restated on the basis of materiality.
Operating cash conversion
Operating
cash conversion is calculated by dividing cash generated from
operations excluding cash inflows and outflows in respect of
exceptional items, dividends received from associates, maturing
inventories, provisions, other items and post employment payments
in excess of the amount charged to operating profit by operating
profit before depreciation, amortisation, impairment and
exceptional operating items.
The
ratio is stated at the budgeted exchange rates for the respective
year in line with management reporting and is expressed as a
percentage.
Operating cash
conversion for the years ended 30 June 2018 and 30 June 2017 were
as follows:
|
2018
|
2017
|
|
|
£ million
|
|
£ million
|
|
|
|
|
|
Operating profit
|
|
3,691
|
|
3,559
|
Exceptional operating items
|
|
128
|
|
42
|
Depreciation and amortisation(i)
|
|
368
|
|
361
|
Retranslation to budgeted exchange rates
|
|
68
|
|
(582)
|
|
|
4,255
|
|
3,380
|
|
|
|
|
|
Cash generated from operations
|
|
4,086
|
|
4,177
|
Cash payments in respect of exceptional items(ii)
|
|
19
|
|
45
|
Post employment payments less amounts included in
operating profit
|
|
108
|
|
111
|
Net movement in maturing inventories(iii)
|
|
239
|
|
138
|
Provision cash movement(v)
|
|
(4)
|
|
(5)
|
Dividends received from associates
|
|
(159)
|
|
(223)
|
Other items(i)(iv)
|
|
(10)
|
|
(25)
|
Retranslation to budgeted exchange rates
|
|
52
|
|
(611)
|
|
|
4,331
|
|
3,607
|
|
|
|
|
|
Operating cash
conversion(v)
|
|
101.8%
|
|
106.7%
|
(i)
Excluding exceptional items.
(ii)
Exceptional cash payments for exceptional restructuring and for
discontinued operations were £19 million (2017 - £14
million) and £nil million (2017 - £31 million),
respectively.
(iii)
Excluding exchange of £(31) million (2017 - £35
million).
(iv)
Excluding payment of £31 million in respect of discontinued
operations in the year ended 30 June 2017
(v) The
provision cash movement is excluded from the cash generated from
operations. For the year ended 30 June 2017 the operating cash
conversion percentage has been restated to 106.7% from previously
reported 106.8% to be comparable.
Return on average total invested capital
Return
on average total invested capital is used by management to assess
the return obtained from the group's asset base and is calculated
to aid evaluation of the performance of the business.
The
profit used in assessing the return on average total invested
capital reflects operating profit before exceptional items
attributable to the equity shareholders of the parent company plus
share of after tax results of associates and joint ventures after
applying the tax rate before exceptional items for the year.
Average total invested capital is calculated using the average
derived from the consolidated balance sheets at the beginning,
middle and end of the year. Average capital employed comprises
average net assets attributable to equity shareholders of the
parent company for the year, excluding post employment benefit net
liabilities (net of deferred tax) and average net borrowings. This
average capital employed is then aggregated with the average
restructuring and integration costs net of tax, and goodwill
written off to reserves at 1 July 2004, the date of
transition to IFRS, to calculate average total invested
capital.
Calculations for the return on average total
invested capital for the years ended 30 June
2018 and 30 June 2017
are set out in the table
below.
|
2018
|
|
2017
|
|
£ million
|
|
£ million
|
|
|
|
|
Operating profit
|
3,691
|
|
3,559
|
Exceptional operating items
|
128
|
|
42
|
Profit before exceptional operating items attributable to
non-controlling interests
|
(122)
|
|
(119)
|
Share of after tax results of associates and joint
ventures
|
309
|
|
309
|
Tax at the tax rate before exceptional items of 20.7% (2017 -
20.6%)
|
(829)
|
|
(781)
|
|
3,177
|
|
3,010
|
|
|
|
|
Average net assets (excluding net post employment
assets/liabilities)
|
12,067
|
|
11,828
|
Average non-controlling interests
|
(1,749)
|
|
(1,715)
|
Average net borrowings
|
8,727
|
|
8,488
|
Average integration and restructuring costs (net of
tax)
|
1,639
|
|
1,639
|
Goodwill at 1 July 2004
|
1,562
|
|
1,562
|
Average total invested capital
|
22,246
|
|
21,802
|
|
|
|
|
Return on average total invested capital
|
14.3%
|
|
13.8%
|
Net borrowings to earnings before operating exceptional items,
interest, tax, depreciation, amortisation and impairment
(EBITDA)
Diageo
manages its capital structure to achieve capital efficiency,
provide flexibility to invest through the economic cycle and give
efficient access to debt markets at attractive cost levels. The
group regularly assesses its debt and equity capital levels to
enhance its capital structure by reviewing the ratio of adjusted
net borrowings to EBITDA.
Calculations for
net borrowings to EBITDA leverage for the years ended 30 June 2018
and 30 June 2017 are set out in the table below.
|
2018
|
|
2017
|
|
£ million
|
|
£ million
|
|
|
|
|
Borrowings due within one year
|
1,828
|
|
2,459
|
Borrowings due after one year
|
8,074
|
|
6,583
|
Fair value of foreign currency derivatives and interest rate
hedging instruments
|
(92)
|
|
(142)
|
Finance lease liabilities
|
155
|
|
183
|
Less: Cash and cash equivalents
|
(874)
|
|
(1,191)
|
Net borrowings
|
9,091
|
|
7,892
|
Post employment benefit liabilities before tax
|
872
|
|
772
|
Adjusted net borrowings
|
9,963
|
|
8,664
|
|
|
|
|
Operating profit
|
3,691
|
|
3,559
|
Exceptional operating items
|
128
|
|
42
|
Depreciation, amortisation and impairment (excluding exceptional
items)
|
368
|
|
361
|
Share of associates' and joint ventures' result after
tax
|
309
|
|
309
|
EBITDA
|
4,496
|
|
4,271
|
|
|
|
|
|
|
|
|
Net borrowings to EBITDA (x)
|
2.2
|
|
2.0
|
Tax rate before exceptional items
Tax
rate before exceptional items is calculated by dividing the total
tax charge on continuing operations before tax charges and credits
in respect of exceptional items, by profit before taxation adjusted
to exclude the impact of exceptional operating and non-operating
items, expressed as a percentage. The measure is used by management
to assess the rate of tax applied to the group's continuing
operations before tax on exceptional items.
The tax
rates from operations before exceptional and after exceptional
items for the year ended 30 June 2018 and year ended 30 June 2017
are set out in the table below:
|
2018
£ million
|
|
2017
£ million
|
|
|
|
|
Tax before exceptional items (a)
|
799
|
|
736
|
Tax in respect of exceptional items
|
(13)
|
|
(4)
|
Exceptional tax items
|
(190)
|
|
-
|
Taxation on profit from continuing operations (b)
|
596
|
|
732
|
|
|
|
|
Profit from continuing operations before taxation and exceptional
items (c)
|
3,868
|
|
3,581
|
Non-operating items
|
-
|
|
20
|
Exceptional operating items
|
(128)
|
|
(42)
|
Profit before taxation (d)
|
3,740
|
|
3,559
|
|
|
|
|
Tax rate before exceptional items (a/c)
|
20.7%
|
|
20.6%
|
Tax rate from continuing operations after exceptional items
(b/d)
|
15.9%
|
|
20.6%
|
Other definitions
Volume
share is a brand's retail volume expressed as a percentage of the
retail volume of all brands in its segment. Value share is a
brand's retail sales value expressed as a percentage of the retail
sales value of all brands in its segment. Unless otherwise stated,
share refers to value share.
Price/mix is the
number of percentage points by which the organic movement in net
sales differs to the organic movement in volume. The difference
arises because of changes in the composition of sales between
higher and lower priced variants/markets or as price changes are
implemented.
Shipments comprise
the volume of products made to Diageo's immediate (first tier)
customers. Depletions are the estimated volume of the onward sales
made by our immediate customers. Both shipments and depletions are
measured on an equivalent units basis.
References to
emerging markets include Russia, Eastern Europe, Turkey, Africa,
Latin America and Caribbean, and Asia Pacific (excluding Australia,
Korea and Japan).
References to
reserve brands include, but not limited to, Johnnie Walker Blue
Label, Johnnie Walker Green Label, Johnnie Walker Gold Label
Reserve, Johnnie Walker Platinum Label 18 year old, John Walker
& Sons Collection, Johnnie Walker The Gold Route, Johnnie
Walker The Royal Route and other Johnnie Walker super premium
brands; Roe & Co; The Singleton, Cardhu, Talisker,
Lagavulin and other malt brands; Buchanan's Special Reserve,
Buchanan's Red Seal; Bulleit Bourbon, Bulleit Rye; Tanqueray No.
TEN, Tanqueray Malacca Gin; Cîroc, Ketel One vodka; Don Julio,
Casamigos, Zacapa, Bundaberg SDlx, Shui Jing Fang, Jinzu gin, Haig
Club whisky, Orphan Barrel whiskey and DeLeón
Tequila.
References to
global giants include the following brand families: Johnnie Walker,
Smirnoff, Captain Morgan, Baileys, Tanqueray and Guinness. Local
stars spirits include Buchanan's, Bundaberg, Crown Royal, JeB,
McDowell's, Old Parr, Yenì Raki, Black & White, Shui Jing
Fang, Windsor and Ypióca. Global giants and local stars
exclude ready to drink and beer except Guinness. References to
Shui Jing Fang represent total Chinese white spirits of which Shui
Jing Fang is the predominant brand.
References to ready
to drink also include ready to serve products, such as pre-mix cans
in some markets, and progressive adult beverages in the United
States and certain markets supplied by the United
States.
References to beer
include cider and some non-alcoholic products such as Malta
Guinness.
The
results of Hop House 13 Lager are included in the Guinness
figures.
References to the
group include Diageo plc and its consolidated
subsidiaries.
RISK FACTORS
Diageo's products are sold in over 180 countries worldwide, which
subjects Diageo to risks and uncertainties in multiple
jurisdictions across developed and developing markets. The group's
aim is to manage risk and control its business and financial
activities cost-effectively and in a manner that enables it to:
exploit profitable business opportunities in a disciplined way;
avoid or reduce risks that can cause loss, reputational damage or
business failure; manage and mitigate historic risks and exposures
of the group; support operational effectiveness; and enhance
resilience to external events. To achieve this, an ongoing process
has been established for identifying, evaluating and managing risks
faced by the group. A detailed description of the key risks and
uncertainties facing the group are described in the 'Strategic
report' section of the annual report for the year ended 30 June
2017 and under 'Risk Factors' in the annual report on Form 20-F for
the year ended 30 June 2017.
These
key risks and uncertainties include: unfavourable economic,
political, social or other developments and risks in the countries
in which Diageo operates, including in relation to the potential
impact of any global, regional or local trade wars and the
negotiating process surrounding, as well as the eventual terms of,
the exit of the United Kingdom from the European Union; changes in
consumer preferences and tastes and adverse impacts of a downturn
in economic conditions, among other factors, which could adversely
affect demand; litigation or similar proceedings specifically
directed at the beverage alcohol industry, as well as other
litigation or proceedings more generally; changes in the
international tax environment resulting in unexpected tax
exposures; the impact of climate change, or legal, regulatory or
market measures intended to address climate change, including on
the cost and supply of water; changes in the cost of production;
other legal and regulatory developments impacting the production,
distribution and marketing of Diageo's products and its business
more generally; the consequences of any failure to comply with
anti-corruption, sanctions or similar laws and regulations; any
failure of internal controls, including those affecting compliance
with accounting and/or disclosure requirements; the impact of any
contamination, counterfeiting or other events on support for and
sales of Diageo's brands; any failure by Diageo to maintain its
brand image and corporate reputation; competitive pressures, which
could reduce Diageo's market share and margins; any disruption to
production facilities, business service centres or information
systems (including through cyber-attacks); failures to derive the
expected benefits from Diageo's business strategies, acquisitions
and/or any cost-saving and restructuring programmes; increased
costs for, or shortages of, talent; fluctuations in exchange and/or
interest rates; movements in the value of Diageo's pension funds;
any failure to maintain or renegotiate distribution, supply,
manufacturing and licence agreements on favourable terms; any
inability by Diageo to protect its intellectual property rights;
and difficulty in effecting service of US process and enforcing US
legal process against Diageo and its directors.
Cautionary statement concerning forward-looking
statements
This
document contains 'forward-looking' statements. These statements
can be identified by the fact that they do not relate only to
historical or current facts. In particular, forward-looking
statements include all statements that express forecasts,
expectations, plans, outlook, objectives and projections with
respect to future matters, including trends in results of
operations, margins, growth rates, overall market trends, the
impact of changes in interest or exchange rates, the availability
or cost of financing to Diageo, anticipated cost savings or
synergies, expected investments, the completion of any strategic
transactions or restructuring programmes, anticipated tax rates,
changes in the international tax environment, expected cash
payments, outcomes of litigation, anticipated changes in the value
of assets and liabilities related to pension schemes and general
economic conditions. By their nature, forward-looking statements
involve risk and uncertainty because they relate to events and
depend on circumstances that will occur in the future. There are a
number of factors that could cause actual results and developments
to differ materially from those expressed or implied by these
forward-looking statements, including factors that are outside
Diageo's control.
These
factors include, but are not limited to:
●
economic, political, social or other developments in
countries and markets in which Diageo operates, which may
contribute to a reduction in demand for Diageo's products, adverse
impacts on Diageo's customer, supplier and/or financial
counterparties, or the imposition of import, investment or currency
restrictions (including the potential impact of any global,
regional or local trade wars or any tariffs, duties or other
restrictions or barriers imposed on the import or export of goods
between territories, including but not limited to, imports into and
exports from the United States, Canada, Mexico, the United Kingdom
and/or the European Union);
●
the negotiating process surrounding, as well as the final
terms of, the United Kingdom's exit from the European Union, which
could lead to a sustained period of economic and political
uncertainty and complexity whilst detailed withdrawal terms and any
successor trading arrangements with other countries are negotiated,
finalised and implemented, potentially adversely impacting economic
conditions in the United Kingdom and Europe more generally as well
as Diageo's business operations and financial
performance;
●
changes in consumer preferences and tastes, including
as a result of changes in demographics, evolving social trends
(including any shifts in consumer tastes towards locally produced
small-batch products), changes in travel, vacation or leisure
activity patterns, weather conditions, and/or a downturn in
economic conditions;
●
any litigation or other similar proceedings (including with
customs, competition, environmental, anti-corruption or other
regulatory authorities), including litigation directed at the
beverage alcohol industry generally or at Diageo in
particular;
●
changes in the domestic and international tax
environment, including as a result of the OECD Base Erosion and
Profit Shifting Initiative and EU anti-tax abuse measures, leading
to uncertainty around the application of existing and new tax laws
and unexpected tax exposures;
●
the effects of climate change, or legal, regulatory
or market measures intended to address climate change, on Diageo's
business or operations, including on the cost and supply of
water;
●
changes in the cost of production, including as a
result of increases in the cost of commodities, labour and/or
energy or as a result of inflation;
●
legal and regulatory developments, including changes in
regulations relating to production, distribution, importation,
marketing, advertising, sales, pricing, labelling, packaging,
product liability, antitrust, labour, compliance and control
systems, environmental issues and/or data privacy;
●
the consequences of any failure by Diageo or its associates
to comply with anti-corruption, sanctions, trade restrictions or
similar laws and regulations, or any failure of Diageo's related
internal policies and procedures to comply with applicable law or
regulation;
●
the consequences of any failure of internal controls,
including those affecting compliance with new accounting and/or
disclosure requirements;
●
contamination, counterfeiting or other circumstances
which could harm the level of customer support for Diageo's brands
and adversely impact its sales;
●
Diageo's ability to maintain its brand image and
corporate reputation or to adapt to a changing media
environment;
●
increased competitive product and pricing pressures,
including as a result of actions by increasingly consolidated
competitors, that could negatively impact Diageo's market share,
distribution network, costs and/or pricing;
●
any disruption to production facilities, business
service centres or information systems, including as a result of
cyber-attacks;
●
Diageo's ability to derive the expected benefits from
its business strategies, including in relation to expansion in
emerging markets, acquisitions and/or disposals, cost savings and
productivity initiatives or inventory forecasting;
●
increased costs for, or shortages of, talent, as well
as labour strikes or disputes;
●
fluctuations in exchange rates and/or interest rates, which
may impact the value of transactions and assets denominated in
other currencies, increase Diageo's cost of financing or otherwise
adversely affect Diageo's financial results;
●
movements in the value of the assets and liabilities
related to Diageo's pension plans;
●
Diageo's ability to renew supply, distribution,
manufacturing or licence agreements (or related rights) and
licences on favourable terms, or at all, when they expire;
or
●
any failure by Diageo to protect its intellectual
property rights.
All
oral and written forward-looking statements made on or after the
date of this document and attributable to Diageo are expressly
qualified in their entirety by the above cautionary factors, by the
'Risk Factors' section immediately preceding those and by the 'Risk
Factors' included in Diageo's annual report on Form 20-F for the
year ended 30 June 2017 filed with the US Securities and Exchange
Commission (SEC). Any forward-looking statements made by or on
behalf of Diageo speak only as of the date they are made. Diageo
does not undertake to update forward-looking statements to reflect
any changes in Diageo's expectations with regard thereto or any
changes in events, conditions or circumstances on which any such
statement is based. The reader should, however, consult any
additional disclosures that Diageo may make in any documents which
it publishes and/or files with the SEC. All readers, wherever
located, should take note of these disclosures.
This
document includes names of Diageo's products, which constitute
trademarks or trade names which Diageo owns, or which others own
and license to Diageo for use. All rights reserved. © Diageo
plc 2018.
The
information in this document does not constitute an offer to sell
or an invitation to buy shares in Diageo plc or an invitation or
inducement to engage in any other investment
activities.
This
document may include information about Diageo's target debt rating.
A security rating is not a recommendation to buy, sell or hold
securities and may be subject to revision or withdrawal at any time
by the assigning rating organisation. Each rating should be
evaluated independently of any other rating.
Past
performance cannot be relied upon as a guide to future
performance.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The responsibility statement set out below has been prepared in
connection with (and will be set out in) the Annual Report for the
year ended 30 June 2018, which will be published on 6
August 2018
(and which can be found thereafter
at www.diageo.com).
Each of the directors of Diageo plc confirms, to the best of his or
her knowledge, that:
●
the Annual Report for the year ended 30 June 2018, taken as a whole, is fair,
balanced and understandable, and provides the information necessary
for shareholders to assess the group's performance, business model
and strategy;
●
the consolidated
financial statements contained in the Annual Report for the year
ended 30 June 2018, which have been prepared in accordance with
IFRS as issued by the IASB and as adopted for use in the EU, give a
true and fair view of the assets, liabilities, financial position
and profit or loss of the group; and
●
the management report represented by the directors'
report contained in the Annual Report for the year ended 30 June
2018 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.
The directors of Diageo plc are as follows: Javier Ferrán
(Chairman), Ivan Menezes (Chief Executive), Kathryn Mikells (Chief
Financial Officer), Lord Davies of Abersoch (Senior Non-Executive
Director and Chairman of the Remuneration Committee), Alan JH
Stewart (Non-Executive Director and Chairman of the Audit
Committee) and Non-Executive Directors: Peggy B Bruzelius, Betsy D
Holden, Susan Kilsby, Ho KwonPing and Nicola S
Mendelsohn.
Webcast, presentation slides and transcript
At 08.00 (UK time) on Thursday 26 July, Ivan Menezes, Chief
Executive and Kathryn Mikells, Chief Financial Officer will present
Diageo's preliminary results as a webcast. This will be available
to view at www.diageo.com.
The presentation slides and script will also be available to
download from www.diageo.com at
08.00 (UK time).
A transcript of the Q&A session will be available for download
on 27 July 2018 at www.diageo.com.
Live Q&A conference call and replay
Ivan
Menezes, Chief Executive and Kathryn Mikells, Chief Financial
Officer will be hosting a Q&A conference call on Thursday 26
July 2018 at 09:30 (UK time). If you would like to listen to
the call or ask a question, please use the dial in details
below.
From
the UK (local): +44 (0)330 336 9105
|
|
From
the UK (free call): 0800 358 6377
|
|
From
the USA (local): +1 323 794 2551
|
|
From
the USA (free call): 800 239 9838
|
|
The conference call is for analysts and investors only. To join the
call please use the password already sent to you or email
suzanne.austin@diageo.com.
To hear
a replay of the call, please use the telephone numbers
below:
From
the UK (local): +44 (0)20 7660 0134
|
|
From
the UK (free call): 0808 101 1153
|
|
From
the USA (local): + 1 719 457 0820
|
|
From
the USA (free call): 888 203 1112
|
|
Investor
enquiries to:
|
Andy
Ryan
|
+44 (0)
20 8978 6504
|
|
Pier
Falcione
|
+44 (0)
20 8978 4838
|
|
Sharon
Rolston
|
+44 (0)
20 8978 1219
|
|
|
investor.relations@diageo.com
|
|
|
|
Media
enquiries to:
|
Jessica
Rouleau
|
+44 (0)
20 8978 1286
|
|
Clemmie
Raynsford
|
+44 (0)
20 8978 1221
|
|
Bianca
Agius
|
+44 (0)
20 8978 1450
|
|
Dominic
Redfearn
|
+44 (0)
20 8978 2749
|
|
|
press@diageo.com
|
James
Edmunds (Deputy Company Secretary) is responsible for arranging the
release of this announcement on behalf of Diageo.
SIGNATURE
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 authorized.
|
Diageo plc
|
|
(Registrant)
|
|
|
Date:
26 July 2018
|
|
|
|
|
By:___/s/ James
Edmunds
|
|
|
|
James Edmunds
|
|
Title: Deputy Company
Secretary
|