Slide 1: Preliminary Results Year Ended 30 June 2014
PRELIMINARY RESULTS YEAR ENDED 30 JUNE 2014
Slide 2: Ivan Menezes, CEO
DIAGEO IVAN MENEZES CEO
Slide 3: Diageo is a strong global business with leading brands
Diageo is a It has been a challenging year but we are a strong global stronger business business with leading brands and outstanding Leading portfolio of brands routes to market World class marketing and leading innovation Extending our global footprint through acquisitions and organic growth
Slide 4: Our long term performance ambition
Our long term performance ambition is: To create one of the best performing, most trusted and respected consumer products companies in the world
Slide 5: Our long term strategy is unchanged
Our long term Recruiting and re-recruiting consumers to our strategy is brands unchanged and in F14 we continued to Embedding a sales culture through our route to pursue it: consumer programme Created a more agile, leaner organisation with greater accountability Building a company where everyone act
Slide 6: Deirdre Mahlan, CFO
DIAGEO DEIRDRE MAHLAN CFO
Slide 7: Efficient growth in a challenging year
Efficient growth Economic weakness in emerging markets impacted in a challenging net sales growth year Share gains despite lower top line growth Focus on cost drove 77 bps of operating margin improvement Investment in our brands, innovation, reserve and route to consumer
Slide 8: Adverse foreign exchange movements
Adverse foreign Net sales (£m) exchange 11,200 movements 11,013 severely impacted 10,800 Organic movement our top line 10,400 277 10,258 10,000 (797) (235) 9,600 9,200 2013* FX Volume Price/mix 2014 Reported Year ended 30 June *Reported net sales adjusted for acquisitions and disposals
Slide 9: Emerging market weakness impacted volume
Emerging market Organic volume movement (mEU) weakness 161 impacted 158.9 volume 159 157 (1.7) 0.3 155.2 0.7 155 (1.5) (0.7) (0.8) 153 151 2013* Scotch in Senator Nigeria US Spirits** Reserve Other 2014* emerging keg beer brands including markets** local spirits** *Organic figures year ended 30 June
Slide 10: Positive mix and selective price increases
Positive mix Organic net sales movement (£m) and selective 10,300 price increases 10,209 offset volume 10,200 10,167 120 decline 157 10,100 (88) 10,000 (44) (55) 40 9,900 (88) 9,800 2013* Scotch in Senator Nigeria SJF US spirits** Reserve Other 2014* emerging keg beer brands including markets** loca
Slide 11: Q3 performance drove weaker H2
Q3 performance Quarterly net sales growth* (%) drove weaker H2 H1 Q3 Q4 H2 FY 1.0% 0.8% 0.8% 0.5% 0.4% 0.0% (0.1)% (0.5)% (1.0)% (1.5)% (1.3)% Year ended 30 June 2014 *Organic growth
Slide 12: Our focus on efficient growth has delivered
Our focus on efficient growth has delivered our Operating margin improvement (bps)* commitment to 200bps of margin F12 59 expansion in F13 78 three years F14 77 TOTAL 214 Year ended 30 June *Organic growth
Slide 13: Procurement savings have increased effective marketing spend
Procurement Procurement savings in marketing spend (£m) savings have 1,700 increased 25 1,692 effective 1,680 marketing spend 15 1,660 32 1,640 1,620 1,620 1,600 1,580 2014 Media Point of sale Other projects Effective materials marketing spend Year ended 30 June
Slide 14: Investing behind the biggest opportunities
Investing behind Marketing spend (£m) the biggest 2013 Marketing spend* 1,769 opportunities FX and disposals (142) 2013 Restated marketing spend 1,627 Organic movements North America 10 Western Europe (1) Africa, Eastern Europe and Turkey 2 Latin America and Caribbean 2 Asia Pacific (24) Corporate 1
Slide 15: Embedding a cost culture in the business
Embedding a Lower staff costs cost culture in the business Less business travel Co-ordinated procurement of travel costs Review of all costs over £50k Priority based budgeting used in F14 and F15 planning
Slide 16: Lower operating profit and negative working capital movement
Lower operating Free cash flow (£m) profit and negative working 2013 2014 Movement capital movement Operating profit* 3,927 3,393 (534) impacted free Working capital (552) (597) (45) cash flow Net interest (427) (432) (5) Tax (544) (469) 75 Net capex (597) (562) 35 One off contribution to pension fu
Slide 17: Our financial strength drives lower interest charges
Our Financial Net borrowings (£m) strength drives lower interest charges 2013 (8,403) Acquisitions (536) Dividend (1,228) Free cash flow 1,235 Other 82 2014 (8,850) Year ended 30 June
Slide 18: Business restructuring to make our business more agile
Business Exceptional items (£m) restructuring to make our 2013 2014 business more agile and Business restructuring (69) (163) efficient Other operating exceptionals (30) (264) Operating exceptional items pre-tax (99) (427) Tax on operating exceptional items 55 99 Exceptional non operating items (83)
Slide 19: Summing up the year
Summing up the year Negative foreign Reduced our effective interest exchange impact on rate to operating profit £0.3bn 3.8% Weaker free cash Operating Economic flow at margin improvement weakness in £1,235m 77bps emerging markets Share gains Strong performance in reserve in a number of contributed t
Slide 20: Ivan Menezes, CEO
DIAGEO IVAN MENEZES CEO
Slide 21: Highlights by region
Highlights by North America: US Spirits and Wines; DGUSA; Canada region Western Europe AEET: East Africa; Nigeria; Africa Regional Markets; South Africa; Russia and Eastern Europe; Turkey Latin America: West LAC; PUB; Mexico; Venezuela; Colombia Asia Pacific: South East Asia; Australia; North Asia;
Slide 22: North America is our biggest and most profitable region
North America is Top line growth and margin expansion our biggest and most profitable region continues Premium Core brands impacted by slower growth of spirits to deliver market Strong growth from our reserve portfolio Strength in innovation Operating margin expansion
Slide 23: Spirits are gaining share of the US total beverage alcohol market
Spirits are Spirits Share of TBA 21-24 TBA drinkers Hispanic LDA and TBA drinkers gaining share of servings (Spirits share of TBA*) (Spirits share of TBA*) the US total beverage alcohol market and the fundamentals 53% 36% remain strong 58% Beer 43% 30% 35% 15% 14% Wine 28% Spirits 32% 2003 2013 2005
Slide 24: Western Europe saw stronger performance
Western Europe Remains challenging but has stabilised saw stronger performance and improved Targeted marketing delivering share gains trends Reserve and innovation driving growth Strengthening our route to consumer Modest operating margin expansion
Slide 25: Africa, Eastern Europe and Turkey mixed performance
Africa, Eastern Slow top line growth Europe and Turkey has had mixed Strong performance in some markets offset by weakness in performance others Continued strong reserve growth Innovation across all key consumer trends Operating margin hit by fixed cost under recovery and salary inflation
Slide 26: Performance in Latin America was strong
Performance in Good performance despite weak economic conditions Latin America was strong overall with Multi category growth with some challenges in scotch share gains and an expanded Reserve continued strong growth portfolio Very strong growth from innovation Operating margin improved
Slide 27: Asia Pacific top line performance was challenging
Asia Pacific top Top line decline impacted by performance in China and South line performance East Asia was challenging across a number of areas Scotch and baijiu were particularly impacted Continued strong performance in reserve Innovation focused on super and ultra premium Operating Margin was cha
Slide 28: Our six 'Must Do's' are improving focus
Our six ‘Must Do’s’ are 01 Strengthen and accelerate our premium core brands improving focus across the 02 Win in reserve in every market business 03 Innovate at scale to meet new consumer needs Build and then continually extend our advantage 04 in route to consumer 05 Drive out costs to invest in g
Slide 29: Progress strengthening and accelerating our premium core brands
We are making Strengthening the equity of Guinness progress in and recruiting new consumers strengthening and accelerating our Stabilising Smirnoff premium core brands Bringing new consumers into Baileys Increasing the penetration of Captain Morgan
Slide 30: Strengthening the equity of Guinness
Strengthening the equity of Guinness and recruiting new consumers
Slide 31: Strengthening the equity of Guinness
Strengthening the equity of Guinness and recruiting new consumers
Slide 32: Strengthening the equity of Guinness
Strengthening “As a Marine who lost a leg and played wheel chair basketball, I the equity of thought there was no way to top last years commercial. Hats off to you Guinness. Cheers and Semper Fi” Guinness and - Facebook user recruiting new consumers "Guinness gets it right" "Step aside Nike and Appl
Slide 33: Strengthening the equity of Guinness
Strengthening the equity of Guinness and recruiting new consumers 33
Slide 34: Stabilising Smirnoff
Stabilising Smirnoff
Slide 35: Stabilising Smirnoff
Stabilising Smirnoff
Slide 36: Bringing new consumers into Baileys
Bringing new consumers into Baileys
Slide 37: Bringing new consumers into Baileys
Bringing new consumers into Baileys
Slide 38: Increasing the penetration of Captain Morgan
Increasing the penetration of Captain Morgan
Slide 39: Strengthening and accelerating our premium core brands
We are making Strengthening the equity of Guinness progress in and recruiting new consumers strengthening and accelerating Stabilising Smirnoff our premium core brands Bringing new consumers into Baileys Increasing the penetration of Captain Morgan
Slide 40: Strong Reserve performance with extended leadership position
Strong Reserve performance with extended leadership position
Slide 41: Innovating at scale to meet new consumer needs
Innovating at Building New scale to meet existing consumer new consumer brands occasions needs Captain Morgan Orijin White Our launches are increasingly Reaching BIG New brands new for new consumers opportunities Jebel Gold Haig Club
Slide 42: Realising growth through an advantaged route to consumer
Realising growth through Our brands in Global toolkit an advantaged more to drive rate of sale route to places consumer More brands through innovation and investment in talent and capability are key enablers Growing sales and gaining share
Slide 43: Driving out costs to invest in growth
Driving out 80% Reduced mobile Move from fixed to costs to invest telephone costs in Brazil by variable warehousing in Spain saved in growth Saving in capex for 44% €500k distillery in North America Saved £1.4m in Russia by re-locating strip stamp application and re-invested into A&P £1.2m reclaimed
Slide 44: Increased focus on talent
Increased focus on talent Leaner organisation, removing regional layers to drive accountability and growth Significant changes in our Senior Leadership population In F15 each Regional President will have talent as one of their individual objectives Diversity remains a key priority
Slide 45: In Summary
In Summary In F14 we set out the how we would deliver change We have clear goals and a stronger business We start F15 with a more agile organisation
Slide 46: Outlook statements
Outlook Exchange rate movements statements Using current exchange rates (£1 = $1.70; £1 = €1.26), exchange rate movements for the year ending 30 June 2015 are expected to adversely impact operating profit by £160 million. Taxation The effective tax rate was 18.2% in the year ended 2014 and is curren
Slide 47: Appendix: Quarterly net sales growth
Appendix Quarterly net sales growth (%) Q1 Q2 Q3 Q4 North America 5 4 1 2 Western Europe (1) (1) 1 - Africa, Eastern Europe and Turkey 1 2 (5) 3 Latin America and Caribbean (2) 2 28 (6) Asia Pacific 1 (10) (19) - Diageo 1.6 0.3 (1.3) 0.8
Slide 48: 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