Diageo Plc · LSE:DGE
Diageo — Q2 2022 Earnings Presentation
38 slides from Diageo's earnings presentation, Jan 27, 2022
Slide 1: Delivering sustainable long-term growth: Interim Results Fiscal 22
DIAGEO Delivering sustainable long-term growth Interim Results Fiscal 22 Ivan Menezes Chief Executive 27 January 2022
Slide 2: Cautionary statements concerning forward-looking statements and non-GAAP financial measures
DELIVERING SUSTAINABLE LONG-TERM GROWTH DIAGEO Cautionary statements concerning forward-looking statements and non-GAAP financial measures The following presentations contain ‘forward-looking’ statements, including statements related to the medium term guidance issued on 16 November 2021, future Tot
Slide 3: To be one of the best performing, most trusted and respected consumer products companies
DELIVERING SUSTAINABLE LONG-TERM GROWTH To be one of the best performing, most trusted and respected consumer products companies in the world DIAGEO | 3. Interim Results Fiscal 22
Slide 4: Delivered strong H1 F22 results
DELIVERING SUSTAINABLE LONG-TERM GROWTH Delivered strong H1 F22 results . Sustained market share gains Strong growth momentum in H1 F22 . Invested in long-term growth . Continued progress on Society 2030 mB WN = . Created shareholder value DIAGEO = 4_|_ Interim Results Fiscal 22
Slide 5: Strong results across all key financial metrics
DELIVERING SUSTAINABLE LONG-TERM GROWTH Strong results across all key financial metrics DIAGEO | 5_ | Interim Results Fiscal 22 Organic volume T4+9.3% Free cash flow £1.6bn \-£0.2bn Organic net sales T +20.0% Pre-exceptional eps 85.6p 4 +22.5% Organic operating margin T +131bps Interim dividend 29.3
Slide 6: Strong organic net sales growth across all regions
DELIVERING SUSTAINABLE LONG-TERM GROWTH Strong organic net sales growth = Sn, across all regions Source: HI F22 Diageo internal information DIAGEO = 6_([__ Interim Results Fiscal 22 For additional information on non-GAAP measures, please see financial/legal appendix
Slide 7: Advantaged portfolio, smart investment and strong execution enabled market share gains
DELIVERING SUSTAINABLE LONG-TERM GROWTH Advantaged portfolio, smart investment and strong execution have enabled continued off-trade market share gains DIAGEO) = 7_([_ Interim Results Fiscal 22 Percentage of Diageo total net sales value gaining/holding off-trade share in measured markets 85% gaining
Slide 8: Strong performance enabled by our core capabilities
DELIVERING SUSTAINABLE LONG-TERM GROWTH Strong performance enabled by our core capabilities HOUSE °FGUCCI SFunguainy, | Best brand builders Supply chain excellence Advantaged culture DIAGEO = 8. | Interim Results Fiscal 22
Slide 9: Investing to deliver our Society 2030 sustainability action plan
DELIVERING SUSTAINABLE LONG-TERM GROWTH Investing to deliver our Society 2030 sustainability action plan Promote Champion Pioneer positive drinking inclusion and diversity grain to glass sustainability DIAGEO) 9_[_ Interim Results Fiscal 22
Slide 10: Strong track record of creating shareholder value
DELIVERING SUSTAINABLE LONG-TERM GROWTH Strong track record of creating shareholder value Dividend per share pence 5-year full year dividend CAGR +4.2% F22 interim dividend +5.0% 72.55 I Final dividend I Interim dividend 29.36 FOOFO2FO4FO6FO8 FIO F12 F14 F16 FI8 F20F22 Source: Diageo internal inform
Slide 11: Strong performance across all key financial metrics
DELIVERING SUSTAINABLE LONG-TERM GROWTH Strong performance across all key financial metrics DIAGEO = 11._ | Interims Results Fiscal 22 Efficient growth Organic net sales value growth T +20.0% Organic operating margin expansion T+131bps Free cash flow £1.6bn \ -£0.2bn Pre-exceptional 85.6p T+22.5% Fo
Slide 12: Our profitable growth algorithm delivers quality long-term growth
DELIVERING SUSTAINABLE LONG-TERM GROWTH Our profitable growth algorithm delivers quality long-term growth Upweighting Driving top line A&P growth aA . £1.4bn Organic net sales 1. Driving top line growth Rothe ae growth +27.0% {Pena 2. Improving price/mix 3. Driving productivity 4. Upweighting A&P P
Slide 13: Accelerating top line growth by region
DELIVERING SUSTAINABLE LONG-TERM GROWTH 1 Accelerating top line growth Driving double-digit top line growth across all regions Organic net sales value growth by region 45% 27% H1F220s HI F21 20% Greater China 18% 23% H1 F22 13% 13% vs H1F21 Total Diageo North America Europe Asia Pacific Africa Latin
Slide 14: Accelerating top line growth by category
DELIVERING SUSTAINABLE LONG-TERM GROWTH 1 Accelerating top line growth Our advantaged portfolio in fast-growing spirits categories and recovery of beer are driving top line growth Organic net sales growth by category' 56% 27% 26% 21% 22% 6% Scotch Other International Gin Tequila Beer Chinese White S
Slide 15: Over 70% of net sales growth in premium plus price tiers
DELIVERING SUSTAINABLE LONG-TERM GROWTH 1 Accelerating top line growth Over 70% of net sales growth was in the premium plus price tiers Organic net sales growth by price tier!) 31% 27% 20% a Value + Standard Premium Super Premium + Total Diageo ReoEa 2% 5% 12% 3% Source: HI F22 Diageo internal infor
Slide 16: Improving price/mix
DELIVERING SUSTAINABLE LONG-TERM GROWTH 2 Improving price/mix Revenue growth management is strengthening top line growth and margin expansion DIAGEO 316 | Interims Results Fiscal 22 US: Casamigos and Don Julio share of US spirits up over +60bps!! and +25bps" respectively in H1 F22 Avg. price growth
Slide 17: Upweighted A&P
DELIVERING SUSTAINABLE LONG-TERM GROWTH 3 Upweighted A&P Upweighted investment and marketing effectiveness are driving growth and share gains Upweighted Increased Gained/held Accelerated A&P investment re-investment rate off-trade share top line growth 6) 0 ~ 0 0 +27% 17% 85% +20% £1,353m of reporte
Slide 18: Driving productivity
DELIVERING SUSTAINABLE LONG-TERM GROWTH 4 Driving productivity Productivity initiatives delivered close to £190m of cost savings through H1 F22 Logistics Manufacturing Marketing Overhead | | effectiveness efficiencies COGS productivity DIAGEO = 28 | Interims Results Fiscal 22 Source: HI F22 Diageo i
Slide 19: Strong growth in operating profit driven by organic growth
DELIVERING SUSTAINABLE LONG-TERM GROWTH Strong growth in operating profit driven by organic growth Reported operating margin') DIAGEO PRIOR PERIOD OPERATING PROFIT!) Exchange rate movements Fair value remeasurement & other Acquisitions & disposals Organic growth CURRENT PERIOD OPERATING PROFIT") 19
Slide 20: Strong improvement in operating margin despite cost inflation and upweighted marketing
DELIVERING SUSTAINABLE LONG-TERM GROWTH Strong improvement in operating margin despite increased cost inflation and upweighted marketing Movement in organic operating margin 147bps 33.1% a (92lbps 76bps 34.4% H1 F21 Gross margin Marketing DIAGEO = 20 | _Interims Results Fiscal 22 Other operating ite
Slide 21: We are investing smartly to win share and sustain long-term growth
DELIVERING SUSTAINABLE LONG-TERM GROWTH We are investing smartly to win share and sustain long-term growth Core capa digital ‘ool —— DIAGEO = 21 | Interims Results Fiscal 22
Slide 22: Strong free cash flow generation
DELIVERING SUSTAINABLE LONG-TERM GROWTH Strong free cash flow generation Movement in free cash flow (£m) 621 1,753 38 ; | (87) (481) (133) — —— (62) (74) F211 Exchange (i) Operating WC (iil) Capex Tax Interest Other (iv) F22 HI profit (i) Source: HI F22 Diageo internal information (i) Exchange on op
Slide 23: Leverage ratio remains within our target range
DELIVERING SUSTAINABLE LONG-TERM GROWTH Leverage ratio remains within our target range ee eee ae DIAGEO Closing net debt) Average net debt!) Net interest charge Net other finance charges Net finance charges Effective interest rate Adjusted!) net debt!i) / Adjusted) EBITDA 23. | Interims Results Fisc
Slide 24: Consistent and disciplined approach to capital allocation
DELIVERING SUSTAINABLE LONG-TERM GROWTH Consistent and disciplined approach to capital allocation Leverage ratio policy Adjusted net debt!) to adjusted EBITDA: 2.5x - 3.0x Organic Dividends MerA and growth 1.8x to 2.2x portfolio dividend cover management Return excess cash to shareholders ; ; Source
Slide 25: Translation driving adverse impact from foreign exchange
DELIVERING SUSTAINABLE LONG-TERM GROWTH Translation driving adverse impact from foreign exchange Exchange rates Total exchange impact (£m) P Total impact on net sales Total impact on operating profit!) Translation rate i i F22 HIF 21 (i HI F2200 format S/E 131 136 1.36 €/E awn 1.17 119 (87) saction
Slide 26: Guidance notes on finance charges and tax
(i) Includes finance charges net of tax (ii) Excludes tax related to acquisitions and disposals (iii) Excludes finance charges related to acquisitions and disposals
Slide 27: Well positioned for the second half of fiscal 22
DELIVERING SUSTAINABLE LONG-TERM GROWTH Well positioned tor the second half of fiscal 22 DIAGEO) =. 27_|_Interims Results Fiscal 22 saints
Slide 28: Confident in our profitable growth algorithm
DELIVERING SUSTAINABLE LONG-TERM GROWTH Confident in our profitable growth algorithm Advantaged portfolio and geographic footprint Upweighting Driving top line drives accelerated top line growth A&P growth Embedded culture of everyday efficiency enables continued margin expansion Continued investmen
Slide 29: Bold ambition for 2030
DELIVERING SUSTAINABLE LONG-TERM GROWTH Bold ambition for 2030 4% _ 2020 5 O,, 6% a increase in Diageo’s 2030 TBA market share ambition by 2030 DIAGEO 9.29 | _ Interim Results Fiscal 22 Source: IWSR, Diageo's 2020 Retail Soles Value (RSV) % Share of Total Beverage Alcohol {TBA} Market
Slide 30: TBA opportunity is large and growing
DELIVERING SUSTAINABLE LONG-TERM GROWTH TBA opportunity is large and growing Confident in our strategy and ability to deliver sustainable long-term growth . Diageo has an advantaged portfolio . Our capabilities are a competitive advantage . We invest for the long-term mB WN = . We do business the ri
Slide 31: Celebrating life, every day, everywhere
DIAGEO Celebrating life, every day, everywhere
Slide 32: 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 33: Continued from the previous page
DELIVERING SUSTAINABLE LONG-TERM GROWTH DIAGEO 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 im
Slide 34: Continued from the previous page
DELIVERING SUSTAINABLE LONG-TERM GROWTH DIAGEO Continued from the previous page Gains and losses on the 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 subsidiary and other material, unusual non-
Slide 35: Continued from the previous page
DELIVERING SUSTAINABLE LONG-TERM GROWTH DIAGEO Continued from the previous page With respect to Global Travel, the impact of continued Covid-19 travel restrictions on this channel will have also driven some incremental sales of our products in certain domestic markets, which would have a positive im
Slide 36: Cautionary statements concerning forward-looking statements and non-GAAP financial measures
DELIVERING SUSTAINABLE LONG-TERM GROWTH DIAGEO Cautionary statements concerning forward-looking statements and non-GAAP financial measures This document contains ‘forward-looking’ statements, including statements related to the medium term guidance issues on 16 November 2021, future TBA market share
Slide 37: Continued from the previous page
DELIVERING SUSTAINABLE LONG-TERM GROWTH DIAGEO 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 gener
Slide 38: Other Information
DELIVERING SUSTAINABLE LONG-TERM GROWTH 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, by those set out in Diageo’s annual report for the year