Slide 1: 2010 Preliminary Results Live Q&A Session
2010 Preliminary Results Live Q&A Session Please use the following dial-in numbers: UK – Toll free 0800 279 9640 North America – Toll free 1866 850 2201 France – Toll free 0805 770 155 Germany – Toll free 0800 673 8355 Ireland – Toll free 1800 944 322 Italy – Toll free 800 976 303 Netherlands – Toll
Slide 2: 2010 Preliminary Results
2010 Preliminary Results 26 August 2010
Slide 3: Paul Walsh, CEO
Paul Walsh CEO
Slide 4: Diageo delivered top and bottom line growth and strong cash flow in a challenging year
Diageo delivered top and bottom line growth and strong cash flow in a challenging year • Organic net sales up 2% • Organic operating profit up 2% • Favourable currency movements led to reported growth of 5% in net sales and 6% in operating profit • eps pre-exceptionals up 13% • Free cash flow of £2b
Slide 5: Taking the actions that make the business stronger
Taking the actions that make the business stronger • Marketing spend increased ahead of net sales • Focus on building first class consumer goods sales capabilities • Improving brand positions • Successful execution of restructuring programmes • Exceptional cash flow and improved returns on invested
Slide 6: Nick Rose, CFO
Nick Rose CFO
Slide 7: Organic growth in net sales and favourable exchange rate movements drove reported net sales growth
Organic growth in net sales and favourable exchange rate movements drove reported net sales growth Volume, Net sales, eu m £m F‟09 141 9,311 Exchange - 267 Organic movement 2 168 Scope change* - 34 F‟10 143 9,780 Organic growth 2% 2% Reported growth 2% 5% Year ended 30 June. *Scope change comprises
Slide 8: Developing markets were again the growth engine of the business
Developing markets were again the growth engine of the business Net sales growth*, £m 2% 180 15% 150 10% 120 90 19% 60 30 1% 0 (30) (60) (2)% (90) (3)% (120) North America Europe Asia Pacific Latin America Africa Global Travel Diageo & Caribbean & Middle East = Net sales growth Year ended 30 June 20
Slide 9: Second half performance improved and price/mix maintained in the full year
Second half performance improved and the price/mix achieved in fiscal 2009 was maintained in the full year 6 6 3 (2) (2) (2) (4) (6) F'09 H1 F'09 H2 F'10 H1 F'10 H2 Volume, % Net sales, % Year ended 30 June. Organic growth. 9
Slide 10: Return to growth in premium segments driven by scotch
Return to growth in premium segments driven by scotch in Latin America and Global Travel £m 75 Net sales growth* by segment 50 25 0 Value Standard Premium Super/Ultra premium ▲ Volume (1)% 1% 3% 4% ▲ Net sales 5% 1% 3% 4% % of Diageo 2% 65% 25% 8% Year ended 30 June 2010. *Organic growth. 10
Slide 11: Stronger second half performance drove full year operating profit growth
Stronger second half performance drove full year operating profit growth Volume, Net sales, Operating eu m £m profit*, £m F‟09 141 9,311 2,588** Exchange - 267 126 Organic movement 2 168 46 Scope change*** - 34 (9) F‟10 143 9,780 2,751 Organic growth 2% 2% 2% Reported growth 2% 5% 6% Year ended 30 J
Slide 12: Strong performance of International and return to growth of Asia Pacific
Strong performance of International and the return to growth of Asia Pacific delivered organic operating profit growth £m 25% 160 120 80 2% 40 6% 0% 0 £(34)m (1)% (40) (80) £(82)m (120) (160) Corporate North America Europe International Asia Pacific Diageo Operating margin, % 35.5 31.2 29.7 18.0 28.
Slide 13: Organic operating profit growth, FX benefits and lower net finance charges led to strong PBET growth
Organic operating profit growth, FX benefits and lower net finance charges led to strong growth in PBET F’09*, F’10, Movement, £m £m £m Operating profit** 2,588 2,751 163 Associate income net of tax 164 142 (22) Trading profit** 2,752 2,893 141 Net finance charges (592) (462) 130 PBET 2,160 2,431 27
Slide 14: Finance charges benefited from lower interest rates and lower debt
Finance charges benefited from lower interest rates and lower debt F’09, F’10, Movement, £m £m £m Net interest charge (516) (375) 141 Finance income/(charge) from post employment obligations 2 (47) (49) Other finance charges (34) (30) 4 Exchange movements on short term inter-company balances and oth
Slide 15: Exceptional operating items totalled £177 million
Exceptional operating items totalled £177 million F’09, F’10, £m £m Global restructuring 166 85 Global Supply operations - 93 Brewing operations in Ireland 4 12 US wine restructuring - (48) Brand value adjustment - 35 Total exceptional items 170 177 Cash outflow 53 145 Year ended 30 June. 15
Slide 16: Profit for the full year increased despite an increase in the reported tax rate
Profit for the full year increased despite an increase in the reported tax rate F’09*, F’10, Movement, £m £m £m PBET 2,160 2,431 271 Exceptional items (170) (177) (7) Sale of businesses - (15) (15) PBT 1,990 2,239 249 Tax (286) (477) (191) Profit for the period** 1,704 1,762 58 Memo: Reported tax ra
Slide 17: Focus on working capital improvement delivered record free cash flow of £2 billion
Focus on working capital improvement delivered record free cash flow of £2 billion £110m £587m £2,024m £(191)m £48m £110m £156m £1,204m F'09 Increase in Decrease in net Decrease in Change in Decrease in net Other F'10 operating profit interest paid tax paid working capital capex spend Year ended 30
Slide 18: Strong free cash flow generation drove the reduction in net debt
Strong free cash flow generation drove the reduction in net debt £7,419m £206m £10m £6,954m £429m £914m £(2,024)m Net borrowings Free cash flow Dividends paid Exchange Purchase of Other Net borrowings at 30 June 2009 businesses at 30 June 2010 Year ended 30 June. 18
Slide 19: Growth in eps pre-exceptionals was driven by FX and organic growth
Growth in eps pre-exceptionals was driven by FX and organic growth Pence % eps pre-exceptionals, 2009* 63.6 - Underlying eps growth** 4.5 6 Impact of foreign exchange 4.3 7 Scope change*** (0.4) - Impact of IAS 19 (1.7) (3) Impact of IAS 21 and IAS 39 1.7 3 eps pre-exceptionals, 2010* 72.0 13 Year e
Slide 20: Diageo's financial strength was enhanced in a challenging year
Diageo’s financial strength was enhanced in a challenging year • Exceptional cash performance • Broadly maintained margins with strict control of costs • Economic profit was £890 million, up £78 million • ROIC was 14.8%, up 30 basis points • Accessed debt markets to optimise long term interest charg
Slide 21: Outlook
Outlook • Growth will continue to be driven by developing markets • COGS are likely to be flat on like for like basis • Favourable currency benefits overall although uncertainty around Venezuela • Modest increase in our effective interest rates • Focus on cash flow is likely to deliver free cash flo
Slide 22: Summary
Summary • Robust performance despite economic challenges • Positioned well for the future • Invest to promote growth • Financial strength 22
Slide 23: Paul Walsh, CEO
Paul Walsh CEO
Slide 24: Delivering growth while building on Diageo's strengths in a challenging year
Delivering growth while building on Diageo’s strengths in a challenging year • The level of economic recovery varied by region • Stronger H2 performance, stronger performance in developing markets • Focused investment by market and by category • Further investment in our proven brand building market
Slide 25: Marketing spend was increased in the second half behind proven campaigns
Marketing spend was increased in the second half behind proven campaigns and category strength F’09 H1 H2 F’10 % increase (9)% (5)% 14% 3% % of net sales 14.3% 13.9% 15.2% 14.5% H2 Marketing spend increases North Asia America Europe International Pacific H2 20% 7% 18% 8% 14% Year ended 30 June. 25
Slide 26: Investing behind proven campaigns - Captain Morgan
Investing behind proven campaigns - Captain Morgan • H2 marketing spend up 75% • 40% net sales growth in Europe • In Northern Europe, a step change in trajectory − Volume up 80% − Net sales up 93% − Marketing spend up 92% Year ended 30 June 2010. 26
Slide 27: Investing behind momentum in GTME
Investing behind momentum in GTME 1 million cases Net sales +38% Marketing +47% Year ended 30 June 2010. 27
Slide 28: Diageo's innovation delivers access to four major growth opportunities
Diageo’s innovation delivers access to four major growth opportunities Winning in developing markets Driving growth in developed markets Premiumising our brands Sustaining what we’ve launched 28
Slide 29: Enhancing our sales capabilities with increasing focus on customers and shoppers
Enhancing our sales capabilities with increasing focus on customers and shoppers Improving performance with Providing solutions for the key global customers on trade, e.g. in ROI Net sales growth, % • Implementation in first 175 pubs in just 14 weeks 17.2 • DIAGEO beer sales +17% in top 100 accounts
Slide 30: Investing behind strong brands and routes to market in developed markets
Investing behind strong brands and routes to market in developed markets • North America: Upweighted investment in marketing and industry leading innovation • Europe: Strong customer focus and innovation • Developed Asia Pacific: Increased marketing spend 30
Slide 31: Developing markets are the growth engine
Developing markets are the growth engine Organic net sales growth, 11% 16.3% 15.4% 11.2% 10.4% 6.0% Middle East/ Latin America Russia Africa Developing North Africa & Caribbean Asia Year ended 30 June 2010. Developing Asia: includes South East Asia, China, India, Taiwan, Thailand. 31
Slide 32: Our range of brands across categories delivered overall growth of 2%
Our range of brands across categories delivered overall growth of 2% in a difficult environment Category Net sales growth Diageo’s leading brand Diageo category performance Scotch 5% 7% 15% 10% Vodka (1)% (4)% 46% 5% Rum 3% 2% 38% Beer 5% 0% 26% 41% 32
Slide 33: We have taken significant steps to build a more efficient organisation
We have taken significant steps to build a more efficient organisation • The restructuring programmes delivered a leaner cost base • Increased investment in Scotland drove supply efficiencies • North American wine restructuring improved returns • The US Virgin Islands rum production is on track to p
Slide 34: Summary: Taking action in F'10 to improve performance in F'11
Summary: Taking action in F’10 to improve performance in F’11 • North America: Improved margins and investment behind proven growth drivers delivered share gains in key brands • Europe: Robust performance in a tough environment • International: The growth engine of the business • Asia Pacific: Share
Slide 35: Outlook statements for the year ending 30 June 2011
Outlook statements for the year ending 30 June 2011 Cost of goods sold Diageo expects to hold cost of goods sold flat in fiscal 2011. Hedging policies in place provide support for this outcome, underpinned by the cost savings which the restructurings will achieve. Organic operating profit growth As
Slide 36: Impact of exchange rate movements on PBET for year ended June 2010
Impact of exchange rate movements on PBET for year ended 30 June 2010 F’10, £m Operating profit translation benefit 37 Operating profit transaction impact 133 170 Impact of IAS 21 on operating profit (44) Impact on operating profit* 126 Impact on associates 4 Impact on net finance charge 2 Impact of
Slide 37: Cautionary statement concerning forward-looking statements
Cautionary statement concerning forward-looking statements This presentation contains „forward-looking‟ statements. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. In particular, forward-looking statements include all statem