Diageo Plc · LSE:DGE
Diageo — FY2021 Earnings Presentation
38 slides from Diageo's earnings presentation, Jul 28, 2021
Slide 1: Diageo Preliminary Results Year Ended 30 June 2021
DIAGEO PRELIMINARY RESULTS YEAR ENDED 30 JUNE 2021
Slide 2: Diageo Has Emerged Stronger
DIAGEO HAS EMERGED STRONGER Delivered strong performance across all key financial metrics Responded to consumer demand enabling off-trade share gains Supported the on-trade across key markets Invested in marketing, innovation, capex and portfolio Continued to do business the right way for all our st
Slide 3: Strong Performance Across All Key Financial Metrics
STRONG PERFORMANCE ACROSS ALL KEY FINANCIAL METRICS Organic volume Organic net sales Organic operating margin +11.2% +16.0% +46bps Free cash flow EPS pre-exceptionals Final dividend +£1.4bn +7.4% +5.0% to £3.0bn to 117.5p to 44.59p Source: F21 Diageo internal data For additional information, please
Slide 4: Return to Top-Line Growth Across All Regions in Fiscal 21
RETURN TO TOP-LINE GROWTH ACROSS ALL REGIONS IN FISCAL 21 Organic net sales value movement by region 30% F21 20% 20% vs 16% 14% F20 4% Total Diageo North America Europe Africa Latin America Asia Pacific and Turkey and Caribbean F21 vs +6% +24% -9% +4% +9% -4% F19 F21 AHEAD OF F19 FOR TOTAL DIAGEO AT
Slide 5: Strong Off-Trade Market Share Performance with Growth Opportunity in Broader TBA
STRONG OFF-TRADE MARKET SHARE PERFORMANCE WITH GROWTH OPPORTUNITY IN BROADER TBA Percentage of Diageo total net sales value Diageo share of total beverage alcohol gaining/holding off-trade share in measured markets by value in 2020 (all channels) Held or grew off-trade share in 100% ~85% of total ne
Slide 6: Using Consumer Insights and Commercial Capabilities to Respond to Consumer Demand
USING CONSUMER INSIGHTS AND COMMERCIAL CAPABILITIES TO RESPOND TO CONSUMER DEMAND AT-HOME PURCHASING BEHAVIOUR PREMIUMISATION CONVENIENCE 6
Slide 7: Combining World-Class Brand Building with Data Tools and Analytics
COMBINING WORLD-CLASS BRAND BUILDING WITH OUR DATA TOOLS AND ANALYTICS TOOLS AND ANALYTICS CREATIVITY WITH PRECISION INNOVATION CONSUMER EXPERIENCE CAPABILITIES UNDERPINNED BY OUR PEOPLE AND CULTURE 7
Slide 8: Supported the On-Trade to Enable Strong Recovery
SUPPORTED THE ON-TRADE TO ENABLE STRONG RECOVERY Continued to raise awareness and provide support for our partners Delivering support through Providing training and ‘Raising the Bar’, our $100 guidance to bartenders million global on-trade and bar owners on safe recovery programme re-opening through
Slide 9: Launch of Society 2030: Spirit of Progress
LAUNCH OF “SOCIETY 2030: SPIRIT OF PROGRESS” HIGHLIGHTS FROM 25 GLOBAL GOALS PROMOTE • Reach 1 billion people with messages POSITIVE DRINKING of moderation through our brands • Increase representation of leaders from ethnically CHAMPION INCLUSION diverse backgrounds to 45%* & DIVERSITY • Champion ge
Slide 10: Continued to Do Business the Right Way
CONTINUED TO DO BUSINESS THE RIGHT WAY Diageo recognised in Dow Jones World Sustainability Index 2020 for third consecutive year Diageo named as the top Diageo’s SASB-compliant company in the FTSE 100 in Sustainability & Diageo included on the Hampton-Alexander Responsibility Performance CDP A List
Slide 11: Strong Track Record of Creating Shareholder Value
STRONG TRACK RECORD OF CREATING SHAREHOLDER VALUE DIVIDENDS RETURN OF CAPITAL TSR 5-year CAGR Cumulative RoC F18-F21 5-year Annualised TSR +13% +4.2% £5.6bn Up to 10-year Annualised TSR +13% £6.5bn 72.55 27% 68.57 69.88 £5.5bn £5.6bn PHASE 2 23% 32% 62.20 65.30 59.20 £4.3bn PHASE 1 12% £1.5bn F18-F1
Slide 12: Strong Performance Across All Key Financial Metrics
STRONG PERFORMANCE ACROSS ALL KEY FINANCIAL METRICS Efficient growth Value creation Organic net sales Organic operating ROIC value growth margin expansion 13.5% +16.0% 46bps 112bps Free cash flow Pre-exceptional EPS Total Shareholder Return £3.0bn 117.5p 32.4% £1.4bn 7.4% Source: F21 Diageo internal
Slide 13: Strong Sequential Improvement of Top Line Performance
STRONG SEQUENTIAL IMPROVEMENT OF TOP LINE PERFORMANCE 39% 16% 6% 4% 6% 1% 3% (8)% (23)% F19F19 vs. F18 F20 H1 F20 H1 F21 H1 F21 H1 F20 H2 F20 H2 F21 H2 F21 H2 F20 F20 F21 F21 CAGRF20- 2Y2YCAGR 2Y2YF20-F21 CAGR (ii) CAGRF20- (ii) F20-F21 F21 F21Retail excl. Travel & Guinness (iii) excl. Global Travel
Slide 14: Return to Top Line Organic Growth Across All Regions
RETURN TO TOP LINE ORGANIC GROWTH ACROSS ALL REGIONS Organic net sales movement by region (i) 30% 2Y CAGR F20-F21 (ii) Greater China +13% 20% 20% 14% 9% 9% 5% 7% 4% 4% 2% (12)% (13)% (15)% (16)% F19 F20 F21 F19 F20 F21 F19 F20 F21 F19 F20 F21 F19 F20 F21 NAM Europe and Turkey Africa Latin America As
Slide 15: Strong Top Line and Share Performance in North America
STRONG TOP LINE AND SHARE PERFORMANCE IN NORTH AMERICA Diageo North America share of TBA North America North America F21YTD (i) Value share change within TBA (bps)(i) Organic net sales growth (%)(ii) 20% Diageo North America 7% 42 2% 31 F20 F21 North America Organic operating margin (%)(ii) 15 45.3%
Slide 16: Strong Net Sales Improvement Across All Categories
STRONG NET SALES IMPROVEMENT ACROSS ALL CATEGORIES Organic net sales movement by category (i) 79% 29% 22% 25% 15% 14% 6% 7% 5% 4% 2% (4)% (8)% (11)% (17)% F19 F20 F21 F19 F20 F21 F19 F20 F21 F19 F20 F21 F19 F20 F21 Scotch Vodka Gin Tequila Beer 2Y Volume CAGR (2)% (1)% +2% +38% (3)% F20-F21(ii) Sour
Slide 17: Super Premium+ Contributed to Almost Half of Organic Net Sales Growth
SUPER PREMIUM+ CONTRIBUTED TO ALMOST HALF OF ORGANIC NET SALES GROWTH PREMIUM IMPACTED BY TRAVEL RETAIL AND GUINNESS Organic net sales movement by price tier (i) 35% 12% 13% 11% 9% 8% 3% 4% (5)% (6)% (11)% (15)% F19 F20 F21 F19 F20 F21 F19 F20 F21 F19 F20 F21 Super Premium+ Premium Standard Value 2Y
Slide 18: Reported Operating Profit Up 7.2%, Organic Operating Profit Up 17.7%
REPORTED OPERATING PROFIT UP 7.2% ORGANIC OPERATING PROFIT UP 17.7% Reported £m FY F21 FY F20 operating margin(ii) PRIOR PERIOD OPERATING PROFIT(i) 3,494 4,116 29.7% Exchange rate movements (306) (1) (46)bps Fair value remeasurement & other (38) 2 (24)bps Acquisitions & disposals (31) (34) (7)bps Or
Slide 19: Operating Margin Up 46bps with Marketing Spend Growing Ahead of Net Sales
OPERATING MARGIN UP 46BPS WITH MARKETING SPEND GROWING AHEAD OF NET SALES Movement in organic operating margin 177bps 30.9% 30.4% (40)bps (91)bps F20 FY Gross margin Marketing Other operating items F21 FY Source: Diageo internal data 19
Slide 20: Embedded Culture of Everyday Efficiency
EMBEDDED CULTURE OF EVERYDAY EFFICIENCY Manufacturing Procurement Smartlyefficiency everyday Advertising & Overheads Promotion Invest Embed 20
Slide 21: Strong Increase in Free Cash Flow
STRONG INCREASE IN FREE CASH FLOW Movement in free cash flow 316 3,037 73 49 659 (43) 655 £ million 1,634 (306) + £1,403 million increase in free cash flow F20 FY Exchange (i) Operating WC (iii) Capex Tax Interest Other (iv) F21 FY profit (ii) Source: Diageo internal data (i) Exchange on operating p
Slide 22: Strong Results Have Brought Leverage Back Within Our Target Range
STRONG RESULTS HAVE BROUGHT LEVERAGE BACK WITHIN OUR TARGET RANGE F21 F20 Movement Closing net debt(i) £m (12,109) (13,246) 1,137 Average net debt(i) £m (12,702) (12,708) 6 Net interest charge £m (348) (333) (15) Net other finance charges £m (25) (20) (5) Net finance charges £m (373) (353) (20) Effe
Slide 23: A Consistent and Disciplined Approach to Capital Structure
A CONSISTENT AND DISCIPLINED APPROACH TO CAPITAL STRUCTURE Leverage ratio policy Adjusted Net Debt(i) to adjusted EBITDA: 2.5x – 3.0x Organic Dividends M&A and portfolio 1.8x to 2.2x growth dividend cover management Return excess cash to shareholders 23 (i) Net Debt is equivalent to net borrowings.
Slide 24: Adverse Exchange Impact for Both Net Sales and Operating Profit
ADVERSE EXCHANGE IMPACT FOR BOTH NET SALES AND OPERATING PROFIT Exchange rates Total exchange impact Translation rate(i) £m F21 F20 F21 $/£ 1.26 1.35 Net sales (800) €/£ 1.14 1.13 Transaction rate(ii) Operating profit(iii) (306) F20 F21 $/£ 1.35 1.34 Net interest 12 €/£ 1.12 1.14 (i) Average rate (i
Slide 25: Basic EPS Increased 89.4%, EPS Before Exceptional Items Up 7.4%
BASIC EPS INCREASED 89.4% EPS BEFORE EXCEPTIONAL ITEMS UP +7.4% Movement in earnings per share before exceptional items Pence per share F20 FY EPS before exceptional items 109.4 Foreign exchange on operating profit (13.1) Acquisitions and disposals(i) (1.4) Fair value remeasurement (1.5) Organic ope
Slide 26: Well Positioned for Fiscal 22
WELL POSITIONED FOR FISCAL 22 Encouraged by the strong performance we have delivered in fiscal 21 Delivered top-line growth, strong cash flow and improved leverage and continue to invest ahead for the future Confident in our ability to manage the changing external environment Expect organic net sale
Slide 27: Confident in Our Strategy and Ability to Deliver Sustainable Long-Term Growth
CONFIDENT IN OUR STRATEGY AND ABILITY TO DELIVER SUSTAINABLE LONG-TERM GROWTH Increasing confidence in long-term growth drivers Culture of creativity, acting with pace and excellent execution Investing for the long-term in innovation, capex and portfolio Ambitious commitment to positively impact soc
Slide 28: Diageo: Celebrating Life, Every Day, Everywhere
DIAGEO CELEBRATING LIFE, EVERY DAY, EVERYWHERE
Slide 29: Appendix 1: Forward Looking Statements 1/2
APPENDIX 1: 1/2 FORWARD LOOKING STATEMENTS Net sales • We expect organic net sales momentum to continue into fiscal 22. We believe we are well positioned to continue to benefit from resilience in the off-trade and recovery in the on-trade. However, we expect near-term volatility to remain, including
Slide 30: Appendix 1: Forward Looking Statements 2/2
APPENDIX 1: 2/2 FORWARD LOOKING STATEMENTS Exchange • We are not able to provide specific guidance in relation to fiscal 22, however, if we applied exchange rates of £1=$1.39 and £1=€1.16, where sterling has further strengthened compared to the actual exchange rates experienced in fiscal 21, net sal
Slide 31: Appendix 2: Reconciliation of Cash Flow Statement
APPENDIX 2: RECONCILIATION OF CASH FLOW STATEMENT Statement of cash flows (£m) F20 F21 Movement Movement on OP as shown in YoY waterfall (£m) Operating profit after exceptional items 2,137 3,731 1,594 Operating profit after exceptional items 1,594 Increase in working capital excluding maturing stock
Slide 32: Definitions and Reconciliation of Non-GAAP Measures to GAAP Measures
Definitions and reconciliation of non-GAAP measures to GAAP measures (refers to Slide 3) 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, and some of them are used for incentive purp
Slide 33: Continued from the Previous Page
Continued from the previous page Exchange impacts in respect of the external hedging of intergroup sales by the markets in a currency other than their functional currency and the intergroup recharging of services are also translated at prior period weighted average exchange rates and are allocated t
Slide 34: 2019 to 2021 Growth on Constant Basis
Continued from the previous page (d) Fair value remeasurement Fair value remeasurement in the organic movement calculation reflects an adjustment to eliminate the impact of fair value changes in biological assets, earn-out arrangements that are accounted for as remuneration and fair value changes re
Slide 35: Organic Growth Excluding Travel Retail and Guinness
Organic growth excluding Travel Retail and Guinness (refers to Slide 13) The performance of the Travel Retail channel is dependent on the level of international travel and the performance of Guinness is highly dependent on the availability of the on-trade channel (particularly in Europe and Turkey).
Slide 36: Cautionary Statement Concerning Forward-Looking Statements
Cautionary statement concerning forward-looking statements This document contains ‘forward-looking’ statements. These 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 statements that express fo
Slide 37: Continued from the Previous Page
Continued from the previous page • any litigation or other similar proceedings (including with tax, customs, competition, environmental, anti-corruption or other regulatory authorities), including litigation directed at the beverage alcohol industry generally or at Diageo in particular; • legal and
Slide 38: Other Information
Other Information All oral and written forward-looking statements made on or after the date of this document and attributable to Diageo are expressly qualified in their entirety by the above risk factors and by the ‘Risk factors’ section contained in the annual report on Form 20-F for the year ended