Diageo Plc · LSE:DGE
Diageo — FY2023 Earnings Presentation
40 slides from Diageo's earnings presentation, Aug 1, 2023
Slide 1: Cautionary statements concerning forward-looking statements and non-GAAP financial measures
DELIVERING SUSTAINABLE LONG-TERM GROWTH Cautionary statements concerning forward-looking statements and non-GAAP financial measures The following presentation contains ‘forward-looking’ statements. These statements can be identified by the fact that they do not relate only to historical or current f
Slide 2: Delivering sustainable long-term growth
Delivering sustainable long-term growth Preliminary Results Fiscal 23 Debra Crew & Lavanya Chandrashekar 1 August 2023
Slide 3: Ivan 1959 - 2023
Ivan 1959 - 2023
Slide 4: Our ambition is to be one of the best performing, most trusted and respected consumer products companies
DELIVERING SUSTAINABLE LONG-TERM GROWTH Our ambition is to be one of the best performing, most trusted and respected consumer products companies in the world 4 Preliminary Results Fiscal 23
Slide 5: A strong set of results and organic NSV
DELIVERING SUSTAINABLE LONG-TERM GROWTH F23 results A strong set of results Organic volume Organic net sales value growth and organic NSV ↑ -1% ↑ +6% 4-YEAR CAGR1 8% Organic Free operating profit cash flow £1.8bn ↑ +7% ↑ -£1.0bn Source: Diageo internal information 1. F19 to F23 4YR CAGR indicative,
Slide 6: Our advantaged portfolio of brands is fundamental to driving our business
DELIVERING SUSTAINABLE LONG-TERM GROWTH Our advantaged portfolio F23 organic net sales growth of brands is fundamental to driving our business. We delivered double-digit +15% +16% growth from our biggest brands in our top 3 categories. +16% +20% 6 Preliminary Results Fiscal 23 Source: Diageo interna
Slide 7: Johnnie Walker continued to grow double-digit
DELIVERING SUSTAINABLE LONG-TERM GROWTH Johnnie Walker, the world’s #1 international spirit1 brand, continued to grow double-digit 7 Preliminary Results Fiscal 23 1. 2022 Retail Sales Value - IWSR 2022
Slide 8: Diageo is #1 in global tequila
DELIVERING SUSTAINABLE LONG-TERM GROWTH Diageo is #1 in global tequila1 and is well positioned to take tequila around the world 8 Preliminary Results Fiscal 23 1. 2022 Retail Sales Value - IWSR 2022
Slide 9: A momentous year for Guinness
DELIVERING SUSTAINABLE LONG-TERM GROWTH A momentous year for Guinness 9 Preliminary Results Fiscal 23
Slide 10: Resilience and opportunity from our diversified footprint
DELIVERING SUSTAINABLE LONG-TERM GROWTH Resilience and opportunity from our diversified footprint F23 full year organic net sales growth by region Europe North America +11% +0% Asia Pacific Latin America +13% and Caribbean +9% Africa +5% 10 Preliminary Results Fiscal 23 Source: Diageo internal infor
Slide 11: Delivered quality market share gains in fiscal 23
DELIVERING SUSTAINABLE LONG-TERM GROWTH Delivered quality Percentage of Diageo total net sales value gaining/holding share in measured markets market share gains in fiscal 23 and going forward expect 70%+ gaining/holding consistent gains from share key markets Source: Internal estimates incorporatin
Slide 12: US spirits consumer resilient and continues to premiumise
DELIVERING SUSTAINABLE LONG-TERM GROWTH US spirits consumer resilient and continues to premiumise Spirits taking share of US TBA Super-Premium Plus: +11% 4yr CAGR in US US TBA +4% 10yr CAGR LUXURY 50 4% 15% POPULAR 45 17% 4% ULTRA PREMIUM Beer/malt 17% % TBA share 40 16% 2% Spirits 21% Spirits 12% 3
Slide 13: Diageo US distributor inventory levels at historical levels
DELIVERING SUSTAINABLE LONG-TERM GROWTH Diageo US distributor inventory levels at historical levels Diageo US Spirits Distributor Historical DSI1 Historical range June 18 Dec 18 June 19 Dec 19 June 20 Dec 20 June 21 Dec 21 June 22 Dec 22 June 23 13 Preliminary Results Fiscal 23 Source: Diageo intern
Slide 14: Opportunity for Diageo to re-gain share competitiveness in the US
DELIVERING SUSTAINABLE LONG-TERM GROWTH Opportunity for Diageo to re-gain share competitiveness in the US Diageo US TBA Share change (bps) 26 24 -1 F21 F22 F23 14 Preliminary Results Fiscal 23 Source: Nielsen 1st July 2022 – 17th June 2023, NABCA 1st July 2022 – 31st May 2023
Slide 15: Near-term opportunities – Innovation
DELIVERING SUSTAINABLE LONG-TERM GROWTH Near-term opportunities – Innovation Speed & agility 15 Preliminary Results Fiscal 23
Slide 16: Near-term opportunities – Global brand building
DELIVERING SUSTAINABLE LONG-TERM GROWTH Near-term opportunities – Global brand building Scotch Tequila Guinness Speed & agility 16 Preliminary Results Fiscal 23
Slide 17: Productivity initiatives delivered £450m of cost savings in F23
DELIVERING SUSTAINABLE LONG-TERM GROWTH Productivity initiatives delivered £450m of cost savings in F23 Critical to fueling investment to deliver our medium- term guidance 17 Preliminary Results Fiscal 23
Slide 18: Strong F23 performance across key financial metrics
DELIVERING SUSTAINABLE LONG-TERM GROWTH Strong F23 Efficient growth Organic net sales Organic operating Value creation Return on performance value growth margin expansion invested capital across key ↑+6.5% ↑+15bps 16.3% financial ↓-50bps metrics Free cash flow Pre-exceptional eps Total shareholder r
Slide 19: Our profitable growth algorithm delivers quality long-term growth
DELIVERING SUSTAINABLE LONG-TERM GROWTH Our profitable growth algorithm delivers quality long-term growth Driving top-line growth Organic net sales value growth ↑+6.5% 1. Driving top-line growth 2. Improving price/mix 3. Driving productivity Increasing A&P Improving price/mix £2.8bn contributing 7.3
Slide 20: Our advantaged portfolio in fast-growing categories is driving top-line growth
DELIVERING SUSTAINABLE LONG-TERM GROWTH Our advantaged portfolio in fast-growing categories is driving top-line growth F23 Organic net sales growth of key categories1 F19 - F23 CAGR3 19% Net sales Volume Scotch 8% 4% 12% 9% Tequila 43% 32% 5% Chinese white Beer 5% -1% 1% spirits Gin 8% 5% Scotch Teq
Slide 21: Our premium-plus price tier has grown 7 percentage points since F19
DELIVERING SUSTAINABLE LONG-TERM GROWTH Our premium-plus price tier has grown 7 percentage points since F19 F23 Organic net sales growth vs F22 Reported net sales by price tier1 by price tier, F19 – F232 9% Super premium+, Super 18% premium+, 7% 27% 6% 5% +7 ppt Premium, 4% 38% Premium, 36% Standard
Slide 22: Our diversified global footprint is delivering strong top-line growth
DELIVERING SUSTAINABLE LONG-TERM GROWTH Our diversified global footprint is delivering strong top-line growth Organic net sales growth by region 13% 11% 9% 6% F23 5% vs F22 0% Latin America North America Europe Asia Pacific Africa Total Diageo and Caribbean F19-F23 net sales CAGR2 9% 7% 6% 15% 8% 8%
Slide 23: Revenue growth management is driving balanced top-line growth and share gains
DELIVERING SUSTAINABLE LONG-TERM GROWTH Revenue growth management is driving balanced top-line growth and share gains in key categories Volume (ppts) Price/Mix (ppts) Share1 (bps) Global | Malts 3 13 16 +87 APAC | Scotch 14 12 26 +139 USA | Tequila 9 6 15 +121 Mexico | Tequila 3 9 12 +65 Europe | Jo
Slide 24: Productivity initiatives delivered around £450m during fiscal 23
DELIVERING SUSTAINABLE LONG-TERM GROWTH Productivity initiatives delivered around £450m during fiscal 23 Procurement Product Logistics Manufacturing Marketing Overhead effectiveness efficiencies COGS productivity 24 Preliminary Results Fiscal 23 Source: Diageo internal information
Slide 25: Resilience in organic operating margin despite increased cost inflation
DELIVERING SUSTAINABLE LONG-TERM GROWTH Resilience in organic operating margin despite increased cost inflation Movement in organic operating margin +15bps 98 bps 30.9% 30.7% -97bps 14bps F22 Gross Marketing Other operating F23 margin items 25 Preliminary Results Fiscal 23 Source: Diageo internal in
Slide 26: Free cash flow generation impacted primarily by creditors within working capital
DELIVERING SUSTAINABLE LONG-TERM GROWTH Free cash flow generation impacted primarily by creditors within working capital Movement in free cash flow 384 £m 122 2,783 (779) (217) (87) 72 1,800 (252) (226) F22 Exchange (1) Operating WC Maturing stock Capex Tax Interest Other (3) F23 profit (2) Source:
Slide 27: Translation driving positive impact from foreign exchange
DELIVERING SUSTAINABLE LONG-TERM GROWTH Translation driving Net sales £mm £m Operating profit1 £m positive impact 702 from foreign Translation Transaction exchange 122 Source: Diageo internal information 27 Preliminary Results Fiscal 23 1. Operating profit excluding exceptional items
Slide 28: Diageo will change its functional and presentation currency from GBP to USD
DELIVERING SUSTAINABLE LONG-TERM GROWTH Diageo, starting F24, will change its functional and presentation currency from GBP to USD F23 Reported Operating Profit by Geography1 • Change in functional currency % took effect 1 July, 2023 Europe and Turkey Africa • No change to UK listing Latin America •
Slide 29: Strong balance sheet drives resilience in our business
DELIVERING SUSTAINABLE LONG-TERM GROWTH Strong balance sheet drives resilience in our business F23 F22 Movement Closing net debt1 £m (15,541) (14,137) (1,404) Average Net Debt1 £m (15,244) (12,692) (2,552) Net interest charge £m (595) (353) (242) Net other finance charges £m 1 (69) 70 Net Finance Ch
Slide 30: Consistent and disciplined approach to capital allocation
DELIVERING SUSTAINABLE LONG-TERM GROWTH Consistent and disciplined approach to capital allocation Leverage ratio policy Adjusted net debt1 to adjusted EBITDA: 2.5x – 3.0x Organic Dividends M&A and growth 1.8x to 2.2x portfolio dividend cover management Return excess cash to shareholders Source: Diag
Slide 31: Strong growth in eps driven primarily by organic operating profit
DELIVERING SUSTAINABLE LONG-TERM GROWTH Strong growth in eps driven primarily by organic operating profit Movement in earnings per share before exceptional items pence 5.3 13.8 0.9 2.3 0.8 163.5 2.0 (2.0) (4.3) 151.9 (1.7) (5.5) F22 eps Organic Hyper Foreign Associates Non- Share F23 eps before oper
Slide 32: Well positioned for the long-term
DELIVERING SUSTAINABLE LONG-TERM GROWTH Well positioned for the long-term • Encouraged by the strong performance we delivered for the full year in F23 • F23–F25 medium-term guidance: — Organic net sales growth of 5% to 7% — Organic operating profit growth of 6% to 9% 32 Preliminary Results Fiscal 23
Slide 33: On track to deliver bold 2030 ambition
DELIVERING SUSTAINABLE LONG-TERM GROWTH On track to deliver bold 2030 ambition ~ 50% increase in Diageo’s TBA 6.0% 2030 4.7% 2022 market share by 2030 4.0% 2020 33 Preliminary Results Fiscal 23 Source: IWSR CY 2022, Diageo’s Retail Sales Value (RSV) % Share of TBA Market
Slide 34: Well positioned for the long term
DELIVERING SUSTAINABLE LONG-TERM GROWTH Well positioned for the long term • TBA remains an attractive, growing and resilient market • Spirits continue to gain share • Premiumisation is continuing • Consumer remains resilient • Diversified footprint and advantaged footprint • Our core capabilities pr
Slide 35: Diageo: Celebrating life, every day, everywhere
DIAGEO Celebrating life, every day, everywhere FA \ ee BM itn Horan Drink respersiby, DRNKIQ.com Joweste Wacken GUINNESS
Slide 36: Increase in operating profit driven by organic growth
DELIVERING SUSTAINABLE LONG-TERM GROWTH APPENDIX : Increase in operating profit(1) driven by organic growth F23 F22 Reported £m £m operating margin2 Prior period operating profit 4,797 3,746 31.0% before exceptional items1 Exchange rate movements 122 (32) (58)Bps Fair value remeasurement & other 75
Slide 37: Financial/legal appendix: Definitions and reconciliation of non-GAAP measures
DELIVERING SUSTAINABLE LONG-TERM GROWTH Financial/legal appendix: Definitions and reconciliation of non-GAAP measures to GAAP measures 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
Slide 38: Continued from the previous page: Exchange rates
DELIVERING SUSTAINABLE LONG-TERM GROWTH Continued from the previous page (a) Exchange rates 'Exchange' in the organic movement calculation reflects the adjustment to recalculate the reported results as if they had been generated at the prior period weighted average exchange rates. Exchange impacts i
Slide 39: Continued from the previous page: Exceptional items
DELIVERING SUSTAINABLE LONG-TERM GROWTH Continued from the previous page Gains and losses on the sale or directly attributable to a prospective sale of businesses, brands or distribution rights, step up gains and losses that arise when an investment becomes an associate or an associate becomes a sub
Slide 40: Shareholder value metrics and market share approach
DELIVERING SUSTAINABLE LONG-TERM GROWTH Continued from the previous page Shareholder value metrics • Dividends: Diageo internal information. • Return of Capital (RoC): Diageo internal information. • TSR: FactSet as of 30 June 2023. TSR based on time periods of 1 year, annualised 5 years and annualis