Diageo Plc · LSE:DGE
Diageo — H1 F23 Earnings Presentation
34 slides from Diageo's earnings presentation, Jan 26, 2023
Slide 1: Delivering sustainable long-term growth
Delivering sustainable long-term growth Interim Results Fiscal 23 Ivan Menezes & Lavanya Chandrashekar 26 January 2023
Slide 2: Cautionary statements concerning forward-looking statements and non-GAAP financial measures
D E L I V E R I N G S U S TA I N A B L E LO N G -T E R M G ROW T H Cautionary statements concerning forward-looking statements and non-GAAP financial measures This document contains ‘forward-looking’ statements. These statements can be identified by the fact that they do not relate only to historica
Slide 3: Continued strong growth in H1 F23
D E L I V E R I N G S U S TA I N A B L E LO N G -T E R M G ROW T H 1. Delivered strong H1 F23 results with quality growth and improving margins Continued 2. Quality market share gains strong growth in H1 F23 3. Continued investment in long-term growth 4. Continued progress on Society 2030 5. Continu
Slide 4: Strong H1 F23 results across key financial metrics
D E L I V E R I N G S U S TA I N A B L E LO N G -T E R M G ROW T H Strong H1 F23 Organic volume Organic net sales value Organic operating margin results across key growth expansion financial metrics +1.8% +9.4% +9bps Free Pre-exceptional Interim 4 Year organic cash flow eps dividend NSV CAGR £0.8bn
Slide 5: Strong organic net sales growth
D E L I V E R I N G S U S TA I N A B L E LO N G -T E R M G ROW T H Europe +10% Strong organic net sales growth +9.4% NAM +3% Organic volume APAC +17% growth +1.8% LAC +20% Africa +6% Source: Diageo internal information. 5 Interim Results Fiscal 23 For additional information on non-GAAP measures, ple
Slide 6: Continued quality market share gains
D E L I V E R I N G S U S TA I N A B L E LO N G -T E R M G ROW T H Percentage of Diageo total net sales value gaining/holding share in measured markets Continued quality market 75% share gains gaining/holding share Source: Internal estimates incorporating AC Nielsen, Association of Canadian Distille
Slide 7: We are continuing to premiumise our portfolio
D E L I V E R I N G S U S TA I N A B L E LO N G -T E R M G ROW T H We are continuing to premiumise our portfolio Reported net sales Super-premium-plus(i) net sales growth by price segment £bn, H1 F19 , H1 F23 by region % H1 F22 – H1 F23 28 3.4 H1 F19 H1 F23 2.7 2.8 21 2.6 2.3 13 13 1.3 10 0.6 0.6 Va
Slide 8: Continuously premiumising our portfolio and increasing exposure to fast-growing categories
D E L I V E R I N G S U S TA I N A B L E LO N G -T E R M G ROW T H Continuously premiumising our portfolio and increasing exposure to fast-growing categories Diageo spirit acquisitions and disposals (i-iii) Acquisitions F23 since F17 by price tier (ii) Super- Premium-Plus 10 1 Premium 6 4 Standard 1
Slide 9: We continue to invest strongly in brand building
D E L I V E R I N G S U S TA I N A B L E LO N G -T E R M G ROW T H We continue to invest strongly in brand building A&P Investment Reinvestment Rate Cost per 1000 Digital Ad views Reported £bn Reported A&P/NSV% GB Cost in H1 F22 & H1 F23 1.6 16.7% 1.1 -50% 15.3% H1 F19 H1 F23 H1 F19 H1 F23 H1 F22 H1
Slide 10: Our world-class brand building is fundamental to driving our business
D E L I V E R I N G S U S TA I N A B L E LO N G -T E R M G ROW T H Our world-class brand building is fundamental to driving our business Johnnie Walker Don Julio & Casamigos Guinness 10 Interim Results Fiscal 23
Slide 11: Doing business the right way
D E L I V E R I N G S U S TA I N A B L E LO N G -T E R M G ROW T H Doing business the right way 4%Get new images of sport media coverage Promote Positive Drinking Champion Inclusion & Diversity Grain to Glass Sustainability 11 Interim Results Fiscal 23
Slide 12: Continued our strong track record of creating shareholder value
D E L I V E R I N G S U S TA I N A B L E LO N G -T E R M G ROW T H Continued our strong track record of creating shareholder value Return of capital - Dividend per share cumulative share buybacks Annualised TSR (i) pence £bn % 5-year full year dividend CAGR 10-year Annualised TSR +4.1% 76.18p £8.5bn
Slide 13: Strong performance across key financial metrics
D E L I V E R I N G S U S TA I N A B L E LO N G -T E R M G ROW T H Strong Efficient growth Value creation Organic net sales Organic operating Return on performance value growth margin expansion invested capital across key +9.4% +9bps 19.7% financial NSV CAGR F19 H1 -F23 H1 +8% +37bps metrics Free Pr
Slide 14: Our profitable growth algorithm delivers quality long-term growth
D E L I V E R I N G S U S TA I N A B L E LO N G -T E R M G ROW T H Our profitable growth algorithm delivers quality long-term growth Driving top-line growth 1. Driving top-line growth Organic net sales value growth ↑+9.4% Organic volume growth ↑+1.8% 2. Improving price/mix 3. Driving productivity In
Slide 15: Driving strong net sales growth across all regions
D E L I V E R I N G S U S TA I N A B L E LO N G -T E R M G ROW T H 1 Driving top-line growth Driving strong net sales growth across all regions Organic net sales growth by region 20% 17% 10% 9% H1 F23 6% vs 3% H1 F22 North America Europe Asia Pacific Latin America Africa Total Diageo and Caribbean H
Slide 16: Our advantaged portfolio in fast-growing categories is driving top-line growth
D E L I V E R I N G S U S TA I N A B L E LO N G -T E R M G ROW T H 1 Driving top-line growth Our advantaged portfolio in fast-growing categories is driving top-line growth H1 F23 Organic net sales growth H1 F19 - H1 F23 CAGR(iii) of key categories(i) Net sales Volume 28% 9% 4% Scotch Tequila 43% 32%
Slide 17: 65% of net sales growth from premium-plus price tiers
D E L I V E R I N G S U S TA I N A B L E LO N G -T E R M G ROW T H 2 Improving price/mix 65% of net sales growth from premium-plus price tiers H1 F23 Organic net sales growth Reported net sales by price tier(i) by price segment, H1 F19 – H1 F23(ii) 12% Super premium+, Super 9% 9% 19% premium+, 9% 28
Slide 18: Revenue growth management is driving balanced top-line growth
D E L I V E R I N G S U S TA I N A B L E LO N G -T E R M G ROW T H 2 Improving price/mix Revenue growth management is driving balanced top-line growth Johnnie Walker, Southern Europe Don Julio, Mexico H1 F23 Net Sales Growth, Index to 100 H1 F23 Net Sales Growth, Index to 100 26.9 159.8 Volume Volum
Slide 19: Productivity initiatives delivered around £220m of cost savings
D E L I V E R I N G S U S TA I N A B L E LO N G -T E R M G ROW T H 3 Driving productivity Productivity initiatives delivered around £220m of cost savings in the first half of fiscal 23 Procurement Product Logistics Manufacturing Marketing Overhead effectiveness efficiencies COGS productivity 19 Inte
Slide 20: Increased investment and marketing effectiveness are driving balanced growth
D E L I V E R I N G S U S TA I N A B L E LO N G -T E R M G ROW T H 4 Increasing A&P Increased investment and marketing effectiveness are driving balanced growth Increased Consistent Gained/held Strong A&P investment re-investment rate Total trade share top-line growth +7% 17% ~ 75% +9% £1,452m of re
Slide 21: Resilience in organic operating margin despite increased cost inflation
D E L I V E R I N G S U S TA I N A B L E LO N G -T E R M G ROW T H Resilience in organic operating margin despite increased cost inflation Strategic Levers Movement in organic operating margin +9bps 1. RGM capabilities 2. Continued premiumisation 47bps 34.2% 34.1% -79bps 41bps 3. Volume leverage 4.
Slide 22: Strong growth in operating profit driven by organic growth
D E L I V E R I N G S U S TA I N A B L E LO N G -T E R M G ROW T H Strong growth in operating profit(i) driven by organic growth H1 F23 H1 F22 Reported (£m) (£m) operating margin(ii) PRIOR PERIOD OPERATING PROFIT 2,743 2,256 34.5% BEFORE EXCEPTIONAL ITEMS(i) Exchange rate movements 201 (87) (31)bps
Slide 23: Robust free cash flow generation
D E L I V E R I N G S U S TA I N A B L E LO N G -T E R M G ROW T H Robust free cash flow generation Movement in free cash flow (£m) 238 201 1,575 (855) (54) 8 817 (258) (38) F22 H1 Exchange(i) Operating WC(iii) Capex Tax Interest Other(iv) F23 H1 profit(ii) Source: Diageo internal information (i) Ex
Slide 24: Strong balance sheet drives resilience in our business
D E L I V E R I N G S U S TA I N A B L E LO N G -T E R M G ROW T H Strong balance sheet drives resilience in our business H1 F23 H1 F22 Movement Closing net debt(i) £m (15,169) (12,331) (2,838) AVERAGE NET DEBT(i) £m (14,867) (12,359) (2,508) Net interest charge £m (282) (162) (120) Net other financ
Slide 25: Consistent and disciplined approach to capital allocation
D E L I V E R I N G S U S TA I N A B L E LO N G -T E R M G ROW T H Consistent and disciplined approach to capital allocation Leverage ratio policy Adjusted net debt to adjusted EBITDA: 2.5x – 3.0x (i) Organic Dividends M&A and growth 1.8x to 2.2x portfolio dividend cover management Return excess cas
Slide 26: Translation driving positive impact from foreign exchange
D E L I V E R I N G S U S TA I N A B L E LO N G -T E R M G ROW T H Translation driving positive impact from foreign exchange Exchange rates Total exchange impact F23 H1 (£m) Translation rate Net sales Operating profit(iv) H1 F22(i) H1 F23(i) F23(ii) 669 Transaction $/£ 1.36 1.18 1.19 Translation €/£
Slide 27: Strong growth in eps
D E L I V E R I N G S U S TA I N A B L E LO N G -T E R M G ROW T H Strong growth in eps Movement in earnings per share before exceptional items (pence) 8.6 (0.8) 98.6 11.1 0.9 0.5 1.5 (4.0) (0.8) (0.5) (3.5) 85.6 F22 HY eps before Organic operating Acquisitions and Hyper related Fair value Foreign e
Slide 28: Well positioned for F23
D E L I V E R I N G S U S TA I N A B L E LO N G -T E R M G ROW T H Well positioned • Encouraged by the strong performance we have delivered so far in F23 for F23 • Confident in our ability to navigate ongoing volatility and uncertainty • Confident in our F23–F25 medium-term guidance — Organic net sa
Slide 29: Confident in our strategy and ability to deliver sustainable long-term growth
D E L I V E R I N G S U S TA I N A B L E LO N G -T E R M G ROW T H 1. TBA opportunity large, growing and resilient Confident in our strategy and 2. Diageo has an advantaged portfolio ability to deliver 3. Our capabilities are a competitive advantage sustainable long- term growth 4. We invest for the
Slide 30: Diageo: Celebrating life, every day, everywhere
DIAGEO Celebrating life, every day, everywhere
Slide 31: Financial/legal appendix: Definitions and reconciliation of non-GAAP measures
D E L I V E R I N G S U S TA I N A B L E LO N G -T E R M G ROW T H Financial/legal appendix: Definitions and reconciliation of non-GAAP measures to GAAP measures Diageo’s strategic planning process is based on certain non-GAAP measures, including organic movements. These non-GAAP measures are chosen
Slide 32: Continued from the previous page
D E L I V E R I N G S U S TA I N A B L E LO N G -T E R M G ROW T H Continued from the previous page (a) Exchange rates 'Exchange' in the organic movement calculation reflects the adjustment to recalculate the reported results as if they had been generated at the prior period weighted average exchang
Slide 33: Continued from the previous page
D E L I V E R I N G S U S TA I N A B L E LO N G -T E R M G ROW T H Continued from the previous page Gains and losses on the sale or directly attributable to a prospective sale of businesses, brands or distribution rights, step up gains and losses that arise when an investment becomes an associate or
Slide 34: Continued from the previous page: Shareholder value metrics, market share approach
D E L I V E R I N G S U S TA I N A B L E LO N G -T E R M G ROW T H Continued from the previous page Shareholder value metrics • Dividends: Diageo internal information. • Return of Capital (RoC): Diageo internal information. • TSR: FactSet as of 31st December 2022. TSR based on time periods of 6 mont