Diageo Plc · LSE:DGE
Diageo — H1 FY2012 Earnings Presentation
31 slides from Diageo's earnings presentation, Feb 9, 2012
Slide 1: Half Year Results
HALF YEAR RESULTS 9 February 2012
Slide 2: Paul Walsh
DIAGEO O Paul Walsh E Cc fan Arne
Slide 3: First half performance is a strong start to the year
First half performance is a strong start to the year Top line growth accelerated Strong growth in emerging markets: now c40% of the business Marketing spend up as % of net sales Operating margin expansion 9% operating profit growth Double digit eps* growth Interim dividend up 7% On t
Slide 4: Deirdre Mahlan
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Slide 5: A strong start
A strong start Marketing up 10% to 15.8% of net sales* 7% net sales growth with strong price/mix Gross margin up 70 bpts* Operating profit growth of 9% with 60 bpts operating margin expansion* Free cash flow of £0.5 billion 7% increase in interim dividend 6 months ended 31 December 2011.
Slide 6: Volume growth and positive price/mix drove 7% organic net sales growth
Volume growth and positive price/mix drove 7% organic net sales growth Net sales, £m 115 5,757 195 (42) 169 5,320 Reported 2010 Volume Price/mix Scope change* FX Reported 2011 6 months ended 31 December . *Scope change comprises acquisitions and disposals. 6
Slide 7: Strong underlying performance in both Q1 and Q2
Strong underlying performance in both Q1 and Q2 Volume, EUm NSV, £m 90 6,000 80 5,000 70 4,000 60 50 3,000 40 2,000 30 20 1,000 Q1 Q2 H1 Q1 Q2 H1 % Growth* 5% 2% 3% % Growth* 9% 5% 7% 6 months ended 31 December 2011. *Organic. 7
Slide 8: Incremental marketing spend behind our biggest growth engines
Incremental marketing spend behind our biggest growth engines 20% 28% 72% 10% 4% Percent of incremental marketing spend Increase in spending, % Developed markets Emerging markets Total 6 months ended 31 December 2011. Organic movement. 8
Slide 9: Organic operating margins improved with 10% increase in marketing investment
Organic operating margins improved with 10% increase in marketing investment Margin movement*, ppts Total 2011 Operating margin** 32.4 Gross margin 0.7 Marketing spend (0.4) Overheads 0.3 Operating margin 0.6 2012 Operating margin*** 33.0 6 months ended 31 December. *Organic. **Adjusted for exchange
Slide 10: Free cash flow for the period was £0.5 billion
Free cash flow for the period was £0.5 billion Free cash flow, £m 124 775 (226) 35 533 (114) (61) 2011 Operating profit Working capital Dividends, Net CAPEX Other operating 2012 movement interest and tax* activities** 6 months ended 31 December. *Includes dividends paid to non-controlling interests,
Slide 11: Exceptional items reflect restructuring costs and tax settlements
Exceptional items reflect restructuring costs and tax settlements 2011, 2012, £m £m Supply restructuring (4) (7) Brewing operations in Ireland (5) (5) Operating model review - (12) Exceptional operating items (9) (24) Sale of businesses (1) 102 Exceptional tax items 2 (518) Post tax exceptional item
Slide 12: Ongoing tax rate is 18% following change in taxation basis
Ongoing tax rate is 18% following change in taxation basis 2011, % 2012, % Tax rate pre exceptionals 21.8 18.1 Reported tax rate 21.8 45.2 6 months ended 31 December. 12
Slide 13: Improved performance throughout the income statement
Improved performance throughout the income statement 2011, 2012, Movement, £m £m £m Operating profit* 1,727 1,866 139 Associate income net of tax 104 122 18 Trading profit* 1,831 1,988 157 Net finance charges (209) (206) 3 PBET 1,622 1,782 160 Taxation* (354) (323) 31 Non-controlling interest (66) (
Slide 14: Summary
Summary Strong top line growth Positive price/mix Strong gross margin improvement Increased marketing investment behind brands Increased operating margin Continued financial strength 14
Slide 15: Paul Walsh
DIAGEO O Paul Walsh E Cc fan Arne
Slide 16: First half performance demonstrates a strong business is getting stronger
First half performance demonstrates that a strong business is getting stronger as we: Invested to drive growth Delivered operating model savings Enhanced our presence in emerging markets Drove efficient growth in North America Built a consumer and customer focused organisation in Western E
Slide 17: Investing to drive growth
Investing to drive growth 15% net sales 9% net sales 5% net sales growth growth growth Marketing spend up 10% Launched 80 new innovations Enhanced focus on the sales agenda 6 months ended 31 December 2011. Organic movement. 17
Slide 18: Marketing spend increases focused on our biggest growth opportunities
Marketing spend increases focused on our biggest growth opportunities c70% of the marketing spend increase was made in emerging markets Marketing spend was up 8% in North America Spend was up on key categories and brands in Western Europe 6 months ended 31 December 2011. Organic movement. 18
Slide 19: Maximising marketing effectiveness
Maximising marketing effectiveness Asia Pacific Latin America Africa 19
Slide 20: Driving growth through a consistent global programme of innovations
Driving growth through a consistent global programme of innovations Premiumising our brands Emerging middle class consumers The female opportunity Unlocking growth in developed markets 20
Slide 21: Renewed customer focus at a market level is driving the top line
Renewed customer focus at a market level is driving the top line 21
Slide 22: The new operating model is now in place
The new operating model is now in place Overheads down as % of net sales Supply cost savings on track Integrated performance management and incentive schemes driving focus on efficient growth 22
Slide 23: Enhancing our presence in the wealth creating markets
Enhancing our presence in the wealth creating markets Increased investment ̶ Marketing up 20% ̶ Investment in in- market organisations up 15% Innovations to capture the expanding middle class consumer base Acquisitions to extend our brand reach into premium local spirits and beer 6 months ende
Slide 24: Driving efficient growth in North America
Driving efficient growth in North America 5% net sales* growth driven by price and mix Strong increase in marketing spend Overheads reduced as a percent of net sales Enhanced our distributor relationships 6 months ended 31 December 2011. *Organic movement. 24
Slide 25: Building a consumer and customer focused organisation in Western Europe
Building a consumer and customer focused organisation in Western Europe Integration now complete Growth of premium brands has accelerated Marketing efficiencies have funded increased activity levels Operating margin expansion of over 1ppt* 6 months ended 31 December 2011. *Organic movement.
Slide 26: Accelerating value creation
Accelerating value creation Strong Faster organic net sales growth platform + Aim: 6% CAGR in the medium term Expansion Maximising in faster Organic operating cash and growing margin improvement returns markets Aim: The first 200bpts by year ending + 2014 Sharper EPS growth focus Aim: Double digit g
Slide 27: Questions
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Slide 28: Supplementary slides
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Slide 29: Net finance charges
Net finance charges 2011, 2012, Movement, £m £m £m Core interest (184) (184) 0 IAS 39 (12) (8) 4 Net interest charge (196) (192) 4 Finance income/(charge) from post employment obligations (2) 3 5 Other finance charges (11) (17) (6) Net other finance charge (13) (14) (1) Net finance charges (209) (20
Slide 30: Outlook statements
Outlook statements For the year ending 30 June 2012 Exceptional operating items The table below sets out expected exceptional charges for the year ending 30 June 2012. £m 2012 Operating Exceptional charges (100) Cash impact (180) The costs associated with the initiatives we have put in place will be
Slide 31: 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