Slide 1: Preliminary Results 2011
PRELIMINARY RESULTS 2011 Year ended 30 June 2011
Slide 2: A strong business, getting stronger - Paul Walsh, CEO
A strong business, getting stronger Paul Walsh, CEO 2
Slide 3: A strong business, getting stronger in F11
A strong business, getting stronger in F11 2 ppts of positive price/mix* Gross margin up 70 bpts* Increased our presence in emerging markets Share gains in majority of markets Year ended 30 June 2011. *Organic movement. 3
Slide 4: A strong business, changing to become stronger
A strong business, changing to become stronger F11 performance Operating model review 2 ppts of positive price/ mix* Increased investment in the emerging markets Gross margin up 70 bpts* Closer to customers and Increased our presence consumers in emerging markets Share gains in majority
Slide 5: A strong business, getting stronger
A strong business, getting stronger Delivering for F’11 performance Operating model review shareholders 2 ppts of positive price/ Increased investment Driving top line growth mix* in the emerging and sustained markets operating margin Gross margin up 70 expansion bpts* Closer to customers
Slide 6: Deirdre Mahlan, CFO
A strong business, getting stronger Deirdre Mahlan, CFO 6
Slide 7: A strong business, getting stronger in F11
A strong business, getting stronger in F11 Net sales up 5% with price/mix of 2 ppts* Gross margin up 70 bpts* Marketing as % net sales up 50 bpts to 15.5%* Operating margin maintained* Free cash flow of £1.7 billion ROIC up 110 bpts to 15.9% Year ended 30 June 2011. *Organic movement. 7
Slide 8: Volume growth and positive price/mix drove 5% organic net sales growth
Volume growth and positive price/mix drove 5% organic net sales growth Net sales, £m 178 9,936 (55) 254 9,780 (221) 2010 FX Volume Price/mix Scope change* 2011 Year ended 30 June. *Scope change comprises acquisitions and disposals. 8
Slide 9: The premium and super premium price segments were engines of growth
The premium and super premium price segments were engines of growth Net sales growth, £m £m 7% 5% 1% 400 3% 3% 300 9% 200 22% 17% 38% 100 0 Super Super Other super Premium Other Standard Other Value Total premium deluxe premium scotch premium beer standard vodka scotch Year ended 30 June 2011. Organ
Slide 10: Incremental marketing spend was focused behind the biggest growth opportunities
Incremental marketing spend was focused behind the biggest growth opportunities % bpts 25 120 110 bpts 22% 50 bpts 8% 20 bpts 2% 0 0 Increase in spending, % Increase in reinvestment rate, bpts Developed markets Emerging markets Total Year ended 30 June 2011. Organic movement. 10
Slide 11: Gross margin increased 70 basis points and marketing spend grew 8%
Gross margin increased 70 basis points and marketing spend grew 8% Margin movement, ppts* Total 2010 Operating margin** 29.4 Gross margin 0.7 Marketing spend (0.5) Overheads (0.2) Operating margin - 2011 Operating margin*** 29.4 Year ended 30 June 2011. *Organic movement. **Adjusted for exchange, ac
Slide 12: Improved performance throughout the income statement
Improved performance throughout the income statement 2010, 2011, Movement, £m £m £m Operating profit* 2,751 2,884 133 Associate income net of tax 142 176 34 Trading profit 2,893 3,060 167 Net finance charges (462) (397) 65 PBET 2,431 2,663 232 Taxation* (526) (463) 63 Minority interest (114) (117) (
Slide 13: Exceptional charges reflect the cost of the operating model review
Exceptional charges reflect the cost of the operating model review and focus on expansion into emerging markets 2010, 2011, £m £m Regulatory settlements - (139) Brand value impairment (35) (39) Global restructuring, 2009 (85) - Supply restructuring (93) (24) Brewing operations in Ireland (12) (10) U
Slide 14: The operating model review delivers cost savings and sharpens our focus
The operating model review delivers cost savings and sharpens our focus 2011, 2012, 2013, Total, £m £m £m £m Exceptional costs 77 83 - 160 Cash 11 120 29 160 Cost reduction - 40 40 80 Overheads will be down in North America and Western Europe and corporate functions Sales and organisation costs
Slide 15: F12 financial reporting will reflect our new operating model
F12 financial reporting will reflect our new operating model F11 Net sales, £m F11 Operating profit, £m Current Pro-forma Current Pro-forma North America 3,324 3,418 1,255 1,299 Europe 2,614 - 778 - - Western Europe - 2,428 - 727 - Eastern Europe* - 275 - 84 International 2,747 - 804 - - LAC - 1,010
Slide 16: Summary
Summary Building momentum A return to positive price/mix Strong gross margin improvement Increased marketing investment behind brands Enhanced financial strength Recommended 6% increase in final dividend Year ended 30 June 2011. 16
Slide 17: Diageo: Proven, strong business
Diageo: Proven, strong business Leading brands give us outstanding brand depth and breadth Global reach and strong routes to market Industry leading capabilities in innovation, marketing, customer relations and community initiatives Financial strength 17
Slide 18: Diageo: Strong business, getting stronger
Diageo: Strong business, getting stronger Proven strong business We are expanding our presence in the fastest growing markets We are sharpening our focus 18
Slide 19: Expanding our presence in the fastest growing markets
Expanding our presence in the fastest growing markets Mey İçki Serengeti Breweries Marketing up 15% SJF and Halico Marketing up 20% Marketing up 28% Year ended 30 June 2011. Organic movement. 19
Slide 20: We are sharpening our focus
We are sharpening our focus Differentiating our in-market strategies based on their growth profile Brilliant execution in supply, marketing, sales and innovation in each market every day Driving further cost savings to fund investment and expand our industry leading margins 20
Slide 21: Sharper focus: Differentiated in-market strategies
Sharper focus: Differentiated in-market strategies Focus on customers as key competitive advantages in Western Europe Win in the growing US spirits market Resourced to deliver growth in emerging markets Gain profitable share in the developed markets in Asia 21
Slide 22: Differentiated strategies: Winning in the US spirits market
Differentiated strategies: Winning in the US spirits market No. 1 player in the largest spirits market in the world The US market is growing Diageo can grow share and expand margin 22
Slide 23: Differentiated strategies: Winning in Western Europe
Differentiated strategies: Winning in Western Europe Redefined our Western Europe organisation Individual country markets are focused on their commercial agenda Marketing and innovation at a Western Europe level Reduce cost base 23
Slide 24: Sharper focus: Brilliant execution in marketing, sales and innovation
Sharper focus: Brilliant execution in marketing, sales and innovation Driving marketing innovation Enhance our strategic customer relationships Continue to deliver industry leading new brand and product launches 24
Slide 25: Marketing innovation
Marketing innovation GET INVOLVED AT BE THERE SMIRNOFF, FACEBOOK.COM/ VSMIRNOFF OR WHEN ANB BISCOVER MABONNA22 BEST BANCER 12 NOV 2011 | *: Ff facebook. 25 DIAGEO
Slide 26: Enhance our strategic customer relationships
Enhance our strategic customer relationships Effective use of Deeper space in store and partnerships with innovative shopper strategic customers marketing programmes Accelerated growth for both Diageo & Customers 26
Slide 27: Continue to deliver industry leading innovation
Continue to deliver industry leading innovation Premiumising our brands Emerging middle class consumers Driving growth in developed markets Sustaining what we’ve launched 27
Slide 28: Sharper focus: Driving further operational efficiencies
Sharper focus: Driving further operational efficiencies Drive gross margin improvement through efficiency in supply Decentralised global functions The resources to invest in growth as we expand margins 28
Slide 29: Driving operating efficiency in supply
Driving operating efficiency in supply End to end accountability in market Differentiated approach to plant rationalisation Engaged our 10,000+ employees in efficiency programmes, targeting 7% overall improvement in overall equipment effectiveness (OEE) 29
Slide 30: Sharper focus: Driving further operational efficiencies
Sharper focus: Driving further operational efficiencies Drive gross margin improvement through efficiency in supply Decentralised global functions The resources to invest in growth as we expand margins 30
Slide 31: Accelerating value creation
Accelerating value creation Strong Faster organic net sales growth platform + Aim: 6% CAGR in the medium term Expansion Maximising in faster Organic operating cash and growing margin improvement returns markets Aim: The first 200bpts by year ending + 2014 Sharper EPS growth focus Aim: Double digit g
Slide 32: Questions
DIAGEO Questions
Slide 33: Supplementary slides
DIAGEO Supplementary slides
Slide 34: Net finance charges
Net finance charges 2010, 2011, Movement, £m £m £m Core interest (377) (357) 20 IAS 39 2 (12) (14) Net interest charge (375) (369) 6 Finance income/(charge) from post employment obligations (47) (3) 44 Other finance charges (30) (25) 5 Exchange movements on short term inter-company balances and othe
Slide 35: Exceptional charges
Exceptional charges 2010, 2011, 2012, £m £m £m Regulatory settlements - (139) - Brand value impairment (35) (39) - Global restructuring, 2009 (85) - - Supply restructuring (93) (24) (23) Brewing operations in Ireland (12) (10) (10) US wines restructuring 48 - - Operating model review, 2011 - (77) (8
Slide 36: Outlook statements
Outlook statements For the year ending 30 June 2012 Exceptional operating items The table below sets out expected exceptional charges for the year ending 30 June 2012. £m 2012 Exceptional charges (116) Cash impact (201) These charges are primarily in respect of the operating model review which is ex
Slide 37: 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