Diageo Plc · LSE:DGE
Diageo — FY2013 Earnings Presentation
35 slides from Diageo's earnings presentation, August 2013
Slide 1: Preliminary Results 2013
PRELIMINARY oe RESULTS 2013s. YEAR ENDED 30 JUNE 2013 roe
Slide 2: Ivan Menezes, Chief Executive
Ivan Menezes Chief Executive
Slide 3: Making a strong business stronger
Making a strong business stronger Performance ambition F13 delivery Sustained top line growth 5% organic net sales growth 0.8 ppt organic operating margin Expand operating margin improvement Enhanced financial strength £1.5 billion free cash flow Double digit eps growth eps pre-exceptional items up
Slide 4: My key highlights
My key highlights: £0.5 billion additional net sales* An incremental 1 million cases of Johnnie Walker, now over 20 million cases Innovation was up nearly 30% this year contributing over 50% of our growth We fully integrated Mey İçki, Ypióca, Shuijingfang and Meta Abo Year ended 30 June 2013
Slide 5: Deirdre Mahlan, CFO
. DIAGEO Deirdre Mahlan CFO BUSHHILLS | Fa yr oe a=] | a
Slide 6: Delivering efficient growth
Delivering efficient growth Focus on strategic brands Leading position in US spirits, driving top line growth and margin expansion Scale in emerging markets is now also driving top line growth and margin expansion Our geographic breadth mitigates the impact of individual market challenges 6
Slide 7: Delivering efficient growth from our strategic brands
Delivering efficient growth from our strategic brands 58 Asia Pacific emerging 352 108 LAC 102 AEET Strategic 2,167 brands 165 163 North America (21) Asia Pacific developed Net sales growth Other (590) £m (58) Western Europe Net sales growth from Volume growth strategic brands £m EU k Year ended 30
Slide 8: Delivering efficient growth in North America
Delivering efficient growth in North America 4% volume growth from strategic spirits brands 5 ppts of price/mix from strategic spirits brands Marketing up 10% Gross margin up 150 bpts Operating margin up 120 bpts Year ended 30 June 2013. Organic growth. 8
Slide 9: Scale in the emerging markets drives top line growth and margin expansion
Scale in the emerging markets drives top line growth and margin expansion Net sales growth £m Operating margin expansion bpts Asia Pacific emerging 70 326 297 LAC 182 170 AEET 198 15 Emerging LAC Asia Pacific AEET markets emerging Year ended 30 June 2013. Organic growth. 9
Slide 10: Diageo's strength is in its geographic breadth
Diageo’s strength is in its geographic breadth Net sales % growth 18 15 12 11 10 9 6 5 6 5 5 5 5 3 0 (2) (4) (6) North America Western Europe AEET LAC Asia Pacific Diageo H1 H2 FY Year ended 30 June 2013. Organic growth. 10
Slide 11: Price increases and efficiencies drove operating margin improvement
Price increases and production and overhead efficiencies drove operating margin improvement 0.8 ppts 30.9% 0.2 ppts 29.7% 0.2 ppts F12 Reported FX Acquisitions/ Organic F13 Reported operating margin Disposals movement operating margin Year ended 30 June. 11
Slide 12: Exceptional items reflect decisions made to strengthen the business
Exceptional items reflect decisions made to strengthen the business 2012 2013 £m £m Business restructuring (96) (69) Other operating exceptionals 56 (30) Operating exceptional items pre-tax (40) (99) Sale of businesses 147 (83) Exceptional tax items (505) 55 Discontinued operations net of tax (11) -
Slide 13: Another year of strong free cash flow
Another year of strong free cash flow 416 37 (24) (71) (159) 1,647 14 1,460 (400) 2012 Operating Working Dividends Net interest Net capex Contribution Other 2013 profit* capital income and tax to UK operating movement pension activities schemes Year ended 30 June. £m. *Operating profit is adjusted w
Slide 14: Debt remains at 2.4x EBIT
Debt remains at 2.4 x EBIT* 1,125 844 324 8,403 (1,460) 7,570 Net borrowings Acquisitions Dividends Free cash flow Other Net borrowings at 30 June 2012 at 30 June 2013 *Pre-exceptional items. £m. 14
Slide 15: Interest costs broadly flat despite increased borrowings
Interest costs broadly flat despite increased borrowings 2012 2013 Movement £m £m £m Core interest (386) (403) (17) IAS 39 4 4 - Net interest charge (382) (399) (17) Finance income/(charge) from post employment obligations 7 (5) (12) Other finance charges (22) (20) 2 Net other finance charge (15) (2
Slide 16: Improved performance throughout the income statement
Improved performance throughout the income statement 2012 2013 Movement £m £m £m Operating profit* 3,198 3,530 332 Associate income net of tax 213 199 (14) Trading profit* 3,411 3,729 318 Net finance charges (397) (424) (27) PBET 3,014 3,305 291 Taxation* (533) (584) (51) Non-controlling interests (
Slide 17: Delivering efficient growth
Delivering efficient growth Strong Faster organic net sales growth platform + Aim: 6% CAGR in the medium term Expansion in faster Maximising Organic operating growing cash and margin improvement markets returns Aim: The first 200bps by year ending + 2014 Sharper focus eps growth Aim: Double digit gr
Slide 18: Making a strong business even stronger
Making a strong business even stronger Enhancing our position as Increasing our presence the #1 spirits company in the emerging markets in North America of the world Leading brands across categories and global reach Respected for our Capturing efficient growth actions and performance 18
Slide 19: Industry leading brands across categories
Industry leading brands across categories Scotch whisky Other whisk(e)y Vodka Rum Liqueur Tequila Gin Local spirits Beer Ultra premium Super premium Premium Standard Value 19
Slide 20: The category breadth to deliver on consumer trends in all markets
The category breadth to deliver on consumer trends in all markets Net sales % % 100 100 Wine Local spirits 75 Liqueurs 75 RTDs Vodka Rum Whiskey Beer 50 50 Beer 25 Vodka 25 Scotch Scotch 0 0 Developed markets Emerging markets Tequila, gin, flavoured and local spirits not included Liqueurs, rum, wine
Slide 21: Marketing spend is focused on the biggest growth opportunity by market
Marketing spend is focused on the biggest growth opportunity by market £m F13 Increased spend Western Europe North America Asia Pacific Africa, Eastern Latin America & Europe & Turkey Caribbean Johnnie Walker Red Label Johnnie Walker super and ultra deluxe Year ended 30 June 2013. 21
Slide 22: Enhancing our position as the #1 spirits company in North America
Enhancing our position as the #1 spirits company in North America Building our brands through world class marketing Leading the industry in innovation Building stronger routes to consumers Leading brands across categories and global reach 22
Slide 23: Increasing our presence in the emerging markets of the world
Increasing our presence in the emerging markets of the world Through strong organic growth Through driving value from the acquisitions we have made Building stronger routes to consumers Leading brands across categories and global reach 23
Slide 24: Increasing our presence in new high growth markets through acquisitions
Increasing our presence in the new high growth markets through acquisitions Mey İçki Meta Abo Shui Jing Fang Hanoi Vodka Ypióca United Spirits Turkey Ethiopia China Vietnam Brazil India August 2011 January 2012 June 2012 June 2012 August 2012 July 2013 24
Slide 25: Building stronger routes to consumers in emerging markets
Building stronger routes to consumers in emerging markets For example in Africa: Diageo’s biggest emerging market The biggest emerging middle class opportunity Driving growth in beer and spirits 25
Slide 26: Capturing efficient growth
Capturing efficient growth Leading brands across categories and global reach Managing challenges in Western Europe Drive out cost to invest in growth Premiumising especially in scotch 26
Slide 27: Western Europe is a large and profitable business
Western Europe is a large and profitable business and we can improve performance £m F13 Organic performance Great Britain France Ireland Iberia, Greece Germany Western Europe & Italy Net sales movement Operating profit movement Year ended 30 June 2013. 27
Slide 28: Driving out cost to invest in growth
Driving out cost to invest in growth Deliver restructuring savings Deliver marketing efficiency Consistent focus on driving out cost creates agility 28
Slide 29: Building the global leader in super and ultra premium
Building the global leader in super and ultra premium Net sales % % 100 100 Other Latin America and Caribbean Other Western Europe The Singleton of Glen Ord Buchanans Don Julio Emerging Asia Pacific Ketel One 50 50 Cîroc North America Johnnie Walker 0 0 Leading markets Leading brands Year ended 30 J
Slide 30: Respected for our actions and performance
Respected for our actions and performance Leading brands across categories and global reach Alcohol in society Environment Socio-economic development 30
Slide 31: Setting targets for our environmental impact
Setting targets for our environmental impact which will make a difference Cumulative 2013 performance Target by 2015 Performance % (2007-2013) % Achievement Progress against operational targets Reduce carbon emissions by 50% 4.1 26.3 On track Improve water efficiency by 30% 1.5 19.5 On track Reduce
Slide 32: Respected for our actions and performance
Respected for our actions and performance Leading brands across categories and global reach 32
Slide 33: Diageo, the world's leading premium drinks company
Diageo, the world’s leading premium drinks company
Slide 34: Outlook statements
Outlook statements For the year ending 30 June 2014 Exceptional operating items: Exceptional operating items are expected to be approximately £85 million for the year ending 30 June 2014 in respect of supply restructuring projects. Cash payments related to restructuring programs are expected to be a
Slide 35: 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