Diageo Plc · LSE:DGE
Diageo — Q4 2022 Earnings Presentation
37 slides from Diageo's earnings presentation, Jul 29, 2022
Slide 1: Delivering sustainable long-term growth
DIAGEO Delivering sustainable long-term growth Preliminary Results Fiscal 22 Ivan Menezes & Lavanya Chandrashekar 28 July 2022
Slide 2: Cautionary statements concerning forward-looking statements and non-GAAP financial measures
DELIVERING SUSTAINABLE LONG-TERM GROWTH Cautionary statements concerning forward-looking statements and non-GAAP financial measures The following presentation contains ‘forwarcHooking’ statements. These statements can be identified by the fact that they do not relate only to historical or current fa
Slide 3: Strong F22 results across key financial metrics
DELIVERING SUSTAINABLE LONG-TERM GROWTH Strong F22 results across key financial metrics F22 ORGANIC NSV 3-YEAR CAGR") DIAGEO) =-3._‘|: Preliminary Results Fiscal 22 Organic volume T+1 0.3% Free cash flow £2.80n L-£0.3:n Organic net sales value growth T+21.4% Organic operating margin expansion tT +]
Slide 4: Stronger and more resilient
DELIVERING SUSTAINABLE LONG-TERM GROWTH Stronger and more resilient Increased A&P investment Sustained CAPEX investment Ongoing productivity savings (sbn) (£bn) (sbn) 27 11 0.5 2.2 0.4 04 O04 04 2.0 1.9 18 " 0.7 0.7 : : : FIs Ag F20 Fal F22 Fis Ag F20 Fal F22 FIs Ag F20 F21 F22 DIAGEO = 4_‘I: Prelim
Slide 5: Continued our strong track record of creating shareholder value
DELIVERING SUSTAINABLE LONG-TERM GROWTH Continued our strong track record of creating shareholder value Dividend per share’) Return of capital - cumulative share buybacks!) pence ebn 5-year full year dividend CAGR RoC programme F20-F23 +4.1% 76.18 up to £4.5bn F22 full year dividend £7.9bn +5.0% I F
Slide 6: Our ambition is to be one of the best performing consumer products companies
DELIVERING SUSTAINABLE LONG-TERM GROWTH Our ambition is to be one of the best performing, most trusted and respected consumer products companies in the world DIAGEO 6 | Preliminary Results Fiscal 22
Slide 7: Spirits categories driving TBA growth, winning share and premiumising
DELIVERING SUSTAINABLE LONG-TERM GROWTH Spirits categories driving TBA growth, winning share and premiumising DIAGEO 7 | Preliminary Results Fiscal 22 Spirits share of TBA Spirits growth by price point, CAGR% 2010-2021 39% 40% 14.8% 35% 31% 8.1% 6.8% TBA average 4.1% CAGR 1.0% = 2010 2015 2020 2021
Slide 8: On track to deliver bold 2030 ambition
DELIVERING SUSTAINABLE LONG-TERM GROWTH On track to deliver bold 2030 ambition “S0% increase in Diageo’s TBA market share by 2030 DIAGEO) 8. |: Preliminary Results Fiscal 22
Slide 9: Confident in navigating volatility and delivering long-term sustainable growth
DELIVERING SUSTAINABLE LONG-TERM GROWTH Confident in navigating volatility and delivering long-term sustainable growth Leading Double Agile and World-class Investing portfolio down on resilient leadership in people, across our focus supply chain team and high sustainability categories, on the consum
Slide 10: Advantaged footprint and portfolio
DELIVERING SUSTAINABLE LONG-TERM GROWTH Advantaged footprint and portfolio F22 organic net sales growth by region Advantaged Portfolio (Categories, occasions, formats) North America ; +14% 4 ro : +30% Asia Pacific : y) Latin America +16% and Caribbean * +43% DIAGEO 10 | Preliminary Results Fiscal 22
Slide 11: Continuously premiumising our portfolio
DELIVERING SUSTAINABLE LONG-TERM GROWTH Continuously premiumising our portfolio and increasing exposure to fast-growing categories Diageo spirit acquisitions and disposals!’ since F17 by price tier Acquisitions Super premium plus 1 'OPPE} MEZCAL Eaanos aie psn] UNION giles ” Premium 4 & 4G Shui & N
Slide 12: Our world-class brand building is fundamental to driving our business
DELIVERING SUSTAINABLE LONG-TERM GROWTH Our world-class brand building is fundamental to driving our business Johnnie Walker Don Julio & Casamigos Guinness DIAGEO 2 | Preliminary Results Fiscal 22
Slide 13: Enabled by our capabilities, people and culture
DELIVERING SUSTAINABLE LONG-TERM GROWTH Enabled by our capabilities, people and culture Digital leadership Supply chain excellence Agile, purpose-driven culture DIAGEO 5. | Preliminary Results Fiscal 22
Slide 14: Doing business the right way
DELIVERING SUSTAINABLE LONG-TERM GROWTH Doing business the right way Promote Positive Drinking Champion Inclusion & Diversity!) Grain to Glass Sustainability‘) Women are seen in only aD q a —'Y How/man' = wa “ 4% ) — usually have of sport media coverage DIAGEO 14. | Preliminary Results Fiscal 22
Slide 15: Strong performance across all key financial metrics
DELIVERING SUSTAINABLE LONG-TERM GROWTH Strong performance across all key financial metrics DIAGEO 15. | Preliminary Results Fiscal 22 Efficient growth Organic net sales value growth T+21.40 Free cash flow £2.85 V-£0.3:n Organic operating margin expansion tT +] 21 bps Pre-exceptional eps 151.9, t +2
Slide 16: Our profitable growth algorithm
DELIVERING SUSTAINABLE LONG-TERM GROWTH Our profitable growth algorithm delivers quality long-term growth 1. Driving top-line growth 2. Improving price/mix 3. Upweighting A&P 4 - Driving productivity DIAGEO 16 | Preliminary Results Fiscal 22 Upweighting A&P Driving top-line growth £2.7bn f » Organic
Slide 17: Driving top-line growth
DELIVERING SUSTAINABLE LONG-TERM GROWTH 1 Driving top-line growth Driving double-digit net sales growth across all regions Organic net sales value growth by region 30% F22vs F21 Greater China 13% 22% £22 14% 16% vs F21 North America Europe Asia Pacific Africa and Caribbean FI9-F22 CAGRIii 12% 6% 4%
Slide 18: Driving top-line growth: advantaged portfolio in fast-growing categories
DELIVERING SUSTAINABLE LONG-TERM GROWTH 1 Driving top-line growth Growth ahead of the industry reflects advantaged portfolio in fast-growing spirits categories and the recovery of beer Contribution to organic net sales growth £m F19-F22 volume CAGRIt! (Organic net sales growth %)! yy category Scotch
Slide 19: Improving price/mix
DELIVERING SUSTAINABLE LONG-TERM GROWTH 2 Improving price/mix Over 70% of net sales growth in premium-plus price tiers Organic net sales growth Reported net sales by price tier by price segment, F17-F22 31% Super 26% premium+, 16% 21% 14% 13% Premium, Value Standard Premium Super Total Diageo premiu
Slide 20: Improving price/mix: revenue growth management
DELIVERING SUSTAINABLE LONG-TERM GROWTH 2 Improving price/mix Revenue growth management is strengthening top-line growth and margin expansion Total scotch, Brazil Johnnie Walker, Brazil Average price increases % Gross profit £m 10% 18% [ Es | 7% | +3 5 Obps gross margin improvement T H1 F22 H2 F22 F
Slide 21: Upweighting A&P
DELIVERING SUSTAINABLE LONG-TERM GROWTH 3 Upweighting A&P Upweighted investment and marketing effectiveness are driving growth and share gains Upweighted Increased Gained/held Accelerated A&P investment re-investment rate off-trade share top-line growth +25% 17.6% ~B5% +21% £2,688m of reported net s
Slide 22: Driving productivity
DELIVERING SUSTAINABLE LONG-TERM GROWTH 4 Driving productivity Productivity initiatives delivered almost £380m of cost savings through fiscal 22 Marketing Overhead Manufacturing effectiveness efficiencies Logistics COGS productivity DIAGEO 22 | Preliminary Results Fiscal 22
Slide 23: Strong improvement in organic operating margin
DELIVERING SUSTAINABLE LONG-TERM GROWTH Strong improvement in organic operating margin despite increased cost inflation and upweighted marketing Movement in organic operating margin 121bps | | Tl2bps SSbps 31.0% (46)bps 29.8% F21 Gross margin Marketing Other operating items DIAGEO = .23._- |: Prelim
Slide 24: Strong growth in operating profit driven by organic growth
DELIVERI NG SUSTAINABLE LONG-TERM GROWTH Strong growth in operating profit!’ DIAGEO driven by organic growth F22 F21 Reported (gm) (gm) operating margin'!) Exchange rate movements £(32) £(306) 2lbps Fair value remeasurement & other £104 £(38) 34bps Acquisitions & disposals £(16) £(31) (14)bps Organi
Slide 25: We are investing smartly to win share
DELIVERING SUSTAINABLE LONG-TERM GROWTH We are investing smartly to win share and sustain long-term growth V GUINNESS Consumer experiences DIAGEO 25 | Preliminary Results Fiscal 22
Slide 26: Strong free cash flow generation
DELIVERING SUSTAINABLE LONG-TERM GROWTH Strong free cash flow generation Movement in free cash flow (gm) |_| 3,037 (510) | | 23 1,003 as ———— 2,783 32 (467) a , (32) (97) (174) F21FY Exchange’! mest weuil Capex Tox Interest Other™! F22 FY Source (i) Exchange on operating emorisation post employment
Slide 27: Leverage ratio remains within our target range
DELIVERING SUSTAINABLE LONG-TERM GROWTH Leverage ratio remains within our target range F22 F21 Movement Closing net debt’) (14,137) (12,109) (2,028) AVERAGE NET DEBT! (12,692) (12,702) 10 Net interest charge (353) (348) (5) Net other finance charges (69) (25) (44) NET FINANCE CHARGES (422) (373) (49
Slide 28: Consistent and disciplined approach to capital allocation
DELIVERING SUSTAINABLE LONG-TERM GROWTH Consistent and disciplined approach to capital allocation Leverage ratio policy Adjusted net debt!) to adjusted EBITDA: 2.5x - 3.0x Organic Dividends MerA and growth 1.8x to 2.2x portfolio dividend cover management Return excess cash to shareholders DIAGEO = 2
Slide 29: Translation driving adverse impact from foreign exchange
DELIVERING SUSTAINABLE LONG-TERM GROWTH Translation driving adverse impact from foreign exchange Exchange rates Translation rate Fai (i F2aii F23 til S/E 135 133 1.20 €/e 113 118 118 F2l F22 F23 li S/E 134 1.29 1.27 €/e 14 115 17 DIAGEO 29 | Preliminary Results Fiscal 22 Total exchange impact F22 (s
Slide 30: Strong growth in eps
DELIVERING SUSTAINABLE LONG-TERM GROWTH Strong growth in eps Movement in earnings per share before exceptional items (pence) 42.6 3.5 =— 0.5 151.9 M4) gz) (23) 117.5 0.4 4.0 a F2IFY eps before Foreign exchange Acquisitions and Hyperrelated Fair value Organic operating Assoicates and Tox (i) Netfinan
Slide 31: Well positioned for F23
DELIVERING SUSTAINABLE LONG-TERM GROWTH Ee * Encouraged by the strong performance we have Well positioned © asivered'in #22 * Confident in our ability to navigate ongoing for F23 volatility and uncertainty * Confident in our F23-F25 medium-term guidance — Organic net sales growth 5% to 7% — Organic
Slide 32: Confident in our strategy and ability to deliver sustainable long-term growth
DELIVERING SUSTAINABLE LONG-TERM GROWTH Confident in our strategy and ability to deliver sustainable long-term growth DIAGEO 32 | Preliminary Results Fiscal 22 mB WN = . Diageo has an advantaged portfolio . Our capabilities are a competitive advantage . We invest for the long term . We do business t
Slide 33: Celebrating life, every day, everywhere
DIAGEO Celebrating life, every day, everywhere
Slide 34: Financial/legal appendix: Definitions and reconciliation of non-GAAP measures
DELIVERING SUSTAINABLE LONG-TERM GROWTH 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 for planning and reporting
Slide 35: Continued from the previous page
DELIVERING SUSTAINABLE LONG-TERM GROWTH Continued from the previous page (a) Exchange rates ‘Exchange’ in the organic movernent calculation reflects the adjustment to recalculate the reported results as if they had been generated at the prior period weighted average exchange rates. Exchange impacts
Slide 36: Continued from the previous page
DELIVERING SUSTAINABLE LONG-TERM GROWTH DIAGEO Continued from the previous page Gains and losses on the sale of businesses, brands or distribution rights, step up gains and losses that arise when an investment becomes an associate or an associate becomes a subsidiary and other material, unusual non-
Slide 37: Continued from the previous page
DELIVERING SUSTAINABLE LONG-TERM GROWTH Continued from the previous page Shareholder value metrics * Dividends: Diageo internal information. * Return of Capital (RoC): Diageo internal information. * TSR: FactSet as of 30th June 2022. TSR based on time periods of 1 year, 5 years and 10 years up to 30