Diageo Plc · LSE:DGE
Diageo — H1 FY2013 Earnings Presentation
40 slides from Diageo's earnings presentation, February 2013
Slide 1: Interim Results
Interim Results Six months ended 31 December 2012
Slide 2: Paul Walsh, CEO
DIAGEO Paul Walsh CEO
Slide 3: A strong business, getting stronger
A strong business, getting stronger • Reiterating our medium term guidance • Increased presence in the faster growing markets, pricing globally, growth in US spirits, and premiumisation are driving net sales growth and margin improvement • Continued investment behind our strategy • Achieved: ̶ 9% or
Slide 4: Deirdre Mahlan, CFO
DIAGEO Deirdre Mahlan CFO
Slide 5: Continued efficient growth
Continued efficient growth • 5% net sales growth with 4ppt price/mix* • Gross margin up 70 bps* • Operating profit growth of 9% with 110 bps operating margin expansion* • 9% increase in eps pre exceptionals • Free cash flow of £0.7 billion Six months ended 31 December 2012. *Organic movement. 5
Slide 6: Faster growing markets drove volume growth
Faster growing markets drove volume growth Volume, EUk 270 1,626 84,922 (828) (208) 84,062 2011 Faster growing North America Western Europe* Developed Asia 2012 markets Pacific Six months ended 31 December. Organic movement. *Western Europe includes Global Travel Europe. 6
Slide 7: Price was the key driver of 5% organic net sales growth
Price was the key driver of 5% organic net sales growth Net sales, £m 89 287 5,905 (73) (17) 5,614 2011 Faster growing North America Western Europe* Developed Asia 2012 markets Pacific Six months ended 31 December. Organic movement. *Western Europe includes Global Travel Europe. Corporate net sales
Slide 8: Reported net sales up 5%
Reported net sales up 5% Net sales, £m 133 233 6,039 (142) 5% 57 5,757 6% 20% 22% 32% 33% Developed Asia Pacific Western Europe** 42% North America 38% Faster growing markets Reported 2011 Volume* Price/mix* Acquisitions & FX Reported 2012 disposals Six months ended 31 December. % figures represents
Slide 9: Incremental marketing spend behind our biggest growth engines
Incremental marketing spend behind our biggest growth engines Marketing spend, £m 13 50 911 (18) (5) 7% 871 8% 19% 22% 33% 33% Developed Asia Pacific Western Europe* North America 41% 37% Faster growing markets 2011 Faster growing North America Western Europe* Developed Asia 2012 markets Pacific Six
Slide 10: Operating margin expansion from gross margin increase and efficiencies
Operating margin expansion from gross margin increase and efficiencies Margin movement*, ppts Total 2011 Operating margin** 33.2 Gross margin 0.7 Marketing spend 0.1 Overheads 0.3 Operating margin 1.1 2012 Operating margin*** 34.3 Six months ended 31 December. *Organic. **Adjusted for exchange, acqu
Slide 11: Free cash flow of £0.7 billion, up more than £125 million
Free cash flow of £0.7 billion, up more than £125 million Free cash flow, £m 54 203 (38) 708 (78) (13) 580 2011 Operating profit Working capital Dividends interest Net Capex Other operating 2012 and tax activities* Six months ended 31 December. Free cash flow for 6 month ended 31 December 2011 has b
Slide 12: Operating profit growth drove growth in eps
Operating profit growth drove growth in eps 2011 2012 Movement £m £m £m Operating profit* 1,866 2,029 163 Associate income net of tax 122 128 6 Trading profit* 1,988 2,157 169 Net finance charges (206) (212) (6) PBET 1,782 1,945 163 Taxation* (323) (358) (35) Non-controlling interest (66) (63) 3 Pro
Slide 13: Reported operating profit up 9%
Reported operating profit* up 9% Operating profit*, £m 40 164 2,029 3% (41) 1,866 18% 4% 22% 40% 40% Developed Asia Pacific Western Europe** North America 39% 34% Faster growing markets Reported 2011 Organic growth Acquisitions FX Reported 2012 Six months ended 31 December. Corporate represents a (4
Slide 14: Summary
Summary Increased volume driven by the faster growing markets Improved pricing environment and continued premiumisation Strong gross margin improvement Overhead efficiencies Financial strength 9% increase in interim dividend 14
Slide 15: Paul Walsh, CEO
DIAGEO Paul Walsh CEO
Slide 16: A strong business, getting stronger
A strong business, getting stronger 1. Delivering net sales growth + 2. Delivering margin expansion + 3. Investing to access new growth 16
Slide 17: 1. Delivering net sales growth
1. Delivering net sales growth • Building on our strength in the US • Enhancing our presence in the faster growing markets • Leading in Scotch whisky • Managing the challenges of Western Europe and Korea 17
Slide 18: Building on strength in the US
Building on strength in the US • Strategic spirits brands net sales up 8% in US* • 4 percentage points of price/mix* • Significant increase in media spend • Industry-leading innovation • Continued efficiency boosting operating margin Six months ended 31 December 2012. *Organic movement. 18
Slide 19: Enhancing our presence in the faster growing markets
Enhancing our presence in the faster growing markets Reaching the emerging middle Delighting the consumer of class consumer luxury goods + 19
Slide 20: Reaching the increasing number of middle class consumers
Reaching the increasing number of middle class consumers Traditional Emerging middle class consumer base consumer base Ultra Premium Super Premium Premium Emerging opportunity 20
Slide 21: Reaching the increasing number of middle class consumers
Reaching the increasing number of middle class consumers 21
Slide 22: Reaching the increasing number of middle class consumers
Reaching the increasing number of middle class consumers Johnnie Walker volume CAGR in Africa 33% South Africa Total Nigeria East Africa hub Africa regional markets Third party distribution (3)% 2008 2009 2010 2011 2012 2013 estimate Year ended 30 June. 22
Slide 23: Delighting the consumer of luxury goods
Delighting the consumer of luxury goods 23
Slide 24: Strength in malt whisky
Strength in malt whisky 24
Slide 25: 2. Delivering margin expansion
2. Delivering margin expansion • Anchoring gross margin in price increases • Increasing marketing effectiveness • Delivering efficiencies 25
Slide 26: Pricing drives margin expansion
Pricing drives margin expansion £m Net sales growth, £m 70 60 Price Mix 50 40 30 20 10 0 -10 -20 Latin America North America Africa Asia Pacific Europe Six months ended 31 December 2012. 26
Slide 27: Increasing marketing effectiveness in US spirits
Increasing marketing effectiveness in US spirits Media +25% POS (14)% 27
Slide 28: Efficiencies contribute to margin expansion
Efficiencies contribute to margin expansion Growth, % % 20 Net sales Overheads 10 0 -10 Latin America Russia & Faster growing Africa North America Developed Western Diageo Eastern Asia Pacific Asia Pacific Europe Europe Six months ended 31 December 2012. 28
Slide 29: 3. Investing to access new growth
3. Investing to access new growth • Route to market improvement • Delivering the acquisitions 29
Slide 30: Route to market improvement
A strong business, getting stronger Route to market improvement #1 Spirits company in the United States The largest premium drinks company in Europe #1 International spirits company in Asia Pacific #1 International spirits company in Latin America A leading beer and spirits company in Africa 30
Slide 31: Enhancing our routes to market through acquisitions
Enhancing our routes to market through acquisitions Mey İçki, Turkey Ypióca, Brazil Meta Abo, Ethiopia Vodka Hanoi, Vietnam Shui Jing Fang, China 31
Slide 32: Enhancing our routes to market through acquisitions
Enhancing our routes to market through acquisitions Mey İçki, Turkey Ypióca, Brazil Meta Abo, Ethiopia Vodka Hanoi, Vietnam Shui Jing Fang, China United Spirits, India* *Announced 9 November 2012. 32
Slide 33: A strong business, getting stronger
A strong business, getting stronger Delivering net sales growth + Delivering margin expansion + Investing to access new growth 33
Slide 34: Bringing it all together
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Slide 35: A strong business, getting stronger
A strong business, getting stronger
Slide 36: Supplementary slides
DIAGEO Supplementary slides
Slide 37: Net finance charges
Net finance charges 2011* 2012 Movement £m £m £m Core interest (196) (199) (3) IAS 39 4 (2) (6) Net interest charge (192) (201) (9) Finance income/(charge) from post employment obligations 3 (5) (8) Other finance charges (17) (6) 11 Net other finance charge (14) (11) 3 Net finance charges (206) (212
Slide 38: Exceptional items
Exceptional items 2011 2012 £m £m Business restructuring (24) (4) Other operating exceptionals - 20 Operating exceptional items (24) 16 Sale of businesses 102 - Exceptional tax items (518) (2) Post tax exceptional items (440) 14 Cash impact of exceptional items (74) (34) Six months ended 31 December
Slide 39: Outlook statements
Outlook statements For the year ending 30 June 2013 Exceptional operating items: Exceptional operating items are expected to be approximately a cost of £20 million for the year ending 30 June 2013, being a £40 million cost associated with the restructuring of our supply operations in Ireland, Scotla
Slide 40: 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