Dividend increase 9%. Free cash flow £2 billion.
|
· Reported net sales up 5%, with full consolidation of United Spirits
· Free cash flow of £2 billion. Up £0.7 billion
· 9% final dividend increase to give recommended full year dividend of 56.4 pence
· Organic net sales flat; organic operating margin up 24bps
· Shipment volume down 1%; depletion volume is estimated to be up 1%
· Basic eps 95.0 pence, up 6%
· eps before exceptional items 88.8 pence: due to adverse exchange and associates, offset by underlying improvements
· Productivity gains will release a further £500 million of cost to invest in growth and improve margin over a three year period from F17. No exceptional charge will be taken
|
Ivan Menezes, Chief Executive, commenting on the year ended 30 June 2015 said:
|
Key financial information
|
|||||||
Key performance indicators
|
2015
|
2014
|
|||||
Organic net sales growth
|
%
|
-
|
-
|
||||
Organic operating margin improvement
|
basis points
|
24
|
77
|
||||
Earnings per share before exceptional items
|
pence
|
88.8
|
95.5
|
||||
Free cash flow
|
£ million
|
1,963
|
1,235
|
||||
Return on average invested capital (ROIC) (i)
|
%
|
12.3
|
14.1
|
(i)
|
The group has revised the calculation of ROIC by excluding the net assets and net profit attributable to non-controlling interests. Before this adjustment, in the year ended 30 June 2014 the ROIC was reported as 13.7%.
|
Other financial information
|
2015
Reported
|
2014
Reported
|
Organic growth
%
|
Reported growth
%
|
||
Volume
|
EUm
|
246.2
|
156.1
|
(1)
|
58
|
|
Net sales
|
£ million
|
10,813
|
10,258
|
-
|
5
|
|
Marketing spend
|
£ million
|
1,629
|
1,620
|
(1)
|
1
|
|
Operating profit before exceptional items
|
£ million
|
3,066
|
3,134
|
1
|
(2)
|
|
Operating profit (i)
|
£ million
|
2,797
|
2,707
|
3
|
||
Share of associates and joint ventures profit after tax
|
£ million
|
175
|
252
|
(31)
|
||
Non-operating items
|
£ million
|
373
|
140
|
166
|
||
Net finance charges
|
£ million
|
412
|
388
|
6
|
||
Reported tax rate
|
%
|
15.9
|
16.5
|
(4)
|
||
Reported tax rate before exceptional items
|
%
|
18.3
|
18.2
|
1
|
||
Profit attributable to parent company’s shareholders
|
£ million
|
2,381
|
2,248
|
6
|
||
Basic earnings per share
|
pence
|
95.0
|
89.7
|
6
|
||
Recommended full year dividend
|
pence
|
56.4
|
51.7
|
9
|
(i)
|
Operating profit for the year ended 30 June 2015 includes an exceptional operating charge of £269 million (2014 - £427 million), an analysis of which is provided in the ‘Additional Financial Information’ section.
|
Volume
|
Net sales
|
Marketing spend
|
Operating profit(i)
|
||||||
Organic growth by region
|
%
|
EUm
|
%
|
£ million
|
%
|
£ million
|
%
|
£ million
|
|
North America
|
(3)
|
(1.4)
|
(1)
|
(49)
|
(4)
|
(21)
|
(2)
|
(37)
|
|
Europe
|
-
|
(0.2)
|
-
|
2
|
2
|
6
|
3
|
20
|
|
Africa
|
7
|
1.8
|
6
|
85
|
4
|
5
|
10
|
29
|
|
Latin America and Caribbean
|
(7)
|
(1.7)
|
(1)
|
(11)
|
6
|
10
|
(3)
|
(7)
|
|
Asia Pacific
|
(3)
|
(0.5)
|
(2)
|
(32)
|
(8)
|
(25)
|
7
|
20
|
|
Corporate
|
-
|
-
|
3
|
1
|
175
|
7
|
(2)
|
(3)
|
|
Diageo
|
(1)
|
(2.0)
|
-
|
(4)
|
(1)
|
(18)
|
1
|
22
|
|
(i)
|
Before exceptional items.
|
Net
sales
|
Marketing spend
|
Operating profit
|
||
£ million
|
£ million
|
£ million
|
||
Exchange rate movements (i)
|
(337)
|
(47)
|
(161)
|
(i)
|
The exchange rate movement includes the translation of prior year reported results at current year exchange rates.
|
Net sales
|
Net sales
|
Operating
profit
|
Operating
profit
|
|
Acquisitions and disposals (i)
|
2015
|
2014
|
2015
|
2014
|
£ million
|
£ million
|
£ million
|
£ million
|
|
Acquisitions
|
||||
USL
|
921
|
-
|
48
|
(19)
|
Other
|
28
|
-
|
(5)
|
(5)
|
Total
|
949
|
-
|
43
|
(24)
|
Disposals
|
||||
Jose Cuervo
|
3
|
44
|
-
|
(9)
|
Bushmills
|
50
|
60
|
22
|
28
|
The Gleneagles Hotel
|
48
|
45
|
4
|
2
|
Others
|
1
|
6
|
-
|
1
|
Total
|
102
|
155
|
26
|
22
|
(i)
|
Net of acquisition and integration costs.
|
Notes to the business and financial review
|
·
|
commentary 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
|
·
|
GTME refers to Global Travel Asia and Middle East
|
Net sales growth (£ million)
|
The full consolidation of USL, partly offset by adverse exchange delivered reported net sales growth of 5%. Organic net sales flat
|
Net sales
|
£ million
|
2014 Reported
|
10,258
|
Acquisitions and disposals (i)
|
896
|
Exchange
|
(337)
|
Volume
|
(127)
|
Price/mix
|
123
|
2015 Reported
|
10,813
|
(i)
|
Impact of acquisitions and disposals on F14 and F15. See ‘Additional Infromation For Shareholders / Explanatory Notes / Acquisitions and disposals’ for further details.
|
Full consolidation of USL rebased operating margin by c200bps. Organic margin improved 24bps. | |
Operating margin
|
ppt
|
2014 Reported
|
30.55
|
Acquisitions and disposals
|
(1.83)
|
Exchange
|
(0.61)
|
Gross margin
|
(0.64)
|
Marketing spend
|
0.36
|
Other operating expenses
|
0.52
|
2015 Reported
|
28.35
|
(i)
|
Exchange impacts in respect of profit on intergroup sales of products and the intergroup recharges have been re-allocated to the respective profit and loss lines for the purposes of calculating margin impacts only.
|
Earnings per share before exceptional items (pence)
|
eps before exceptionals impacted by adverse exchange and decrease in associate profit
|
eps before exceptionals
|
pence
|
2014 Reported
|
95.5
|
Operating profit excluding FX
|
1.6
|
Exchange on operating profit
|
(6.4)
|
Associates and joint ventures
|
(3.1)
|
Finance charges
|
1.4
|
Tax
|
1.5
|
Non-controlling interests
|
(1.3)
|
Other including USL (i)
|
(0.4)
|
2015 Reported
|
88.8
|
(i)
|
The organic impact of fully consolidating USL results is included in other. The movements for operating profit, finance charges, tax and non-controlling interests, all exclude USL.
|
Movement in net finance charges
|
£ million
|
|
2014 Reported
|
388
|
|
Net interest charge decrease
|
(48)
|
|
Consolidation of net borrowings acquired in USL
|
60
|
|
Movement in other finance charges
|
12
|
|
2015 Reported
|
412
|
|
2015
|
2014
|
|
Average monthly net borrowings (£ million)
|
10,459
|
9,174
|
Effective interest rate (i)
|
3.5%
|
3.8%
|
(i)
|
For the calculation of the effective interest rate, the net interest charge excludes fair value adjustments to derivative financial instruments and borrowings. Average monthly net borrowings include the impact of interest rate swaps that are no longer in a hedge relationship but excludes the market value adjustment for cross currency interest rate swaps.
|
Free cash flow (£ million)
|
Positive working capital movement drove improvement in free cash flow
|
Free cash flow
|
£ million
|
2014 Reported
|
1,235
|
USL FCF (i)
|
(57)
|
Operating profit excluding exchange (ii)
|
76
|
Exchange
|
(156)
|
Working capital movement
|
734
|
Net capex movement
|
(7)
|
Interest and tax
|
79
|
Other operating items (iii)
|
59
|
2015 Reported
|
1,963
|
(i)
|
USL FCF is shown separately and is excluded from the other line items shown above.
|
(ii)
|
Operating profit adjusted for non-cash items including depreciation and amortisation.
|
(iii)
|
Other operating items includes pension related payments, dividends received from associates and joint ventures, movements in loans receivable and other investments, and payments in respect of the settlement of Thalidomide.
|
Return on average invested capital (%) (i)
|
||
The investment in USL has rebased ROIC. Adverse exchange and lower income from associates reduced ROIC in the year
|
||
ppt
|
||
2014 Reported (ii)
|
14.1
|
|
USL
|
(1.1)
|
|
Operating profit after tax
|
0.2
|
|
Exchange
|
(0.4)
|
|
Associates and joint ventures including FX
|
(0.3)
|
|
Other
|
(0.2)
|
|
2015 Reported (iii)
|
12.3
|
(i)
|
ROIC calculation excludes exceptional items.
|
(ii)
|
The group has revised the calculation of ROIC by excluding the net assets and net profit attributable to non-controlling interests. Before this adjustment, in the year ended 30 June 2014 the ROIC was reported as 13.7%.
|
(iii)
|
For the years ended 30 June 2014 and 30 June 2015 average net assets were adjusted for the inclusion of USL as though it was owned throughout the year as it became an associate on 4 July 2013 and a subsidiary on 2 July 2014.
|
North America
|
Key financials £ million:
|
|||||||||||
2014
Reported
|
FX
|
Acquisitions
and
disposals
|
Organic movement
|
2015
Reported
|
Reported movement
%
|
||||||
Net sales
|
3,444
|
97
|
(37)
|
(49)
|
3,455
|
-
|
|||||
Marketing spend
|
540
|
16
|
7
|
(21)
|
542
|
-
|
|||||
Operating profit before exceptional items
|
1,460
|
27
|
(2)
|
(37)
|
1,448
|
(1)
|
|||||
Exceptional items
|
(35)
|
(28)
|
|||||||||
Operating profit
|
1,425
|
1,420
|
-
|
||||||||
Markets:
|
|||||||||||
Organic
|
Organic
|
Reported
|
|||||||||
volume
|
net sales
|
net sales
|
|||||||||
movement(i)
|
movement
|
movement
|
|||||||||
%
|
%
|
%
|
|||||||||
North America
|
(3)
|
(1)
|
-
|
||||||||
US Spirits and Wines
|
(3)
|
(2)
|
1
|
||||||||
DGUSA
|
(3)
|
(1)
|
3
|
||||||||
Canada
|
3
|
2
|
(4)
|
||||||||
Spirits (ii)
|
(3)
|
(1)
|
1
|
||||||||
Beer
|
-
|
(1)
|
1
|
||||||||
Wine
|
(2)
|
(2)
|
2
|
||||||||
Ready to drink
|
(3)
|
(1)
|
(14)
|
||||||||
Global giants and local stars (ii):
|
|||||||||||
Organic
|
Organic
|
Reported
|
|||||||||
volume
|
net sales
|
net sales
|
|||||||||
movement(i)
|
movement
|
movement
|
|||||||||
%
|
%
|
%
|
|||||||||
Smirnoff
|
(2)
|
(3)
|
(1)
|
||||||||
Captain Morgan
|
(10)
|
(12)
|
(10)
|
||||||||
Johnnie Walker
|
(8)
|
(15)
|
(12)
|
||||||||
Guinness
|
2
|
2
|
4
|
||||||||
Baileys
|
(5)
|
(5)
|
(3)
|
||||||||
Tanqueray
|
(2)
|
(2)
|
1
|
||||||||
Crown Royal
|
13
|
12
|
15
|
||||||||
Cîroc
|
4
|
4
|
8
|
||||||||
Ketel One vodka
|
(2)
|
(2)
|
1
|
||||||||
Bulleit
|
32
|
36
|
41
|
||||||||
Don Julio
|
5
|
9
|
13
|
||||||||
Buchanan’s
|
17
|
18
|
23
|
(i)
|
Organic equals reported movement for volume except for North America (4)%, US Spirits and Wines (5)%, spirits (3)% and ready to drink (25)% reflecting the termination of the transitional arrangements following the disposal of Jose Cuervo and Bushmills and the acquisition of the outstanding stake in Don Julio.
|
(ii)
|
Spirits brands excluding ready to drink.
|
·
|
Net sales in US Spirits and Wines declined 2% while the value of distributor depletions was up 4%. Diageo’s North American whiskey performance was very strong with the portfolio outpacing category growth and net sales up 13%. Crown Royal was the primary driver as Crown Royal Regal Apple, the top selling innovation according to Nielsen, gained share as it recruited new consumers to the brand, driving double digit top line growth for the trademark. Bulleit, the fastest growing unflavoured North American whiskey, drove one third of that category’s growth with net sales up 35%. Both Bulleit Bourbon and Bulleit Rye led their respective segments through increased distribution, consumer experience marketing, and the engagement of key trade influencers. In scotch, Buchanan’s was the fastest growing brand in the United States, with net sales up over 20%. Buchanan’s resonates particularly well with the growing Hispanic population, and this year added sponsorship of the Latin Grammy Awards to its full suite of marketing activities. Johnnie Walker did not perform well, partly as a result of lapping the strong launch of Platinum and Gold Label Reserve last year but also due to a reduction in promotional activities for Red, Black, and Blue Label. Cîroc net sales growth of 4% was driven by the notable success of Cîroc Pineapple, the latest addition to the flavour range. Despite an improved performance trajectory, net sales of Smirnoff declined 4% as the flavour portfolio, confections in particular, continued to be a drag on performance. The launch of Captain Morgan White Flavours partially offset the effect of lapping the prior year’s launch of Captain Morgan White which, together with weakness on Original Spiced, drove double digit net sales decline for the brand. Net sales of tequila were up double digit, driven by 10% growth of Don Julio, which was supported by marketing campaigns focused on the heritage and craftsmanship of the brand, and the launch of new DeLeón variants, which broadened the price range and contributed to increased distribution of the brand.
|
·
|
Guinness net sales were up 3% on the strong performance of Blonde American Lager. Guinness Draught was weak given competition in the craft beer segment, particularly in the on trade. Net sales of ready to drink declined slightly, bringing net sales of DGUSA down 1%. Stronger execution and competitive pricing on Smirnoff Ice stabilised the core and flavoured variants but the brand’s growth still lags the category.
|
·
|
In Canada the new distribution system helped drive net sales growth of 2%. Spirits growth of 3% was driven by Johnnie Walker and vodka. Ready to drink net sales growth was principally due to Smirnoff variants, with beer down and wine down double digit. Tactical price reductions resulted in share improvement, with a marginally negative impact on price/mix.
|
·
|
Marketing investment in North America reduced 4% driven by US Spirits and Wines, which delivered significant savings on media and agency fees and procurement efficiencies. Advertising remained focused on Cîroc, Crown Royal, Smirnoff, Captain Morgan, and Johnnie Walker, and increased on Don Julio and Bulleit to support new programmes. Marketing investment in DGUSA supported the launch of Guinnes Blonde American Lager and in Canada, a 1% increase went behind innovation launches.
|
Europe
|
Key financials £ million:
|
||||||||||||
2014
Reported
(restated)
|
FX
|
Acquisitions
and
disposals
|
Organic movement
|
2015
Reported
|
Reported movement
%
|
|||||||
Net sales
|
2,814
|
(186)
|
(13)
|
2
|
2,617
|
(7)
|
||||||
Marketing spend
|
413
|
(30)
|
(1)
|
6
|
388
|
(6)
|
||||||
Operating profit before exceptional items
|
853
|
(67)
|
(2)
|
20
|
804
|
(6)
|
||||||
Exceptional items
|
(20)
|
(20)
|
||||||||||
Operating profit
|
833
|
784
|
(6)
|
|||||||||
Markets:
|
||||||||||||
Organic
|
Organic
|
Reported
|
||||||||||
volume
|
net sales
|
net sales
|
||||||||||
movement(i)
|
movement
|
movement
|
||||||||||
%
|
%
|
%
|
||||||||||
Europe
|
-
|
-
|
(7)
|
|||||||||
Western Europe
|
1
|
1
|
(5)
|
|||||||||
Russia and Eastern
|
||||||||||||
Europe
|
(8)
|
(9)
|
(26)
|
|||||||||
Turkey
|
-
|
3
|
(5)
|
|||||||||
Spirits (ii)
|
(1)
|
1
|
(8)
|
|||||||||
Beer
|
1
|
1
|
(4)
|
|||||||||
Wine
|
-
|
(1)
|
(4)
|
|||||||||
Ready to drink
|
(6)
|
(2)
|
(5)
|
|||||||||
Global giants and local stars (ii):
|
||||||||||||
Organic
|
Organic
|
Reported
|
||||||||||
volume
|
net sales
|
net sales
|
||||||||||
movement(i)
|
movement
|
movement
|
||||||||||
%
|
%
|
%
|
||||||||||
Guinness
|
1
|
2
|
(2)
|
|||||||||
Smirnoff
|
(2)
|
(4)
|
(7)
|
|||||||||
Johnnie Walker
|
(5)
|
(7)
|
(15)
|
|||||||||
Baileys
|
(3)
|
(4)
|
(10)
|
|||||||||
Captain Morgan
|
9
|
10
|
1
|
|||||||||
Yenì Raki
|
(4)
|
4
|
(6)
|
|||||||||
JεB
|
(1)
|
(3)
|
(10)
|
·
|
In Western Europe net sales were up 1%:
|
·
|
In Great Britain net sales were up 3%, with spirits, beer, and ready to drink all in growth. Reserve net sales were up 43% driven by Cîroc and the successful launch of Haig Club. Captain Morgan net sales were up 15%, with investment focused on increased activation in outlets and Smirnoff was back in growth with net sales up 1%, supported by the new ‘We’re Open’ campaign. Beer net sales were up 2% driven by innovation on Guinness. Ready to drink net sales were up 7% supported by strong growth in pre-mix. The only weakness was in Baileys where net sales were down 2%, however Baileys Original was in growth.
|
·
|
In Ireland net sales were down 1%, or flat after accounting for the transfer of wine sales to Diageo Wines Europe. Guinness sustained its positive momentum with net sales up 2%, supported by successful innovations launched through ‘The Brewers Project at St James’s Gate’. Net sales in spirits were down 2% as the category continued to be affected by last year’s duty increase.
|
·
|
In Southern Europe net sales were down 1%. Net sales in Iberia were flat, after accounting for a transfer of sales of one customer to Africa Regional Markets, but showing positive momentum with growth from Tanqueray and Gordon’s in a vibrant gin category and declines in JεB and Cacique. Double digit growth of reserve was the main driver behind the 1% net sales growth in Italy, where Zacapa was up 10% and Cîroc more than trebled net sales. In Greece, performance was impacted by the deterioration of economic environment in the last quarter, which resulted in a 4% net sales decline.
|
·
|
Net sales in Germany and Austria declined 2%. In Germany net sales were up 5%. Underlying performance was strong with net sales of Baileys, Captain Morgan, and Johnnie Walker Red Label all up double digit. In Austria, net sales were down 53% against the buy in ahead of the excise duty increase in January 2014.
|
·
|
Performance in Benelux continued to be impacted by the decision to realign prices in the first half on premium core brands which resulted in a net sales decline of 10%.
|
·
|
In a challenging trading environment in France net sales increased 2% largely driven by growth in scotch, with Scotch malts up 6%, and the strong performance of Captain Morgan which, in its third year, more than doubled net sales.
|
·
|
Net sales in Diageo Wines Europe were up 3% largely driven by the transfer of wine net sales from Diageo Ireland and the strong performance of [yellow tail].
|
·
|
Performance in Russia and Eastern Europe continued to be impacted by the events in the region. In Russia, net sales declined 14%, driven by both destocking amongst distributors and consumers trading down. This impacted Johnnie Walker, however Diageo extended its leadership in whiskey and rum, and gained share with brands such as White Horse, Black & White, and Captain Morgan. In Poland, net sales of Johnnie Walker Red Label declined 15% and the brand lost share, as some competitors did not follow Diageo price increases to cover last year’s excise duty increase.
|
·
|
In Turkey net sales grew 3% despite an excise duty increase in January and the earlier start to Ramadan. Net sales in raki were up 5% with Yenì Raki and the super premium variant Tekirdağ Raki premiumising the category. Good underlying performance of international spirits resulted in share gains for Johnnie Walker, Smirnoff, and Baileys.
|
·
|
Marketing investment in Europe increased 2% largely driven by Western Europe where spend was up 3%. The increased investment was focused on the biggest growth opportunities such as reserve and innovation to support the launches of Haig Club and the Guinness Brewers project.
|
Key financials £ million:
|
|||||||||||
2014
Reported
(restated)
|
FX
|
Acquisitions
and
disposals
|
Organic movement
|
2015
Reported
|
Reported movement
%
|
||||||
Net sales
|
1,430
|
(100)
|
-
|
85
|
1,415
|
(1)
|
|||||
Marketing spend
|
152
|
(10)
|
-
|
5
|
147
|
(3)
|
|||||
Operating profit before exceptional items
|
340
|
(52)
|
1
|
29
|
318
|
(6)
|
|||||
Exceptional items
|
(23)
|
(7)
|
|||||||||
Operating profit
|
317
|
311
|
(2)
|
||||||||
Markets:
|
|||||||||||
Organic
|
Organic
|
Reported
|
|||||||||
volume
|
net sales
|
net sales
|
|||||||||
movement(i)
|
movement
|
movement
|
|||||||||
%
|
%
|
%
|
|||||||||
Africa
|
7
|
6
|
(1)
|
||||||||
Nigeria
|
13
|
6
|
(3)
|
||||||||
East Africa
|
7
|
9
|
6
|
||||||||
Africa Regional
|
|||||||||||
Markets
|
14
|
15
|
1
|
||||||||
South Africa
|
(2)
|
(7)
|
(12)
|
||||||||
Spirits (ii)
|
17
|
13
|
7
|
||||||||
Beer
|
4
|
8
|
(1)
|
||||||||
Ready to drink
|
(34)
|
(28)
|
(33)
|
||||||||
Global giants and local stars (ii):
|
|||||||||||
Organic
|
Organic
|
Reported
|
|||||||||
volume
|
net sales
|
net sales
|
|||||||||
movement(i)
|
movement
|
movement
|
|||||||||
%
|
%
|
%
|
|||||||||
Guinness
|
(5)
|
(7)
|
(15)
|
||||||||
Johnnie Walker
|
3
|
7
|
2
|
||||||||
Smirnoff
|
22
|
22
|
16
|
||||||||
Tusker
|
(6)
|
3
|
1
|
||||||||
Malta
|
(8)
|
(5)
|
(17)
|
||||||||
Senator
|
(11)
|
(16)
|
(20)
|
||||||||
Harp
|
(40)
|
(46)
|
(50)
|
(i)
|
Organic equals reported movement for volume.
|
(ii)
|
Spirits brands excluding ready to drink.
|
·
|
Nigeria delivered double digit volume growth driven primarily by the national rollout of Orijin, while net sales grew 6%. The weak consumer environment led to a move to value lager which resulted in a strong performance of Satzenbrau and a weak performance of Harp. Similarly net sales of Guinness declined although the brand’s performance improved in the second half and volume share stabilised. Spirits net sales were up 19% as inventory reductions on Johnnie Walker and Baileys were offset by the strong performance of local mainstream spirits.
|
·
|
In East Africa, where net sales grew 9%, Guinness volume and net sales grew strong double digits supported by the ‘Made of More’ campaign. Innovation in value beer, in particular, Balozi lager in Kenya, a no added sugar offering, and in Tanzania Kibo Gold, positioned to capture consumers trading down, offset a decline in Senator due to excise duty changes in Kenya in the first half last year. In spirits, growth was led by mainstream spirits brands and good performances from Johnnie Walker and Smirnoff. Success in mainstream spirits was driven by Kane Extra and Liberty in Kenya, which benefitted from improvements in route to consumer, including the introduction of motorcycles to increase sales coverage of mainstream outlets. Johnnie Walker net sales grew 60% driven by recruitment activities, while the launch of Smirnoff Ice Double Black and Guarana also contributed to East Africa’s growth.
|
·
|
In Africa Regional Markets, net sales grew strongly, up 15%. In Ghana, net sales grew 32%. Investment in route to consumer, together with price increases, led to 28% net sales growth of beer, and spirits grew strongly driven by the growth of Johnnie Walker and the introduction of Orijin Bitters. In Cameroon, net sales grew 10% driven by growth of Guinness, which benefitted from increased awareness through the ‘Made of Black’ campaign, together with outperformance of Harp and growth of Johnnie Walker and Baileys. In Angola, spirits net sales doubled following route to consumer investments and the appointment of a new distributor. This led to strong performances from Johnnie Walker, White Horse, and Gordon’s gin. While the performance of Meta beer in Ethiopia was impacted by increased competitive pricing, this was mostly offset by strong net sales of Malta and the introduction of Zemen, a lower-price beer innovation, along with a good performance of spirits.
|
·
|
Net sales in South Africa were down 7% driven by a decline in Smirnoff Ice Double Black and Guarana, which lapped strong replenishment sales and high inventories in the last financial year. Spirits net sales increased 8% driven by Smirnoff 1818, with net sales up 27% based on competitive pricing and following a packaging upgrade. Net sales of Johnnie Walker increased 10% with marketing focused on the brand’s quality credentials. Its contribution to total scotch performance was partially offset by a weaker performance of JεB and Bell’s. Reserve brands continued to benefit from investments in route to consumer.
|
·
|
Marketing investment in Africa increased 4%. In Nigeria spend on beer was refocused from Harp to support the growth of Orijin and value beers, while in East Africa, the decline in Senator volume also led to a reduction in spend. Spend increased behind vodka, notably Smirnoff 1818 in South Africa in support of pack innovations and promotional activity, and investment behind Johnnie Walker grew in South Africa and East Africa. Ready to drink investment increased as Smirnoff Ice Double Black & Guarana launched in East Africa and Nigeria.
|
Key financials £ million:
|
|||||||||||
2014
Reported
|
FX
|
Acquisitions
and
disposals
|
Organic movement
|
2015
Reported
|
Reported movement
%
|
||||||
Net sales
|
1,144
|
(123)
|
23
|
(11)
|
1,033
|
(10)
|
|||||
Marketing spend
|
203
|
(22)
|
3
|
10
|
194
|
(4)
|
|||||
Operating profit before exceptional items
|
328
|
(60)
|
2
|
(7)
|
263
|
(20)
|
|||||
Exceptional items
|
(14)
|
(5)
|
|||||||||
Operating profit
|
314
|
258
|
(18)
|
||||||||
Markets:
|
|||||||||||
Organic
|
Organic
|
Reported
|
|||||||||
volume
|
net sales
|
net sales
|
|||||||||
movement(i)
|
movement
|
movement
|
|||||||||
%
|
%
|
%
|
|||||||||
Latin America and
|
|||||||||||
Caribbean
|
(7)
|
(1)
|
(10)
|
||||||||
PUB
|
(8)
|
(2)
|
(12)
|
||||||||
Venezuela
|
(38)
|
41
|
(60)
|
||||||||
Colombia
|
10
|
10
|
(2)
|
||||||||
Mexico
|
14
|
13
|
19
|
||||||||
West LAC
|
(5)
|
(9)
|
(12)
|
||||||||
Spirits (ii)
|
(8)
|
(3)
|
(12)
|
||||||||
Beer
|
5
|
17
|
11
|
||||||||
Wine
|
1
|
17
|
(1)
|
||||||||
Ready to drink
|
(7)
|
9
|
(6)
|
||||||||
Global giants and local stars (ii):
|
|||||||||||
Organic
|
Organic
|
Reported
|
|||||||||
volume
|
net sales
|
net sales
|
|||||||||
movement(i)
|
movement
|
movement
|
|||||||||
%
|
%
|
%
|
|||||||||
Johnnie Walker
|
(6)
|
(5)
|
(11)
|
||||||||
Smirnoff
|
(12)
|
5
|
(7)
|
||||||||
Baileys
|
(4)
|
8
|
-
|
||||||||
Buchanan’s
|
(17)
|
(12)
|
(24)
|
||||||||
Old Parr
|
(9)
|
(10)
|
(22)
|
||||||||
Ypióca
|
(5)
|
(3)
|
(14)
|
||||||||
Black & White
|
17
|
27
|
6
|
(i)
|
Organic equals reported movement for volume.
|
(ii)
|
Spirits brands excluding ready to drink.
|
·
|
Net sales in Paraguay, Uruguay, and Brazil (PUB) declined 2% as currency weakness and a slower Brazilian economy impacted consumer spending. In Brazil, volume declined mainly as a result of changes in the route to consumer and the harmonisation of interstate pricing, which led to a reduction in inventories held by distributors. In PUB, price increases and a reduction in commercial discounts led to 6pps of positive price/mix. Scotch net sales declined 2% driven by Johnnie Walker, which was down 9% as intense competitor promotional activity amplified the price premium of Johnnie Walker Red Label. In premium scotch, Old Parr and Johnnie Walker Double Black had strong net sales growth and share gains, and in standard scotch, White Horse grew net sales supported by a new media campaign. Smirnoff strengthened its leadership position in vodka, growing net sales 6% driven by price increases and the launch of Smirnoff Peach. Net sales of Ypióca were affected by the transfer from net sales to overheads of tax credits from local production incentives. On a like for like basis, net sales of Ypióca increased high single digit driven by price increases and continued strong performance in the North East.
|
·
|
In Venezuela, while volume declined, net sales increased 41% to £32 million. Access to currency allowed for the importation of some scotch leading to strong comparative performances of Johnnie Walker, Buchanan’s, and Ye Monks. Increased focus on developing local spirits led to strong performances of Cacique, which doubled net sales, despite glass supply constraints, and Gordon’s vodka net sales increased 185%.
|
·
|
In Colombia, investments in the route to consumer increased share across key categories and drove 10% net sales growth. The launch of Old Parr Tribute and the introduction of Buchanan’s Special Reserve, together with double digit growth of Johnnie Walker, led to an 11% increase in the net sales of scotch. Innovations contributed to a 22% increase in Baileys net sales.
|
·
|
In Mexico, the breadth of Diageo’s scotch portfolio was the main driver of a 13% increase in net sales. Selective price increases along with strong trade executions delivered growth across all price segments of scotch other than value. Johnnie Walker net sales increased 15% with growth across all variants and a particularly strong contribution from Johnnie Walker Red Label. Diageo gained share in the fast-growing but competitive standard scotch segment with the introduction of Black & White, which increased net sales over 80%. There was a good contribution to net sales growth from Smirnoff, since Diageo took direct control over marketing and distribution of the brand in December 2014.
|
·
|
In West LAC, net sales were down 9% driven by inventory reductions in the export channels where net sales declined 51%. This impacted the performance of Johnnie Walker, Old Parr, and Buchanan’s. In domestic markets, strong performances in Peru and Jamaica led to a 3% increase in net sales. In Peru, net sales increased 26% with scotch driving growth together with Baileys, while growth in Red Stripe, pack renovations on Guinness and the strong consumer appeal of Dragon Stout helped deliver 15% growth in net sales in Jamaica. Price realignments in Chile and Caribbean & Central America led to some negative price/mix but delivered share gains in key categories. In Argentina, restrictions on imports affected overall performance but a shift to locally bottled spirits including VAT 69, White Horse, and Smirnoff drove share gains.
|
·
|
An increase in marketing investment of 6% supported broader participation within spirits. Spend on scotch was focused on increasing brand equity across price points in Mexico and on supporting the launch of Old Parr Tribute in Colombia. In Jamaica, investment also increased to support the growth of beer and there was growth in spend on Smirnoff to maintain its leadership position in Brazil and in Mexico as Diageo regained distribution of the brand.
|
Asia Pacific
|
Key financials £ million:
|
|||||||||||
2014
Reported
|
FX
|
Acquisitions
and
disposals
|
Organic movement
|
2015
Reported
|
Reported movement
%
|
||||||
Net sales
|
1,347
|
(22)
|
920
|
(32)
|
2,213
|
64
|
|||||
Marketing spend
|
305
|
(1)
|
65
|
(25)
|
344
|
13
|
|||||
Operating profit before exceptional items
|
283
|
(13)
|
66
|
20
|
356
|
26
|
|||||
Exceptional items
|
(276)
|
(193)
|
|||||||||
Operating profit
|
7
|
163
|
2,229
|
||||||||
Markets:
|
|||||||||||
Organic
|
Organic
|
Reported
|
|||||||||
volume
|
net sales
|
net sales
|
|||||||||
movement(i)
|
movement
|
movement
|
|||||||||
%
|
%
|
%
|
|||||||||
Asia Pacific
|
(3)
|
(2)
|
64
|
||||||||
South East Asia
|
(24)
|
(28)
|
(28)
|
||||||||
Greater China
|
3
|
15
|
17
|
||||||||
India
|
5
|
3
|
1,732
|
||||||||
Global Travel Asia &
|
|||||||||||
Middle East
|
5
|
4
|
3
|
||||||||
Australia
|
1
|
2
|
(5)
|
||||||||
North Asia
|
1
|
1
|
(1)
|
||||||||
Spirits (ii)
|
(3)
|
(3)
|
83
|
||||||||
Beer
|
(13)
|
(12)
|
(16)
|
||||||||
Ready to drink
|
(2)
|
1
|
(5)
|
||||||||
Global giants and local stars (ii):
|
|||||||||||
Organic
|
Organic
|
Reported
|
|||||||||
volume
|
net sales
|
net sales
|
|||||||||
movement(i)
|
movement
|
movement
|
|||||||||
%
|
%
|
%
|
|||||||||
Johnnie Walker
|
(10)
|
(14)
|
(14)
|
||||||||
Smirnoff
|
(3)
|
(7)
|
(9)
|
||||||||
Guinness
|
(13)
|
(12)
|
(16)
|
||||||||
Captain Morgan
|
-
|
11
|
8
|
||||||||
Baileys
|
(4)
|
(13)
|
(16)
|
||||||||
Windsor
|
(10)
|
(10)
|
(8)
|
||||||||
Bundaberg
|
(5)
|
(7)
|
(13)
|
||||||||
Shui Jing Fang
|
275
|
239
|
245
|
(i)
|
Organic equals reported movement for volume except for Asia Pacific 622%, India 6347%, and spirits 710%, reflecting the full consolidation of USL.
|
(ii)
|
Spirits brands excluding ready to drink.
|
·
|
In South East Asia, net sales declined 28% given an inventory level reduction in specific wholesale channels, with Johnnie Walker Red and Black Label most impacted. Performance in these channels was also impacted by transferring sales from some Indian travel retail customers to Global Travel Asia. New regulations in Indonesia caused major disruptions, and Guinness net sales declined 30%. In Thailand, price repositioning on Johnnie Walker Red Label and Smirnoff led to negative price/mix, however, Johnnie Walker Red Label volume was up double digit in the second half, while Smirnoff gained share.
|
·
|
In Greater China, net sales were up 15%. Taiwan net sales increased 6%, driven by continued success of The Singleton, which was up significantly and has become the largest malt brand in Taiwan. Mainland China was up 26% including an 11pps benefit from an additional quarter of Shuijingfang to align financial year end timing. Shuijingfang grew significantly through innovation, strengthened route to consumer, and a soft prior year comparable. Shuijingfang also generated profit and drove margin improvement for Greater China, due to a significant reduction in the underlying business loss and benefitting from provision releases. While scotch in mainland China was down 17%, due to increased competition for on trade contracts and a reduction in wholesaler inventory levels, The Singleton and Haig Club drove growth and share gains.
|
·
|
Despite shipment disruptions due to new food safety labelling requirements, Diageo India volume was up 5% and net sales up 3%, and all key priority brands grew depletions. Johnnie Walker and VAT 69 campaigns, and a Black & White packaging relaunch, drove continued premiumisation. The Smirnoff Black launch helped increase Smirnoff share by 5pps over the past 3 months to 56% of vodka. The integration of Diageo and USL completed, and from June, USL started selling Diageo brands.
|
·
|
Global Travel Asia and Middle East net sales were up 4% including 6pps of benefit from transferring sales from some Indian travel retail customers from South East Asia. Middle East performance slowed in the second half due to geopolitical tensions and increased pricing pressure on scotch, with second half sales down 16%. Across GTME, Diageo brands gained share particularly in whisky, led by Johnnie Walker in Global Travel Asia, where premium and above variants drove the brand’s net sales growth.
|
·
|
Net sales in Australia improved 2%, reversing a first half decline. Spirits were up 2%, driven by super premium scotch, spiced rum, and North American whiskey. Captain Morgan net sales grew nearly 50% and it is now the second largest rum brand behind Bundaberg. While pricing pressure impacted Bundaberg and Smirnoff, depletions improved in the last quarter. Ready to drink growth continued in the second half driven by Captain Morgan variants and pack format innovations from several brands.
|
·
|
North Asia net sales were up 1% with Japan up 10% and Korea down 2%, as second half performance slowed following an increase in import duties after a Customs settlement in January. In Korea, whisky contraction decelerated, and the launch of lower ABV offering W ICE by Windsor stabilised Windsor share in the fourth quarter. While Windsor was down, whisky sales in Korea benefitted from strong growth of Johnnie Walker Blue and Black Label. Guinness was up 41%, driven by a campaign and price promotion. In Japan, performance improved due to scotch growth, with depletions up high single digit, and increased distribution and new flavours of Smirnoff Ice.
|
·
|
Marketing investment decreased 8%, due to Johnnie Walker reductions, particularly in Black Label, in China and South East Asia. In China, investment declined in the competitive on trade and was reinvested in testing new at home and with meal off trade campaigns. In Thailand and the Philippines, Johnnie Walker investment focused on recruiting consumers and maintaining Gold and Blue Label sponsorships. Many markets also supported Haig Club’s launch.
|
Key financials £ million:
|
||||||
2014
Reported
|
FX
|
Acquisitions
and
disposals
|
Organic movement
|
2015
Reported
|
Reported movement
%
|
|
Net sales
|
79
|
(3)
|
3
|
1
|
80
|
1
|
Marketing spend
|
7
|
-
|
-
|
7
|
14
|
100
|
Operating profit before exceptional items
|
(130)
|
4
|
6
|
(3)
|
(123)
|
5
|
Exceptional items
|
(12)
|
(10)
|
||||
Operating profit
|
(142)
|
(133)
|
6
|
Key categories:
|
||||
Organic
|
Organic net
|
Reported net
|
||
volume
|
sales
|
sales
|
||
movement(i)
|
movement
|
movement
|
||
%
|
%
|
%
|
||
Spirits (ii)
|
(2)
|
(1)
|
10
|
|
Scotch
|
(4)
|
(5)
|
(9)
|
|
Vodka
|
-
|
1
|
1
|
|
North American whiskey
|
10
|
12
|
15
|
|
Rum
|
(3)
|
(3)
|
(6)
|
|
Liqueurs
|
(1)
|
(4)
|
(8)
|
|
Gin
|
4
|
5
|
3
|
|
Tequila
|
10
|
14
|
38
|
|
Beer
|
3
|
4
|
(2)
|
|
Ready to drink
|
(11)
|
(4)
|
(13)
|
|
Wine
|
(1)
|
(1)
|
(1)
|
|
Total
|
(1)
|
-
|
5
|
(i)
|
Organic equals reported movement for volume except for total 58%, spirits 72%, ready to drink (18)%, liqueurs (1)%, and tequila 25%, largely reflecting the full consolidation of USL, the acquisition of Don Julio, and the termination of agency brand distribution agreements, including Jose Cuervo.
|
(ii)
|
Spirits brands excluding ready to drink.
|
Global giants, local stars and reserve (ii):
|
||||
Organic
|
Organic
|
Reported
|
||
volume
|
net sales
|
net sales
|
||
movement(i)
|
movement
|
movement
|
||
%
|
%
|
%
|
||
Global giants
|
||||
Johnnie Walker
|
(6)
|
(9)
|
(12)
|
|
Smirnoff
|
(1)
|
(2)
|
(3)
|
|
Captain Morgan
|
(4)
|
(6)
|
(7)
|
|
Baileys
|
(4)
|
(4)
|
(8)
|
|
Tanqueray
|
6
|
5
|
5
|
|
Guinness
|
(2)
|
-
|
(5)
|
|
Local stars
|
||||
Crown Royal
|
13
|
12
|
15
|
|
Yenì Raki
|
(4)
|
4
|
(6)
|
|
JεB
|
(2)
|
(4)
|
(9)
|
|
Buchanan’s
|
(9)
|
(3)
|
(12)
|
|
Windsor
|
(10)
|
(10)
|
(8)
|
|
Old Parr
|
(13)
|
(14)
|
(24)
|
|
Bundaberg
|
(5)
|
(7)
|
(13)
|
|
Bell's
|
(3)
|
(5)
|
(14)
|
|
White Horse
|
(5)
|
(7)
|
(26)
|
|
Ypióca
|
(5)
|
(3)
|
(14)
|
|
Cacique
|
(37)
|
3
|
(32)
|
|
Shui Jing Fang
|
268
|
235
|
241
|
|
Reserve
|
||||
Scotch malts
|
11
|
16
|
12
|
|
Cîroc
|
6
|
6
|
9
|
|
Ketel One vodka
|
(3)
|
(2)
|
1
|
|
Don Julio
|
8
|
12
|
43
|
|
Bulleit
|
34
|
38
|
42
|
(i)
|
Organic equals reported movement for volume, except for Don Julio where reported volume growth is 98%.
|
(ii)
|
Spirits brands excluding ready to drink.
|
·
|
Global giants represent 39% of Diageo net sales
|
·
|
Johnnie Walker, with nearly 70% of its net sales in the emerging markets, was impacted by currency weakness and inventory reductions in South East Asia and export channels in Latin America. In the United States, the brand lapped the shipment of two big innovations, Gold Label Reserve and Platinum Label in the prior year; Red and Black Label were negatively impacted by reduced promotional activities. In China, the government’s anti extravagance measures drove continued closure of traditional on trade outlets, leading to increased competition in the modern on trade negatively impacting the whole scotch category. Many other markets delivered strong performance, including Cameroon, Angola, Ghana, and East Africa with net sales up more than 50% and Mexico, Venezuela, and Colombia which all delivered double digit sales growth. In the developed markets in Asia Pacific, Johnnie Walker performed strongly and net sales grew high single digit.
|
·
|
Smirnoff net sales declined 2%, largely driven by the United States, and the weakness in flavoured vodka there. The relaunch of the brand with the ‘Exclusively for Everybody’ marketing campaign, new packaging and targeted price promotions drove improved depletions momentum and share gains on Smirnoff Red. In Western Europe, a number of countries, notably Great Britain, delivered growth. Net sales were up in Latin America, with Brazil growing 8% following the national ‘Cheers to Real Life’ campaign launch. Smirnoff had a very strong year in South Africa with Smirnoff 1818 sales growing 27%.
|
·
|
Captain Morgan net sales were down 6% due to the performance of the brand in the United States, where Captain Morgan held share in a flat rum category that is facing heightened competition from other categories. The decline in shipments was driven by weakness on Original Spiced Rum, and Captain Morgan White Rum which lapped its launch last year. The launch of Captain Morgan White Flavours partially offset the shipments decline on the core variants. Elsewhere, the brand’s performance continued to be strong with double digit growth in Great Britain, Germany, Southern Europe, Australia, India, and East Africa.
|
·
|
Baileys net sales declined 4% having started the year with high inventory levels. It experienced softer depletions this year in the United States and Nigeria. In China, after weakness in the first half, specific interventions to drive consumer conversion resulted in stronger second half depletions, up mid single digit. In Western Europe performance was impacted by lapping the launch of Chocolat Luxe in the prior year, but the Baileys brand achieved share gains in the key markets of Great Britain and Germany. The brand continued to expand its footprint in emerging markets, with double digit growth in Colombia, West LAC, and Africa Regional Markets.
|
·
|
Tanqueray gin benefitted from a strong focus on increased visibility and distribution in the on trade, supported by the highly effective ‘Tonight We Tanqueray’ campaign. This drove strong double digit growth in Western Europe, particularly in Spain and Great Britain, with accelerating growth in Germany and Benelux. Net sales for the gin brand grew 6%, with Tanqueray No. TEN up double digit in every region.
|
·
|
Guinness net sales were flat, reflecting a strong performance in both the United States and Western Europe, where the brand grew 3% and 2% respectively. This was achieved through a combination of acclaimed innovations such as Blonde American Lager and Dublin Porter that built on the Guinness brewing heritage, a drive to increase presence and distribution in bars, and a series of award winning marketing campaigns built under the ‘Made of More’ platform. In Nigeria, sales declined but performance improved over the course of the year and volume share stabilised. Sales declined in Indonesia due to adverse regulatory changes.
|
·
|
Local stars represent 16% of Diageo net sales. Overall performance was good with net sales growth of 4%. In developed markets, there was double digit growth on certain premium brands that have resonance with particular consumer groups, such as Buchanan’s in the United States with the Hispanic community, and Crown Royal Regal Apple with millennial consumers in high energy occasions. In China, Shui Jing Fang showed significant growth due to innovation, a strengthened route to consumer, and a soft prior year comparable. In emerging markets more broadly, there was good performance from local and secondary imported brands as certain consumer segments traded down, particularly where local production protected pricing from currency volatility. The net result is that whilst premium imported brands such as Windsor and Old Parr have seen sales decline, there was strong growth on brands such as Yeni Raki in Turkey, Cacique in Venezuela and White Horse in Brazil.
|
·
|
Reserve brands represent 13% of Diageo net sales, and continued to perform well with net sales growth of 8%. During the economic volatility of recent years, the wealthy consumer base that underpins reserve has been resilient. The slight deceleration in overall reserve growth was driven by lapping strong innovation shipments on Johnnie Walker Gold Label Reserve and Platinum Label in the United States. Ketel One vodka faced increased competitive pressure from both within and outside the category. Across the wider portfolio, performance was strong. Scotch malts grew double digit, led by The Singleton which was the fastest growing of the top 5 global malt whisky brands last year. The very strong performance of Bulleit continued with sales up 38%, benefitting from high advocacy amongst the bartender community. Zacapa rum and Tequila Don Julio also delivered double digit growth globally, reflecting the quality and heritage of these products, and the strength of the reserve business model. Cîroc continues to expand its footprint outside of North America with strong growth in Western Europe, particularly Great Britain, where it rapidly gained share from the market leader and is now the number two ultra premium vodka.
|
·
|
Within whiskey, Scotch represents 24% of Diageo net sales and declined by 5%. Approximately 80% of this decline was due to inventory reductions in South East Asia and export channels in Latin America on Johnnie Walker, Buchanan’s, and Old Parr. Other brands including Haig Club, The Singleton, and scotch malts globally, and Buchanan’s in the United States performed well, with many growing double digit.
|
·
|
Also within whiskey, North American Whiskey, which represents 7% of Diageo net sales, grew 12% this year with over 2pps of positive price/mix. This strong performance was driven by the successful launch of Crown Royal Regal Apple, the continued strong growth of Bulleit, and the acclaimed range of rare bourbons in the Orphan Barrel series.
|
·
|
Vodka represents 12% of Diageo net sales and grew 1%. The growth of Cîroc in Europe and North America, as well as Smirnoff in Africa and Latin America was partially offset by the decline of Smirnoff in developed markets.
|
·
|
Beer represents 18% of Diageo net sales, grew 4% and delivered 1.1pps of positive price/mix. Beer in Africa grew 8%, led by double digit growth in Africa Regional Markets. In Nigeria, the success of Orijin and Satzenbrau more than offset declines in Guinness and Harp. East Africa delivered double digit growth on Guinness and a good performance with Tusker. Performance of Guinness in developed markets was good, driven by the successful launch of Brewer’s Project innovations and Blonde American Lager.
|
·
|
Ready to drink represents 5% of Diageo net sales and declined 4% this year. The main driver of this decline was in South Africa with Smirnoff Ice Double Black and Guarana where the brand lapped a strong performance in the previous year and an increase in inventories ahead of its transition to DHN Drinks. Elsewhere there was growth in ready to drink, including East Africa, West LAC, and Australia. In Great Britain, ready to drink cans underpinned sales growth of 7% in the category.
|
·
|
Wine represents 4% of Diageo sales and declined 1%. In the United States, a decline of 1% was driven by depletion softness as the business lapped one off programming in the prior year on core brands. In Europe, commercial challenges on Blossom Hill were offset by the strong performance of [yellow tail].
|
INCOME STATEMENT
|
2014
|
Exchange
(a)
|
Acquisitions and disposals
(b)
|
Organic movement
|
2015
|
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
|
Sales
|
13,980
|
(509)
|
2,321
|
174
|
15,966
|
Excise duties
|
(3,722)
|
172
|
(1,425)
|
(178)
|
(5,153)
|
Net sales
|
10,258
|
(337)
|
896
|
(4)
|
10,813
|
Cost of sales(i)
|
(4,006)
|
61
|
(666)
|
26
|
(4,585)
|
Gross profit
|
6,252
|
(276)
|
230
|
22
|
6,228
|
Marketing
|
(1,620)
|
47
|
(74)
|
18
|
(1,629)
|
Other operating expenses(i)
|
(1,498)
|
68
|
(85)
|
(18)
|
(1,533)
|
Operating profit before exceptional items
|
3,134
|
(161)
|
71
|
22
|
3,066
|
Exceptional operating items (c)
|
(427)
|
(269)
|
|||
Operating profit
|
2,707
|
2,797
|
|||
Non-operating items (c)
|
140
|
373
|
|||
Net finance charges
|
(388)
|
(412)
|
|||
Share of after tax results of associates and joint ventures
|
252
|
175
|
|||
Profit before taxation
|
2,711
|
2,933
|
|||
Taxation
|
(447)
|
(466)
|
|||
Profit from continuing operations
|
2,264
|
2,467
|
|||
Discontinued operations (c)
|
(83)
|
-
|
|||
Profit for the year
|
2,181
|
2,467
|
|||
(i) Before exceptional operating items.
|
Gains/ (losses)
|
|||
£ million
|
|||
Translation impact
|
(72)
|
||
Transaction impact
|
(89)
|
||
Operating profit before exceptional items
|
(161)
|
||
Net finance charges – translation impact
|
(7)
|
||
Mark to market impact of IAS 39 on interest expense
|
8
|
||
Impact of IAS 21 and IAS 39 on net other finance charges
|
1
|
||
Interest and other finance charges
|
2
|
||
Associates – translation impact
|
(20)
|
||
Profit before exceptional items and taxation
|
(179)
|
||
Year ended
|
Year ended
|
||
30 June 2015
|
30 June 2014
|
||
Exchange rates
|
|||
Translation £1 =
|
$1.57
|
$1.63
|
|
Transaction £1 =
|
$1.58
|
$1.59
|
|
Translation £1 =
|
€1.31
|
€1.20
|
|
Transaction £1 =
|
€1.23
|
€1.26
|
·
|
£47 million (2014 – £98 million) in respect of the Global efficiency programme announced in January 2014;
|
·
|
£35 million (2014 – £35 million) in respect of the Supply excellence restructuring programme;
|
·
|
£41 million in respect of the impairment of the group’s 45.56% equity investment in Hanoi Liquor Joint Company; and
|
·
|
£146 million in respect of settlement of several related disputes with the Korean customs authorities regarding the transfer pricing methodology applicable to imported products. Total payments to settle these disputes in the year were £74 million as £87 million was paid to the customs authorities prior to 30 June 2014, and was previously accounted for as a receivable from Korean customs.
|
MOVEMENT IN NET BORROWINGS AND EQUITY
|
2015
|
2014
|
||
£ million
|
£ million
|
||
Net borrowings at the beginning of the year
|
(8,850)
|
(8,403)
|
|
Free cash flow (a)
|
1,963
|
1,235
|
|
Acquisition and sale of businesses (b)
|
(306)
|
(534)
|
|
Proceeds from issue of share capital
|
1
|
1
|
|
Net purchase of own shares for share schemes (c)
|
(8)
|
(113)
|
|
Dividends paid to non-controlling interests
|
(72)
|
(88)
|
|
Purchase of shares of non-controlling interests (d)
|
-
|
(37)
|
|
Disposal of non-controlling interests
|
1
|
-
|
|
Net movements in bonds (e)
|
(701)
|
(93)
|
|
Net movements in other borrowings (f)
|
386
|
(64)
|
|
Equity dividends paid
|
(1,341)
|
(1,228)
|
|
Net decrease in cash and cash equivalents
|
(77)
|
(921)
|
|
Net decrease in bonds and other borrowings
|
315
|
157
|
|
Exchange differences (g)
|
(7)
|
349
|
|
Borrowings on acquisition of businesses
|
(869)
|
-
|
|
Other non-cash items
|
(39)
|
(32)
|
|
Net borrowings at the end of the year
|
(9,527)
|
(8,850)
|
2015
|
2014
|
||
£ million
|
£ million
|
||
Equity at the beginning of the year
|
7,590
|
8,088
|
|
Profit for the year
|
2,467
|
2,181
|
|
Exchange adjustments (a)
|
(225)
|
(1,133)
|
|
Net remeasurement of post employment plans
|
113
|
(167)
|
|
Exchange recycled to the income statement (b)
|
88
|
-
|
|
Fair value movements on available-for-sale investments (b)
|
20
|
(85)
|
|
Non-controlling interests acquired
|
641
|
8
|
|
Purchase of shares of non-controlling interests
|
-
|
(37)
|
|
Dividends to non-controlling interests
|
(72)
|
(88)
|
|
Dividends paid
|
(1,341)
|
(1,228)
|
|
Other reserve movements
|
(25)
|
51
|
|
Equity at the end of the year
|
9,256
|
7,590
|
DIAGEO CONDENSED CONSOLIDATED INCOME STATEMENT
|
|||||||||||||||||||||||||||||||||||||||||||||||||
Year ended
|
Year ended
|
||||||||||||||||||||||||||||||||||||||||||||||||
30 June 2015
|
30 June 2014
|
||||||||||||||||||||||||||||||||||||||||||||||||
Notes
|
£ million
|
£ million
|
|||||||||||||||||||||||||||||||||||||||||||||||
Sales
|
2
|
15,966
|
13,980
|
||||||||||||||||||||||||||||||||||||||||||||||
Excise duties
|
(5,153)
|
(3,722)
|
|||||||||||||||||||||||||||||||||||||||||||||||
Net sales
|
2
|
10,813
|
10,258
|
||||||||||||||||||||||||||||||||||||||||||||||
Cost of sales
|
(4,610)
|
(4,029)
|
|||||||||||||||||||||||||||||||||||||||||||||||
Gross profit
|
6,203
|
6,229
|
|||||||||||||||||||||||||||||||||||||||||||||||
Marketing
|
(1,629)
|
(1,620)
|
|||||||||||||||||||||||||||||||||||||||||||||||
Other operating expenses
|
(1,777)
|
(1,902)
|
|||||||||||||||||||||||||||||||||||||||||||||||
Operating profit
|
2
|
2,797
|
2,707
|
||||||||||||||||||||||||||||||||||||||||||||||
Non-operating items
|
3
|
373
|
140
|
||||||||||||||||||||||||||||||||||||||||||||||
Finance income
|
4
|
244
|
241
|
||||||||||||||||||||||||||||||||||||||||||||||
Finance charges
|
4
|
(656)
|
(629)
|
||||||||||||||||||||||||||||||||||||||||||||||
Share of after tax results of associates and joint ventures
|
175
|
252
|
|||||||||||||||||||||||||||||||||||||||||||||||
Profit before taxation
|
2,933
|
2,711
|
|||||||||||||||||||||||||||||||||||||||||||||||
Taxation
|
5
|
(466)
|
(447)
|
||||||||||||||||||||||||||||||||||||||||||||||
Profit from continuing operations
|
2,467
|
2,264
|
|||||||||||||||||||||||||||||||||||||||||||||||
Discontinued operations
|
3
|
-
|
(83)
|
||||||||||||||||||||||||||||||||||||||||||||||
Profit for the year
|
2,467
|
2,181
|
|||||||||||||||||||||||||||||||||||||||||||||||
Attributable to:
|
|||||||||||||||||||||||||||||||||||||||||||||||||
Equity shareholders of the parent company - continuing operations
|
2,381
|
2,331
|
|||||||||||||||||||||||||||||||||||||||||||||||
- discontinued operations
|
-
|
(83)
|
|||||||||||||||||||||||||||||||||||||||||||||||
Non-controlling interests - continuing operations
|
86
|
(67)
|
|||||||||||||||||||||||||||||||||||||||||||||||
2,467
|
2,181
|
||||||||||||||||||||||||||||||||||||||||||||||||
Basic earnings per share
|
pence
|
pence
|
|||||||||||||||||||||||||||||||||||||||||||||||
Continuing operations
|
95.0
|
93.0
|
|||||||||||||||||||||||||||||||||||||||||||||||
Discontinued operations
|
-
|
(3.3)
|
|||||||||||||||||||||||||||||||||||||||||||||||
95.0
|
89.7
|
||||||||||||||||||||||||||||||||||||||||||||||||
Diluted earnings per share
|
|||||||||||||||||||||||||||||||||||||||||||||||||
Continuing operations
|
94.6
|
92.6
|
|||||||||||||||||||||||||||||||||||||||||||||||
Discontinued operations
|
-
|
(3.3)
|
|||||||||||||||||||||||||||||||||||||||||||||||
94.6
|
89.3
|
||||||||||||||||||||||||||||||||||||||||||||||||
Weighted average number of shares
|
million
|
million
|
|||||||||||||||||||||||||||||||||||||||||||||||
Shares in issue excluding own shares
|
2,505
|
2,506
|
|||||||||||||||||||||||||||||||||||||||||||||||
Dilutive potential ordinary shares
|
12
|
11
|
|||||||||||||||||||||||||||||||||||||||||||||||
2,517
|
2,517
|
||||||||||||||||||||||||||||||||||||||||||||||||
DIAGEO CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
|
|||||||||||||||||||||||||||||||||||||||||||||||||
Year ended
|
Year ended
|
||||||||||||||||||||||||||||||||||||||||||||||||
30 June 2015
|
30 June 2014
|
||||||||||||||||||||||||||||||||||||||||||||||||
£ million
|
£ million
|
||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive income
|
|||||||||||||||||||||||||||||||||||||||||||||||||
Items that will not be recycled subsequently to the income
statement
|
|||||||||||||||||||||||||||||||||||||||||||||||||
Net remeasurement of post employment plans
|
|||||||||||||||||||||||||||||||||||||||||||||||||
- group
|
125
|
(169)
|
|||||||||||||||||||||||||||||||||||||||||||||||
- associates and joint ventures
|
(10)
|
2
|
|||||||||||||||||||||||||||||||||||||||||||||||
- non-controlling interests
|
(2)
|
-
|
|||||||||||||||||||||||||||||||||||||||||||||||
Tax on post employment plans
|
(11)
|
20
|
|||||||||||||||||||||||||||||||||||||||||||||||
102
|
(147)
|
||||||||||||||||||||||||||||||||||||||||||||||||
Items that may be recycled subsequently to the income
statement
|
|||||||||||||||||||||||||||||||||||||||||||||||||
Exchange differences on translation of foreign operations
excluding borrowings
|
|||||||||||||||||||||||||||||||||||||||||||||||||
- group
|
(345)
|
(1,117)
|
|||||||||||||||||||||||||||||||||||||||||||||||
- associates and joint ventures
|
(205)
|
(294)
|
|||||||||||||||||||||||||||||||||||||||||||||||
- non-controlling interests
|
56
|
(120)
|
|||||||||||||||||||||||||||||||||||||||||||||||
Exchange loss recycled to the income statement in respect of step acquisitions
|
88
|
-
|
|||||||||||||||||||||||||||||||||||||||||||||||
Net investment hedges
|
269
|
398
|
|||||||||||||||||||||||||||||||||||||||||||||||
Tax on exchange differences
|
30
|
12
|
|||||||||||||||||||||||||||||||||||||||||||||||
Effective portion of changes in fair value of cash flow hedges
|
|||||||||||||||||||||||||||||||||||||||||||||||||
- (losses)/gains taken to other comprehensive income - group
|
(40)
|
59
|
|||||||||||||||||||||||||||||||||||||||||||||||
- losses taken to other comprehensive income - associates
and joint ventures
|
(6)
|
(5)
|
|||||||||||||||||||||||||||||||||||||||||||||||
- recycled to income statement
|
(58)
|
34
|
|||||||||||||||||||||||||||||||||||||||||||||||
Tax on effective portion of changes in fair value of cash flow hedges
|
18
|
2
|
|||||||||||||||||||||||||||||||||||||||||||||||
Fair value movements on available-for-sale investments
|
|||||||||||||||||||||||||||||||||||||||||||||||||
- gains taken to other comprehensive income - group
|
11
|
55
|
|||||||||||||||||||||||||||||||||||||||||||||||
- gains taken to other comprehensive income - non-controlling
interests
|
9
|
-
|
|||||||||||||||||||||||||||||||||||||||||||||||
- recycled to income statement
|
-
|
(140)
|
|||||||||||||||||||||||||||||||||||||||||||||||
Tax on available-for-sale fair value movements
|
(4)
|
-
|
|||||||||||||||||||||||||||||||||||||||||||||||
Hyperinflation adjustment
|
18
|
11
|
|||||||||||||||||||||||||||||||||||||||||||||||
Tax on hyperinflation adjustment
|
-
|
(2)
|
|||||||||||||||||||||||||||||||||||||||||||||||
(159)
|
(1,107)
|
||||||||||||||||||||||||||||||||||||||||||||||||
Other comprehensive loss, net of tax, for the year
|
(57)
|
(1,254)
|
|||||||||||||||||||||||||||||||||||||||||||||||
Profit for the year
|
2,467
|
2,181
|
|||||||||||||||||||||||||||||||||||||||||||||||
Total comprehensive income for the year
|
2,410
|
927
|
|||||||||||||||||||||||||||||||||||||||||||||||
Attributable to:
|
|||||||||||||||||||||||||||||||||||||||||||||||||
Equity shareholders of the parent company
|
2,261
|
1,114
|
|||||||||||||||||||||||||||||||||||||||||||||||
Non-controlling interests
|
149
|
(187)
|
|||||||||||||||||||||||||||||||||||||||||||||||
Total comprehensive income for the year
|
2,410
|
927
|
|||||||||||||||||||||||||||||||||||||||||||||||
DIAGEO CONDENSED CONSOLIDATED BALANCE SHEET
|
|||||||||||||||||||||||||||||||||||||||||||||||||
30 June 2015
|
30 June 2014
|
||||||||||||||||||||||||||||||||||||||||||||||||
Notes
|
£ million
|
£ million
|
£ million
|
£ million
|
|||||||||||||||||||||||||||||||||||||||||||||
Non-current assets
|
|||||||||||||||||||||||||||||||||||||||||||||||||
Intangible assets
|
11,231
|
7,891
|
|||||||||||||||||||||||||||||||||||||||||||||||
Property, plant and equipment
|
3,690
|
3,433
|
|||||||||||||||||||||||||||||||||||||||||||||||
Biological assets
|
65
|
53
|
|||||||||||||||||||||||||||||||||||||||||||||||
Investments in associates and joint ventures
|
2,076
|
3,201
|
|||||||||||||||||||||||||||||||||||||||||||||||
Other investments
|
109
|
63
|
|||||||||||||||||||||||||||||||||||||||||||||||
Other receivables
|
46
|
107
|
|||||||||||||||||||||||||||||||||||||||||||||||
Other financial assets
|
9
|
292
|
250
|
||||||||||||||||||||||||||||||||||||||||||||||
Deferred tax assets
|
189
|
246
|
|||||||||||||||||||||||||||||||||||||||||||||||
Post employment benefit assets
|
436
|
251
|
|||||||||||||||||||||||||||||||||||||||||||||||
18,134
|
15,495
|
||||||||||||||||||||||||||||||||||||||||||||||||
Current assets
|
|||||||||||||||||||||||||||||||||||||||||||||||||
Inventories
|
6
|
4,574
|
4,222
|
||||||||||||||||||||||||||||||||||||||||||||||
Trade and other receivables
|
2,435
|
2,499
|
|||||||||||||||||||||||||||||||||||||||||||||||
Assets held for sale
|
143
|
8
|
|||||||||||||||||||||||||||||||||||||||||||||||
Other financial assets
|
9
|
46
|
118
|
||||||||||||||||||||||||||||||||||||||||||||||
Cash and cash equivalents
|
7
|
472
|
622
|
||||||||||||||||||||||||||||||||||||||||||||||
7,670
|
7,469
|
||||||||||||||||||||||||||||||||||||||||||||||||
Total assets
|
25,804
|
22,964
|
|||||||||||||||||||||||||||||||||||||||||||||||
Current liabilities
|
|||||||||||||||||||||||||||||||||||||||||||||||||
Borrowings and bank overdrafts
|
7
|
(1,921)
|
(1,576)
|
||||||||||||||||||||||||||||||||||||||||||||||
Other financial liabilities
|
9
|
(156)
|
(146)
|
||||||||||||||||||||||||||||||||||||||||||||||
Trade and other payables
|
(2,943)
|
(2,800)
|
|||||||||||||||||||||||||||||||||||||||||||||||
Liabilities held for sale
|
(3)
|
-
|
|||||||||||||||||||||||||||||||||||||||||||||||
Corporate tax payable
|
(162)
|
(197)
|
|||||||||||||||||||||||||||||||||||||||||||||||
Provisions
|
(105)
|
(132)
|
|||||||||||||||||||||||||||||||||||||||||||||||
(5,290)
|
(4,851)
|
||||||||||||||||||||||||||||||||||||||||||||||||
Non-current liabilities
|
|||||||||||||||||||||||||||||||||||||||||||||||||
Borrowings
|
7
|
(7,917)
|
(7,638)
|
||||||||||||||||||||||||||||||||||||||||||||||
Other financial liabilities
|
9
|
(443)
|
(447)
|
||||||||||||||||||||||||||||||||||||||||||||||
Other payables
|
(69)
|
(94)
|
|||||||||||||||||||||||||||||||||||||||||||||||
Provisions
|
(238)
|
(253)
|
|||||||||||||||||||||||||||||||||||||||||||||||
Deferred tax liabilities
|
(1,896)
|
(1,365)
|
|||||||||||||||||||||||||||||||||||||||||||||||
Post employment benefit liabilities
|
(695)
|
(726)
|
|||||||||||||||||||||||||||||||||||||||||||||||
(11,258)
|
(10,523)
|
||||||||||||||||||||||||||||||||||||||||||||||||
Total liabilities
|
(16,548)
|
(15,374)
|
|||||||||||||||||||||||||||||||||||||||||||||||
Net assets
|
9,256
|
7,590
|
|||||||||||||||||||||||||||||||||||||||||||||||
Equity
|
|||||||||||||||||||||||||||||||||||||||||||||||||
Share capital
|
797
|
797
|
|||||||||||||||||||||||||||||||||||||||||||||||
Share premium
|
1,346
|
1,345
|
|||||||||||||||||||||||||||||||||||||||||||||||
Other reserves
|
1,994
|
2,243
|
|||||||||||||||||||||||||||||||||||||||||||||||
Retained earnings
|
3,634
|
2,438
|
|||||||||||||||||||||||||||||||||||||||||||||||
Equity attributable to equity
shareholders of the parent company
|
7,771
|
6,823
|
|||||||||||||||||||||||||||||||||||||||||||||||
Non-controlling interests
|
1,485
|
767
|
|||||||||||||||||||||||||||||||||||||||||||||||
Total equity
|
9,256
|
7,590
|
|||||||||||||||||||||||||||||||||||||||||||||||
|