a8156h
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15d-16 OF THE
SECURITIES EXCHANGE ACT OF 1934
1 August 2023
Commission File Number: 001-10691
DIAGEO plc
(Translation
of registrant’s name into English)
16 Great Marlborough Street, London, United Kingdom, W1F 7HS
(Address
of principal executive offices)
Indicate
by check mark whether the registrant files or will file annual
reports under cover Form 20-F or Form 40-F.
Form
20-F X
Form
40-F
Diageo PLC – Diageo delivers strong
performance
Dated
01/08/2023
Diageo delivers strong performance while investing in sustainable
long-term growth
Delivered strong net sales and operating profit growth within
medium-term guidance
-
Reported
net sales of £17.1 billion, increased 10.7%, primarily
reflecting strong organic net sales growth, and favourable impacts
from foreign exchange.
-
Organic
net sales grew 6.5%. Price/mix of 7.3 percentage points reflects a
high single-digit contribution from price and
premiumisation.
-
Reported
volume declined by 7.4%, and organic volume declined by
0.8%.
-
Growth
reflects our advantaged portfolio of strong brands, diversified
footprint, and premiumisation.
Resilient operating margin despite increased cost
inflation
-
Reported
operating profit grew 5.1% to £4.6 billion. Reported operating
margin declined by 147bps, with organic margin expansion more than
offset by exceptional operating items and foreign
exchange.
-
Organic
operating profit grew 7.0% and organic operating margin expanded by
15bps, driven by disciplined cost management. Price increases more
than offset the absolute cost inflation impact on gross
margin.
Advantaged portfolio and premiumisation drove market share
growth
-
Growth
in organic net sales was delivered across most categories,
particularly in our three largest categories: scotch, tequila and
beer.
-
Premium-plus
brands comprised 63% of reported net sales, a 7 percentage point
increase from fiscal 19.
-
Total trade market share grew or held in over
70%(1)
of total net sales value in measured
markets.
Optimisation of portfolio through acquisitions and
disposals
-
Acquired
Mr Black, a leading Australian premium coffee liqueur, Balcones
Distilling, a Texas craft distiller and one of the leading
producers of American single malt whiskey and Don Papa Rum, a
super-premium, dark rum from the Philippines.
-
Completed
the sale of Guinness Cameroun S.A., disposed of Archers and
completed the disposal and franchising of a portfolio of brands in
India.
Invested to sustain long-term growth
-
Increased
organic marketing investment by 5.6%, reflecting strong, consistent
investment in our brands.
-
Invested
£1.2 billion of capital expenditure (capex) in supply
capacity, sustainability, digital capabilities and consumer
experiences.
Continued cash flow generation and strong balance
sheet
-
Net
cash flow from operating activities declined £0.9 billion to
£3.0 billion.
-
Free
cash flow of £1.8 billion, declined £1.0 billion as
strong growth in operating profit and favourable foreign exchange
impacts were more than offset by higher year-on-year working
capital outflows, tax and interest payments, and capital
investment. Increased working capital reflects normalisation of
creditors relative to fiscal 22 as our growth rate moderated in
fiscal 23.
-
Strong balance sheet, with leverage
ratio(2)
of 2.6x as at 30 June 2023, at the
lower end of our target range, as a result of strong operating
profit performance.
Continued progress in delivering Society 2030: Spirit of Progress
ESG goals and doing business the right way
-
Continued
to reduce our absolute Scope 1 and 2 greenhouse gas emissions,
achieving a further 5.4% reduction versus fiscal 22 and a
cumulative 14.7% improvement from our 2020 baseline.
-
SMASHED
programme now live in 38 countries, and educated over 1.9 million
young people, parents and teachers on the impact of underage
drinking in fiscal 23, bringing the total to more than 3.7 million
to date.
Continued creation of long-term shareholder value
-
Increased
basic eps by 17.6% to 164.9 pence and pre-exceptional eps by 7.6%
to 163.5 pence.
-
Increased
recommended final dividend by 5% to 49.17 pence per
share.
-
Annualised
total shareholder return was -2%, mainly driven by lower
year-on-year share price. Total shareholder return, for the 5-year
and 10-year periods of 7% and 9% respectively, remains
strong.
-
Completed
a total of £1.4 billion return of capital in fiscal 23, which
included £0.9 billion related to the completion of our
£4.5 billion multi-year programme, and returned an additional
£0.5 billion during the second half. Today we announced a new
return of capital programme of up to $1 billion.
-
Starting in fiscal 24, in line with reporting
requirements the functional currency of Diageo plc has changed from
sterling to the US dollar. Diageo has also changed its presentation
currency to US dollar.(3)
See page 48 for explanation and reconciliation of non-GAAP
measures, including organic net sales, organic marketing
investment, organic operating profit, free cash flow, eps before
exceptionals, ROIC, adjusted net debt, adjusted EBITDA and tax rate
before exceptional items.
(1)Internal
estimates incorporating Nielsen, Association of Canadian
Distillers, Dichter & Neira, Frontline, INTAGE, IRI, ISCAM,
NABCA, Scentia, State Monopolies, TRAC, IPSOS and other third-party
providers. All analysis of data has been applied with a tolerance
of +/- 3 bps. Percentages represent percent of markets by total
Diageo net sales contribution that have held or gained total trade
share fiscal year to date. Measured markets indicate a market where
we have purchased any market share data. Market share data may
include beer, wine, spirits or other elements. Measured market net
sales value sums to 87% of total Diageo net sales value in fiscal
23. Effective fiscal 23, market share now reflects total on and off
trade.
(2)Ratio
of adjusted net borrowings to adjusted EBITDA. For further details
see page 57.
(3)For
further details, please see pages 7-8 and 47.
Debra Crew, Chief Executive, said:
We have delivered strong fiscal 23 full-year results, with organic
net sales growth of 6% and organic operating profit growth of 7%,
both within our medium-term guidance. We expanded organic operating
margin by 15 basis points in a challenging cost environment while
continuing to invest in the business. These results demonstrate
Diageo’s ability to consistently deliver resilient
performance, even in challenging macro environments. I want to
thank my colleagues, nearly 30,000 globally, for their dedication,
creativity and agility in delivering these results. I am also proud
of how our Diageo family has come together in recent weeks
following the loss of our much loved and respected former CEO, Sir
Ivan Menezes.
In fiscal 23, we drove double-digit organic net sales growth in
scotch, tequila, and Guinness, with our premium-plus brands
contributing 57% of overall organic net sales growth. We delivered
strong growth in four of our five regions, with Europe and Asia
Pacific growing double-digit. North America delivered stable
performance as the US spirits industry continued to normalise
post-pandemic, and we lapped strong comparators, particularly in
the second half of fiscal 23. Globally, we gained or held share in
over 70%(1)
of total net sales value in our
measured markets in fiscal 23.
Our culture of everyday efficiency and strong pipeline of
productivity initiatives drove £450 million of savings in
fiscal 23, fuelling sustained investment in brand building. Our
revenue growth management capabilities, deep consumer insights, and
smart reinvestment enabled us to take strategic pricing actions
with precision and effectiveness. Through free cash flow delivery,
we increased our capital expenditure, acquired a number of brands
to strengthen our exposure to attractive categories and bolstered
our investment in maturing stock in fiscal 23, positioning us well
for sustainable, long-term growth.
Looking ahead to fiscal 24, I expect operating environment
challenges to persist, with continued cost pressure and ongoing
geopolitical and macroeconomic uncertainty. This requires us to
move with greater speed and agility. My near term opportunities to
drive the business focus on bolder and faster innovation, stepping
up operational excellence to meet consumers' evolving tastes and
preferences while driving scotch, tequila and
Guinness.
Fiscal 24 marks the start of Diageo's next stage of evolution, and
it is an incredible privilege to be leading the company through it.
I believe total beverage alcohol (TBA) is an attractive sector
underpinned by strong consumer fundamentals, including population
growth, increased spirits penetration, and resilience in
premiumisation globally. I see a long runway of future growth
opportunities for Diageo to go after with our winning strategy.
And, I firmly believe we have an advantaged portfolio to capitalise
on, to drive sustainable long-term growth and generate value for
shareholders. I am excited to work with our teams around the world
to capture the opportunities ahead.
Financial performance
|
|
Volume (equivalent units)
|
|
Operating profit
|
|
Earnings per share (eps)
|
|
EU243.4m
|
|
|
|
£4,632m
|
|
|
|
164.9p
|
|
|
|
(F22: EU 263.0m)
|
|
|
|
(F22: £4,409m)
|
|
|
|
(F22: 140.2p)
|
|
|
|
Reported movement
|
(7)%
|
↓
|
|
Reported movement
|
5%
|
↑
|
|
Reported movement
|
18%
|
↑
|
|
Organic movement(2)
|
(1)%
|
↓
|
|
Organic movement(2)
|
7%
|
↑
|
|
Eps before exceptional items(2)
|
8%
|
↑
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net sales
|
|
Net cash from operating activities
|
|
Total recommended dividend
per share(3)
|
|
£17,113m
|
|
|
|
£3,024m
|
|
|
|
80.00p
|
|
|
|
(F22: £15,452m)
|
|
|
|
(F22: £3,935m)
|
|
|
|
(F22: 76.18p)
|
|
|
|
Reported movement
|
11%
|
↑
|
|
F23 free cash flow(2)
£1,800m
|
|
|
|
Increase
|
5%
|
↑
|
|
Organic movement(2)
|
6%
|
↑
|
|
F22 free cash flow(2)
£2,783m
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1)Internal
estimates incorporating Nielsen, Association of Canadian
Distillers, Dichter & Neira, Frontline, INTAGE, IRI, ISCAM,
NABCA, Scentia, State Monopolies, TRAC, IPSOS and other third-party
providers. All analysis of data has been applied with a tolerance
of +/- 3 bps. Percentages represent percent of markets by total
Diageo net sales contribution that have held or gained total trade
(on and off trade) share fiscal year to date. Measured markets
indicate a market where we have purchased any market share data.
Market share data may include beer, wine, spirits or other
elements. Measured market net sales value sums to 87% of total
Diageo net sales value in fiscal 23. Effective fiscal 23, market
share now reflects total on and off trade.
(2)See page 48 for explanation and reconciliation of non-GAAP
measures.
(3)Includes recommended final dividend of 49.17p.
Key financial
information
For the year ended 30 June 2023
Summary financial information
|
P12
|
2023
|
2022
|
Organic growth
%
|
Reported growth
%
|
Volume
|
EUm
|
243.4
|
263.0
|
(1)
|
(7)
|
Net sales
|
£ million
|
17,113
|
15,452
|
6
|
11
|
Marketing
|
£ million
|
3,051
|
2,721
|
6
|
12
|
Operating profit before exceptional items
|
£ million
|
5,254
|
4,797
|
7
|
10
|
Exceptional
operating items(1)
|
£ million
|
(622)
|
(388)
|
|
|
Operating profit
|
£ million
|
4,632
|
4,409
|
|
5
|
Share of associate and joint venture profit after tax
|
£ million
|
370
|
417
|
|
(11)
|
Non-operating
exceptional items(1)
|
£ million
|
328
|
(17)
|
|
|
Net finance charges
|
£ million
|
(594)
|
(422)
|
|
|
Exceptional
taxation credit(1)
|
£ million
|
186
|
31
|
|
|
Tax rate including exceptional items
|
%
|
20.5
|
23.9
|
|
(14)
|
Tax rate before exceptional items
|
%
|
23.0
|
22.5
|
|
2
|
Profit attributable to parent company’s
shareholders
|
£ million
|
3,734
|
3,249
|
|
15
|
Basic earnings per share
|
pence
|
164.9
|
140.2
|
|
18
|
Basic earnings per share before exceptional items
|
pence
|
163.5
|
151.9
|
|
8
|
Recommended full year dividend
|
pence
|
80.00
|
76.18
|
|
5
|
(1)For
further details on exceptional items see pages 22 and
34-35.
Reported growth by region
|
Volume
|
Net sales
|
Marketing
|
Operating profit before exceptional items
|
Operating profit
|
|
%
|
EUm
|
%
|
£ million
|
%
|
£ million
|
%
|
£ million
|
%
|
£ million
|
North America
|
(4)
|
(2.4)
|
11
|
663
|
13
|
160
|
10
|
235
|
6
|
139
|
Europe
|
—
|
0.1
|
11
|
357
|
10
|
58
|
9
|
88
|
26
|
226
|
Asia Pacific
|
(14)
|
(13.4)
|
11
|
316
|
11
|
56
|
27
|
194
|
(8)
|
(38)
|
Latin America and Caribbean
|
(3)
|
(0.9)
|
18
|
274
|
22
|
53
|
23
|
123
|
23
|
123
|
Africa
|
(8)
|
(3.0)
|
1
|
17
|
(2)
|
(4)
|
(30)
|
(95)
|
(44)
|
(139)
|
Corporate
|
—
|
—
|
63
|
34
|
58
|
7
|
(37)
|
(88)
|
(37)
|
(88)
|
Diageo
|
(7)
|
(19.6)
|
11
|
1,661
|
12
|
330
|
10
|
457
|
5
|
223
|
Organic growth by region
|
Volume
|
Net sales
|
Marketing
|
Operating profit before exceptional items
|
|
%
|
EUm
|
%
|
£ million
|
%
|
£ million
|
%
|
£ million
|
North America
|
(5)
|
(2.5)
|
—
|
11
|
2
|
22
|
(2)
|
(57)
|
Europe
|
—
|
0.1
|
11
|
347
|
7
|
42
|
11
|
103
|
Asia Pacific
|
5
|
3.9
|
13
|
353
|
9
|
46
|
29
|
200
|
Latin America and Caribbean
|
(3)
|
(0.9)
|
9
|
142
|
14
|
34
|
12
|
62
|
Africa
|
(7)
|
(2.4)
|
5
|
83
|
2
|
4
|
12
|
37
|
Corporate
|
—
|
—
|
61
|
33
|
36
|
4
|
(9)
|
(24)
|
Diageo
|
(1)
|
(1.8)
|
6
|
969
|
6
|
152
|
7
|
321
|
Fiscal 19 to fiscal 23 growth
|
|
Reported net sales growth %(1)
|
Net sales growth on a constant basis %(1)
|
|
Organic volume CAGR %(2)
|
Organic net sales CAGR %(2)
|
North America
|
52
|
41
|
|
2
|
9
|
Europe
|
21
|
30
|
|
3
|
7
|
Asia Pacific
|
19
|
24
|
|
1
|
6
|
Latin America and Caribbean
|
59
|
62
|
|
4
|
15
|
Africa
|
6
|
30
|
|
2
|
8
|
Corporate
|
66
|
62
|
|
—
|
14
|
Diageo
|
33
|
35
|
|
2
|
8
|
See
page 48 for explanation and reconciliation of non-GAAP
measures
(1)For
further details on fiscal 19 to fiscal 23 growth on a constant
basis see pages 49-52.
(2)Fiscal
19 to fiscal 23 CAGR indicative. Calculated by applying each
year’s individual organic growth rates.
Net sales (£ million)
Reported net sales grew 10.7%
Organic net sales grew 6.5%
Reported net sales grew 10.7%, driven by strong organic growth and
favourable foreign exchange impacts.
Organic net sales growth of 6.5% reflects 7.3 percentage points of
positive price/mix and a decline in organic volume of 0.8%. Four
out of five regions delivered growth, despite lapping strong
double-digit growth at the group level in fiscal 22. Price/mix was
driven by price increases and premiumisation.
Net sales
|
£ million
|
2022
|
15,452
|
Exchange(1)
|
702
|
Acquisitions and disposals
|
(114)
|
Hyperinflation(2)
|
104
|
Volume
|
(114)
|
Price/mix
|
1,083
|
2023
|
17,113
|
(1)Exchange
rate movements reflect the adjustment to recalculate the reported
results as if they had been generated at the prior period weighted
average exchange rates.
(2)See
pages 36 and 49-52 for details of hyperinflation
adjustment.
Operating profit (£ million)
Reported operating profit grew 5.1%, mainly driven by growth in
organic operating profit and positive impacts from exchange rate
movements. These favourable items were largely offset by the
negative impact of exceptional operating items, primarily non-cash
impairments related to India and the supply chain agility
programme.
Organic operating profit grew 7.0%, ahead of organic net sales
growth, driven by growth across all regions except North
America.
Operating profit
|
£ million
|
2022
|
4,409
|
Exceptional
operating items(1)
|
(234)
|
Exchange
|
122
|
Acquisitions and disposals
|
(61)
|
FVR(2)
|
53
|
Hyperinflation(3)
|
22
|
Organic movement
|
321
|
2023
|
4,632
|
(1)For
further details on exceptional operating items see pages 22 and
34-35.
(2)Fair
value remeasurements. For further details see page 22.
(3)See
pages 36 and 49-52 for details of hyperinflation
adjustment.
Operating margin (%)
Reported operating margin declined by 147bps
Organic operating margin expanded by 15bps
Reported operating margin declined by 147bps, with organic
operating margin expansion more than offset by exceptional
operating items, negative impact of foreign exchange, acquisitions,
disposals and other items.
Organic operating margin expanded by 15bps, reflecting disciplined
cost management despite inflation. Strong operating margin
expansion in Asia Pacific, Africa and Latin America and Caribbean
was partially offset by declines in North America and
Europe.
Organic gross margin declined by 97bps, primarily driven by cost
pressures. Price increases more than offset the absolute impact of
cost inflation.
Operating margin
|
ppt
|
2022(1)
|
28.5
|
Exceptional
operating items(2)
|
(1.12)
|
Exchange
|
(0.58)
|
Acquisitions and disposals
|
(0.15)
|
Other(3)
|
0.23
|
Gross margin
|
(0.97)
|
Marketing
|
0.14
|
Other operating items
|
0.98
|
2023(1)
|
27.1
|
(1)Operating
margin in waterfall is rounded to nearest decimal
place.
(2)For
further details on exceptional operating items see pages 22 and
34-35.
(3)Fair
value remeasurements and hyperinflation adjustment. For further
details on fair value remeasurements see page 22. See pages 36 and
49-52 for details of hyperinflation adjustment.
Basic earnings per share (pence)
Basic eps increased 17.6% from 140.2 pence to 164.9
pence
Basic eps before exceptional items(1)
increased 7.6% from 151.9 pence to
163.5 pence
Basic eps increased 24.7 pence, mainly driven by organic operating
profit growth and exceptional items, partially offset by increased
finance charges and higher tax.
Basic eps before exceptional items increased 11.6
pence.
(
Basic earnings per share
|
pence
|
2022
|
140.2
|
Exceptional
items after tax(2)
|
13.1
|
Exchange on operating profit
|
5.3
|
Acquisitions
and disposals(3)
|
(1.7)
|
Organic operating profit
|
13.8
|
Associates and joint ventures
|
(2.0)
|
Finance
charges(4)
|
(5.5)
|
Tax(5)
|
(4.3)
|
Share
buyback(3)
|
2.0
|
Non-controlling interests
|
0.8
|
FVR(6)
|
2.3
|
Hyperinflation
(operating profit)(7)
|
0.9
|
2023
|
164.9
|
(1)See
page 48 for explanation of the calculation and use of non-GAAP
measures.
(2)For
further details on exceptional items see pages 22 and
34-35.
(3)Includes finance charges net of tax.
(4)Excludes
finance charges related to acquisitions, disposals, share buybacks
and includes finance charges related to hyperinflation
adjustments.
(5)Excludes
tax related to acquisitions, disposals and share
buybacks.
(6)Fair
value remeasurements. For further details see page 22.
(7)Operating
profit hyperinflation adjustment movement was £12 million
compared to fiscal 22 (F23 – £22 million; F22 –
£10 million).
Net cash from operating activities and free cash flow (£
million)
Generated £3,024 million net cash from operating
activities(1)
and £1,800 million free cash
flow
Net cash from operating activities was £3,024 million, a
decrease of £911 million compared to fiscal 22. Free cash flow
declined by £983 million to £1,800 million.
Free cash flow declined as strong growth in operating profit and
favourable foreign exchange impacts were more than offset by higher
year-on-year working capital outflows, tax payments, interest paid
and capital investment.
The higher year-on-year working capital outflow was
primarily driven by normalisation of
creditors relative to fiscal 22 as our growth rate moderated in
fiscal 23.
The additional tax payments were the result of increased profit
impacting tax instalments and higher balancing
payments. The increase in
interest paid reflects the higher interest rate environment
globally
Free cash flow
|
£ million
|
F22 Net cash from operating activities
|
3,935
|
F22 Capex and movements in loans and other investments
|
(1,152)
|
F22 Free cash flow
|
2,783
|
Exchange(2)
|
122
|
Operating
profit(3)
|
384
|
Working
capital(4)
|
(996)
|
Capex
|
(87)
|
Tax
|
(252)
|
Interest
|
(226)
|
Other(5)
|
72
|
F23 Free cash flow
|
1,800
|
F23 Capex and movements in loans and other investments
|
1,224
|
F23 Net cash from operating activities
|
3,024
|
(1)Net
cash from operating activities excludes net capex (2023 –
£(1,167) million; 2022 – £(1,080) million) and
movements in loans and other investments.
(2)Exchange
on operating profit before exceptional items.
(3)Operating profit excludes exchange, depreciation and
amortisation, post employment charges of £36 million and other
non-cash items.
(4)Working capital movement includes maturing
inventory.
(5)Other
items include dividends received from associates and joint
ventures, movements in loans and other investments and post
employment payments.
Return on average invested capital
(%)(1)
ROIC decreased 50bps
ROIC decreased 50bps, mainly driven by increased capex, maturing
stock investment and continued portfolio optimisation through
acquisitions and disposals. The decline was partially offset by
higher organic operating profit growth, net of higher
tax.
Return on average invested capital
|
ppt
|
2022
|
16.8
|
Exchange
|
0.01
|
Acquisitions and disposals
|
(0.39)
|
Organic operating profit
|
1.32
|
Associates and joint ventures
|
(0.33)
|
Tax
|
(0.46)
|
Other
|
(0.65)
|
2023
|
16.3
|
(1)ROIC
calculation excludes exceptional operating items from operating
profit. For further details on ROIC see page 56.
Fiscal 23 to fiscal 25 medium-term guidance
Organic net sales and organic operating profit
We believe in the fundamental strength of our business and expect
our advantaged portfolio to benefit from international spirits
continuing to gain share of TBA, premiumisation, and continued
investment in marketing and innovation. Our portfolio is
well-positioned across categories, geographies and price points. We
will use our deep understanding of consumers to quickly adapt to
changes in trends and behaviours while investing in marketing and
innovation and leveraging our revenue growth management
capabilities, including strategic pricing actions.
We continue to expect to deliver our medium-term guidance of
consistent organic net sales growth in the range of 5% to 7% and
sustainable organic operating profit growth in the range of 6% to
9%.
Fiscal 24 outlook
Organic net sales growth
In fiscal 23, strong net sales growth in the first half was
followed by moderation in the second half. In the first half of
fiscal 24, despite a tougher comparator, we expect gradual
improvement from the second half of fiscal 23. We expect our
organic net sales growth to accelerate in the second half of fiscal
24, given the softer comparator.
Organic operating profit growth
In a challenging, albeit moderating, inflationary environment, we
will continue to focus on revenue growth management, including
strategic pricing actions and everyday efficiency. We continue to
expect organic operating margin to benefit from premiumisation
trends and operating leverage while investing strongly in
marketing. In line with organic net sales growth, we expect organic
operating profit growth in fiscal 24 to improve from the second
half of fiscal 23 and accelerate gradually through fiscal
24.
Taxation
We expect the tax rate before exceptional items to be in the region
of 24% in fiscal 24.
Effective interest rate
We expect the effective interest rate to be just above 4% in fiscal
24.
Supply Chain Agility Programme
In July 2022, we announced our five-year programme to build a more
agile and sustainable business by strengthening our end-to-end
supply chain and making it fit for the future while driving
productivity savings. The total implementation cost is expected to
be up to $650 million (£500 million) which will comprise
non-cash items and one-off expenses, the majority of which are
expected to be recognised as exceptional operating items. The
programme commenced in fiscal 23, and an exceptional charge was
accounted for primarily relating to accelerated depreciation of
assets and impairment of property, plant, and equipment directly
attributable to the programme in North America and in India. Please
see page 34 for details.
We expect the savings delivered from the supply chain agility
programme to be incremental to our ongoing annual gross
productivity savings (expected to be around $1.5 billion (£1.2
billion) in the period from fiscal 22 to fiscal 24). The programme
is expected to have a five-year payback period, with most savings
delivered in fiscal 25 and beyond.
Capital expenditure and free cash flow
In fiscal 24, we continue to expect capital expenditure for the
full year to be in the range of $1.3-1.5 billion (£1.0-1.2
billion). We expect these levels of spend to continue in the coming
years, but then decline again to historic levels as a percentage of
net sales starting in fiscal 27. We expect cash flow to grow
organically in fiscal 24 while we continue to invest in maturing
stock to support long-term sustainable growth.
Functional/presentation currency
Starting 1 July 2023, in line with reporting requirements the
functional currency of Diageo plc has changed from sterling to US
dollar which is applied prospectively. This is because the group's
share of net sales and expenses in the United States and other
countries whose currencies correlate closely with the US dollar has
been increasing over the years, and that trend is expected to
continue in line with the group's strategic focus. Diageo has also
decided to change its presentation currency to US dollar with
effect from 1 July 2023, applied retrospectively, as it believes
that this change will provide better alignment of the reporting of
performance with its business exposures.
Commencing with the interim dividend to be declared in January 2024
(subject to approval of changes to the Articles of Association to
be proposed at the 2023 Annual General Meeting), Diageo's future
dividends will be declared in US dollar and remain in line with the
group's existing progressive dividend policy. Holders of ordinary
shares will continue to receive their dividends in sterling but
will have the option to elect to receive their dividends in US
dollar instead. Holders of American Depositary Receipts (ADR) will
continue to receive dividends in US dollar.
Selected historical financial information included in the
consolidated financial statements of Diageo for the years ended 30
June 2023, 30 June 2022 and 30 June 2021, and for the six months
ended 31 December 2022 and 31 December 2021 (collectively the
'Re-presented Financial Information') will be re-presented in US
dollar and made available on Diageo's Investor Relations website in
advance of the company's first half fiscal 24 results
announcement.
Notes to the business and financial review
Unless otherwise stated:
-
movements
in results are for the year ended 30 June 2023 compared to the year
ended 30 June 2022;
-
commentary
below refers to organic movements unless stated as
reported;
-
volume
is in millions of equivalent units (EUm);
-
net
sales are sales after deducting excise duties;
-
percentage
movements are organic movements unless stated as
reported;
-
growth
is organic net sales movement unless states otherwise;
and
-
share refers to value share, except for India
which is volume share.
See page 48 for explanation of
the calculation and use of non-GAAP measures.
Business review
North America
●
Reported net sales
grew 11%, primarily driven by a
favourable foreign exchange impact from the strengthening US
dollar.
●
Organic net sales
were flat as growth in Canada and
Diageo Beer Company USA (DBC USA) were offset by a decline in US
Spirits.
●
Strong price/mix
growth was offset by a decline in
volume, while the region held share of TBA.
●
US Spirits net sales
declined 1%, lapping strong
double-digit growth impacted by distributor stock replenishment and
increased inventories of imported products in fiscal 22. Depletion
growth was approximately two percentage points ahead of shipment
growth in fiscal 23, with some variation across brands. Overall
inventory levels at distributors at the end of fiscal 23 were in
line with historical levels.
●
DBC USA net sales
grew 1% reflecting strong growth in
Guinness, partially offset by a decline in Smirnoff flavoured malt
beverages.
●
Organic operating margin
declined by 101bps, primarily driven
by cost inflation and an adverse category mix. Strategic price
increases and productivity savings more than offset the absolute
impact of cost inflation.
●
Marketing investment
grew 2% as we continue to invest and
support growth across key categories.
Market highlights - US Spirits:
●
Tequila net sales grew 15%, and drove significant share
gains in both the spirits industry and tequila category. Casamigos
net sales grew 14% driven by strong price/mix and volume growth,
and the launch of Casamigos Cristalino. Don Julio net sales grew
13%, primarily driven by aged variants and the launch of
ultra-premium Don Julio Rosado Reposado. Both Casamigos and Don
Julio shipments grew ahead of depletions as supply availability
enabled distributors to increase inventory to more optimal
levels.
●
Crown Royal whisky net sales declined 10%, lapping inventory
replenishment in fiscal 22 when the brand recovered from supply
constraints. Crown Royal gained double-digit share of the Canadian
whisky category, and depletions grew ahead of shipments in fiscal
23.
●
Vodka net sales declined 7%, primarily due to
Cîroc, partially offset by growth in Smirnoff. Smirnoff growth
of 4% was driven by core and flavoured variants. Ketel One net
sales were flat, reflecting growth in the core variant offset by a
decline in Ketel One Botanicals. Cîroc net sales declined 32%
as consumers shifted into other spirits
categories.
●
Johnnie Walker
net sales declined 13%. Johnnie Walker
gained share of the scotch category driven by Johnnie Walker Black
Label and Johnnie Walker Blue Label, and depletions grew ahead of
shipments.
●
Rum net sales declined 1%, primarily due to Captain
Morgan, which declined 2%. Zacapa grew 13% driven by super-premium
and luxury variants.
●
Bulleit whiskey net sales declined 6%, lapping inventory
replenishment in fiscal 22 when the brand recovered from supply
constraints. Bulleit whiskey gained both spirits industry and US
whiskey category share, and depletions grew
double-digit.
●
Buchanan's net sales grew 10%, primarily driven by the launch
of Buchanan's Pineapple, an innovation that gained spirits industry
share. Buchanan's scotch declined 4%, but gained both spirits
industry and scotch category share, and depletions grew ahead of
shipments.
●
Single Malts
net sales grew 25%, primarily driven
by ultra-premium Lagavulin 16YO and luxury innovation Lagavulin
11YO Charred Oak Cask.
●
Spirit-based ready to
drink (RTD) net sales declined
44% primarily due to lapping the launch of Crown Royal RTD in
fiscal 22 and Loyal 9 underperformance in certain US
states.
Key financials (£ million):
|
|
2022
|
Exchange
|
Acquisitions
and
disposals
|
Organic movement
|
Other(1)
|
2023
|
Reported movement%
|
Net sales
|
6,095
|
632
|
20
|
11
|
—
|
6,758
|
11
|
Marketing
|
1,200
|
122
|
15
|
22
|
1
|
1,360
|
13
|
Operating profit before exceptional items
|
2,454
|
249
|
(12)
|
(57)
|
55
|
2,689
|
10
|
Exceptional
operating items(2)
|
(1)
|
|
|
|
|
(97)
|
|
Operating profit
|
2,453
|
|
|
|
|
2,592
|
6
|
Markets and categories:
|
|
|
|
|
Global giants, local stars and reserve(5):
|
|
Organic
volume
movement
|
Reported
volume
movement
|
Organic
net sales
movement
|
Reported
net sales
movement
|
|
|
Organic
volume
movement(6)
|
Organic
net sales
movement
|
Reported
net sales
movement
|
|
%
|
%
|
%
|
%
|
|
|
%
|
%
|
%
|
North
America(3)
|
(5)
|
(4)
|
—
|
11
|
|
Crown Royal
|
(12)
|
(10)
|
—
|
|
|
|
|
|
|
Don Julio
|
8
|
13
|
25
|
US
Spirits(3)
|
(6)
|
(6)
|
(1)
|
10
|
|
Casamigos(7)
|
6
|
13
|
26
|
DBC
USA(4)
|
(3)
|
(3)
|
1
|
12
|
|
Johnnie Walker
|
(5)
|
(10)
|
(1)
|
Canada
|
(2)
|
(2)
|
4
|
8
|
|
Smirnoff
|
(1)
|
4
|
14
|
|
|
|
|
|
|
Captain Morgan
|
(5)
|
(1)
|
9
|
Spirits(3)
|
(5)
|
(4)
|
—
|
11
|
|
Ketel One
|
(3)
|
—
|
11
|
Beer
|
(2)
|
(2)
|
2
|
12
|
|
Guinness
|
4
|
9
|
20
|
Ready to drink
|
(11)
|
(11)
|
(16)
|
(10)
|
|
Baileys
|
(4)
|
1
|
11
|
|
|
|
|
|
|
Bulleit
whiskey(8)
|
(8)
|
(6)
|
4
|
|
|
|
|
|
|
Buchanan's
|
—
|
9
|
21
|
|
|
|
North America contributed
|
|
North America organic net sales were flat in fiscal 23
|
39% of Diageo
reported net sales in fiscal 23
|
|
|
(1)Fair value remeasurements. For further details see page
22.
(2)For further details on exceptional operating items see pages 22
and 34-35.
(3)Reported volume movement has been impacted by acquisitions
and/or disposals. For further details see pages 50-53.
(4)Certain spirits-based ready to drink products in certain states
are distributed through DBC USA and those net sales are captured
within DBC USA.
(5)Spirits brands excluding ready to drink and non-alcoholic
variants.
(6)Organic equals reported volume movement.
(7)Casamigos trademark includes both tequila and
mezcal.
(8)Bulleit whiskey excludes Bulleit Crafted Cocktails.
Europe
●
Reported net sales
grew 11%, driven by organic growth and
the hyperinflation adjustment(1)
related to Turkey, partially offset by
an unfavourable impact from foreign exchange.
●
Organic net sales
grew 11%, driven by double-digit
growth across most markets. Growth was mainly driven by price/mix,
while holding volume.
●
Price/mix was primarily driven by strong price increases
across all markets, and supported by positive mix in beer and
scotch.
●
Spirits net sales
grew 10%, driven by growth in scotch,
vodka, tequila. Johnnie Walker grew 29% driven by Northern Europe,
Southern Europe and Travel Retail.
●
Beer net sales
grew 18%, driven by price increases
and volume growth. Guinness net sales grew 20% and gained share in
the on-trade in Great Britain and Ireland.
●
Organic operating margin
declined by 13bps, primarily driven by
cost inflation, partially offset by price increases, improved
category mix and productivity savings.
●
Marketing investment
grew 7%, with focused investment in
Tanqueray, Johnnie Walker, Baileys and
Guinness.
Market highlights:
●
Great Britain
net sales grew 7%, mostly driven by
strong performance in Guinness with strong market share gains.
Spirits net sales growth was driven by tequila, vodka and RTDs,
partially offset by gin.
●
Northern Europe
net sales grew 11%. Growth was
primarily driven by scotch with strong double-digit growth in
Johnnie Walker, and strong growth in vodka and tequila. Spirits
gained market share.
●
Southern Europe
net sales grew 12%, led by strong
performance in scotch, in addition to tequila and gin. Growth
reflected continued recovery in the on-trade and increased tourism,
alongside market share gains in spirits.
●
Ireland net sales grew 16%, primarily driven by growth in
Guinness reflecting share gains in a recovering on-
trade.
●
Eastern Europe
net sales declined 3%, due to the
suspension of exports to and sales in Russia as announced in March
2022 and the winding down of its operations announced in June 2022.
In the rest of the market, spirits grew double-digit and gained
market share primarily driven by Johnnie Walker.
●
Turkey net sales grew 38%, with volume growth of 9%.
Growth was driven by price increases in response to inflation and
higher excise duties. Growth was broad-based, led by scotch, vodka
and raki.
Key financials (£ million):
|
|
2022
|
Exchange
|
Acquisitions
and
disposals
|
Organic movement
|
Other(2)
|
Hyperinflation(1)
|
2023
|
Reported movement
%
|
Net sales
|
3,212
|
(85)
|
(9)
|
347
|
—
|
104
|
3,569
|
11
|
Marketing
|
577
|
3
|
2
|
42
|
—
|
11
|
635
|
10
|
Operating profit before exceptional items
|
1,017
|
5
|
(31)
|
103
|
(11)
|
22
|
1,105
|
9
|
Exceptional
operating items(3)
|
(146)
|
|
|
|
|
|
(8)
|
|
Operating profit
|
871
|
|
|
|
|
|
1,097
|
26
|
(1)See
pages 36 and 49-52 for details of hyperinflation
adjustment.
(2)Fair
value remeasurements. For further details see page 22.
(3)Exceptional
items are in respect of Diageo’s decision, announced on 28
June 2022, to wind down its operations in Russia. For further
details on exceptional operating items see pages 22 and
34-35.
Markets and categories:
|
|
|
|
|
Global giants and local stars(2):
|
|
Organic
volume
movement
|
Reported
volume
movement
|
Organic
net sales
movement
|
Reported
net sales
movement
|
|
|
Organicvolumemovement(3)
|
Organic
net sales
movement
|
Reported
net sales
movement
|
|
%
|
%
|
%
|
%
|
|
|
%
|
%
|
%
|
Europe(1)
|
—
|
—
|
11
|
11
|
|
Guinness
|
6
|
20
|
21
|
|
|
|
|
|
|
Johnnie Walker
|
18
|
29
|
25
|
Great
Britain(1)
|
(8)
|
(8)
|
7
|
6
|
|
Baileys
|
(3)
|
(1)
|
1
|
Southern
Europe(1)
|
4
|
5
|
12
|
13
|
|
Smirnoff
|
(1)
|
14
|
16
|
Northern
Europe(1)
|
8
|
6
|
11
|
12
|
|
Captain Morgan
|
—
|
9
|
10
|
Ireland(1)
|
3
|
3
|
16
|
18
|
|
Tanqueray
|
—
|
6
|
7
|
Eastern
Europe(1)
|
(15)
|
(15)
|
(3)
|
—
|
|
J&B
|
(7)
|
(1)
|
2
|
Turkey(1)
|
9
|
9
|
38
|
10
|
|
Yenì Raki
|
—
|
7
|
(10)
|
|
|
|
|
|
|
|
|
|
|
Spirits(1)
|
—
|
—
|
10
|
10
|
|
|
|
|
|
Beer
|
5
|
5
|
18
|
20
|
|
|
|
|
|
Ready
to drink(1)
|
(2)
|
(2)
|
10
|
12
|
|
|
|
|
|
|
|
|
Europe contributed
|
|
Europe organic net sales grew
|
21% of Diageo
reported net sales in fiscal 23
|
|
11% in fiscal
23
|
(1)Reported
volume movement has been impacted by acquisitions and/or disposals.
For further details see pages 48, 50, and 53.
(2)Spirits
brands excluding ready to drink and non-alcoholic
variants.
(3)Organic
equals reported volume movement, except for Tanqueray and J&B,
which had reported volume movement of 1% and (6)%
respectively.
Asia Pacific
●
Reported net sales
grew 11%, primarily reflecting strong
organic growth and a favourable impact from foreign
exchange.
●
Organic net sales grew 13%. All markets grew, except Greater China,
with strong double-digit growth in India, South East Asia, Travel
Retail Asia and Middle East and North Asia.
●
Price/mix of 7% was led by strong price increases across all
markets. Positive mix was driven by strength in premium-plus scotch
in most markets. Volume grew 8% in premium-plus price
tiers.
●
Spirits net sales
grew 14%, primarily driven by
double-digit growth in scotch, the region’s largest category.
IMFL whisky(1)
also contributed to growth, partially
offset by a decline in Chinese white spirits.
●
Organic operating margin expanded by 363bps as the benefits from the
continued recovery of Travel Retail, price increases and
operational efficiencies more than offset the impact of cost
inflation.
●
Marketing investment grew 9%, with focused investment in scotch in
South East Asia, India, and Greater China.
Market highlights:
●
India net sales grew 17%, driven by strong consumer
demand and continued premiumisation. IMFL whisky and scotch
delivered double-digit growth. Scotch growth was driven by Black
Dog, Johnnie Walker Black Label and Black &
White.
●
Greater China net sales declined 4%. Strong performance in
scotch was more than offset by a decline in Chinese white spirits
which continued to be impacted by Covid-19 restrictions, especially
in the on-trade. Scotch grew 13%, driven primarily by Taiwan, with
strong performance in the super-premium-plus segment led by Johnnie
Walker and The Singleton.
●
Australia net sales grew 2%, primarily driven by price
increases. Growth was led by rum, tequila and
beer.
●
South East Asia net sales grew 33%, benefitting from a strong
recovery following the easing of Covid-19 restrictions and strong
growth in the super-premium-plus segment. Scotch grew 31%, mostly
driven by Johnnie Walker premium variants, and single malts,
primarily The Singleton and Mortlach.
●
North Asia (Korea and Japan) net sales grew 15%, benefitting
from the recovery of the on-trade. Growth was primarily driven by
double-digit growth in Windsor and Johnnie Walker premium-plus
variants led by Johnnie Walker Blue Label and Johnnie Walker Black
Label.
●
Travel Retail Asia and Middle
East net sales grew 67%
primarily driven by Johnnie Walker premium-plus variants, led by
Johnnie Walker Blue Label and Johnnie Walker Black
Label.
Key financials (£ million):
|
|
2022
|
Exchange
|
Acquisitions
and
disposals
|
Organic movement
|
2023
|
Reported movement
%
|
Net sales
|
2,884
|
65
|
(102)
|
353
|
3,200
|
11
|
Marketing
|
490
|
10
|
—
|
46
|
546
|
11
|
Operating profit before exceptional items
|
711
|
15
|
(21)
|
200
|
905
|
27
|
Exceptional
operating items(2)
|
(241)
|
|
|
|
(473)
|
|
Operating profit
|
470
|
|
|
|
432
|
(8)
|
(1)Indian-Made Foreign Liquor (IMFL) whisky.
(2)For further details on exceptional operating items see pages 22
and 34-35.
Markets and categories:
|
|
|
|
|
Global giants, local stars and reserve(2):
|
|
Organic
volume
movement
|
Reported
volume
movement
|
Organic
net sales
movement
|
Reported
net sales
movement
|
|
|
Organicvolumemovement(3)
|
Organic
net sales
movement
|
Reported
net sales
movement
|
|
%
|
%
|
%
|
%
|
|
|
%
|
%
|
%
|
Asia
Pacific(1)
|
5
|
(14)
|
13
|
11
|
|
Johnnie Walker
|
13
|
29
|
30
|
|
|
|
|
|
|
Shui
Jing Fang(4)
|
(15)
|
(14)
|
(12)
|
India(1)
|
6
|
(18)
|
17
|
7
|
|
McDowell's
|
(1)
|
4
|
7
|
Greater China
|
(2)
|
(2)
|
(4)
|
(1)
|
|
Guinness
|
4
|
10
|
13
|
Australia
|
(10)
|
(10)
|
2
|
5
|
|
The Singleton
|
26
|
26
|
31
|
South
East Asia(1)
|
20
|
20
|
33
|
36
|
|
Smirnoff
|
8
|
15
|
19
|
North Asia
|
6
|
6
|
15
|
14
|
|
Windsor
|
29
|
41
|
42
|
Travel Retail Asia and Middle East
|
38
|
38
|
67
|
65
|
|
Black & White
|
28
|
36
|
39
|
|
|
|
|
|
|
|
|
|
|
Spirits(1)(2)
|
6
|
(15)
|
14
|
11
|
|
|
|
|
|
Beer
|
5
|
5
|
10
|
12
|
|
|
|
|
|
Ready to drink
|
(8)
|
(8)
|
1
|
4
|
|
|
|
|
|
|
|
|
Asia Pacific contributed
|
|
Asia Pacific organic net sales grew
|
19% of Diageo
reported net sales in fiscal 23
|
|
13% in fiscal
23
|
(1)Reported
volume movement has been impacted by acquisitions and/or disposals.
For further details see pages 50-53.
(2)Spirits
brands excluding ready to drink and non-alcoholic
variants.
(3)Organic equals reported volume movement.
(4)Growth
figures represent total Chinese white spirits of which Shui Jing
Fang is the principal brand.
Latin America and Caribbean
●
Reported net sales
grew 18%, reflecting organic growth
and a favourable impact from foreign exchange, mainly due to a
strengthening of the Mexican peso and Brazilian
real.
●
Organic net sales
grew 9%, with most markets delivering
growth, despite lapping strong double-digit growth in fiscal 22.
Growth was broad-based across price tiers, except for value, which
declined as a result of our premiumisation strategy. Strong
price/mix was partially offset by a 3% decline in volume, primarily
in the value price tier. Double-digit sales growth in the first
half of fiscal 23 was followed by inventory normalisation in the
second half.
●
Price/mix was driven by strong price increases across all
markets, and positive mix supported by the strength in premium-plus
scotch in most markets.
●
Spirits net sales
grew 11%, primarily led by
double-digit growth in scotch, particularly Johnnie Walker Black
Label, Johnnie Walker Red Label and Old Parr. Growth was also
driven by strong double-digit growth in Don Julio and
Smirnoff.
●
Organic operating margin
expanded by 72bps. The positive impact
of price increases, premiumisation, leverage on operating costs and
one-off tax benefits more than offset the increases in marketing
investment and cost inflation.
●
Marketing investment
grew 14%, ahead of organic net sales
growth, with increased investment in most
markets.
Market highlights:
●
Brazil net sales grew 8%, led by double-digit growth in
Johnnie Walker and Old Parr. Growth was driven by price increases
and higher marketing investment, leading to market share
growth.
●
Mexico net sales grew 9%, primarily driven by scotch and
tequila. Scotch growth was led by Johnnie Walker Red Label and
Johnnie Walker Black Label, driven by price increases. Tequila
growth was driven by price increases, the lapping of aged liquid
supply constraints in fiscal 22 and increased marketing
investment.
●
Central America and Caribbean
(CCA) net sales grew 14%,
mainly driven by scotch and tequila. Growth was driven by price
increases, premiumisation and continuing momentum in the on-trade.
Scotch growth was mostly driven by Johnnie Walker Black Label and
Buchanan's, supported by increased marketing investment. Tequila
growth was driven by Don Julio 1942.
●
South LAC (Argentina, Bolivia, Chile, Ecuador, Paraguay,
Peru and Uruguay) net sales grew 21%, primarily driven by scotch,
vodka and gin. Growth was driven by price increases and
premiumisation, partially offset by a decline in
volume.
●
Andean (Colombia and Venezuela) net sales declined 7%,
due to an adverse macroeconomic environment in Colombia. Strong
price increases and premiumisation were more than offset by a
decline in volume.
Key financials (£ million):
|
|
2022
|
Exchange
|
Acquisitions
and
disposals
|
Organic movement
|
Other
(1)
|
2023
|
Reported movement
%
|
Net sales
|
1,525
|
129
|
3
|
142
|
—
|
1,799
|
18
|
Marketing
|
243
|
18
|
1
|
34
|
—
|
296
|
22
|
Operating profit
|
538
|
52
|
—
|
62
|
9
|
661
|
23
|
(1)Fair
value remeasurements. For further details see page 22.
Markets and categories:
|
|
|
|
|
Global giants, local stars and reserve(3):
|
|
Organic
volume
movement
|
Reported
volume
movement
|
Organic
net sales
movement
|
Reported
net sales
movement
|
|
|
Organicvolumemovement(4)
|
Organic
net sales
movement
|
Reported
net sales
movement
|
|
%
|
%
|
%
|
%
|
|
|
%
|
%
|
%
|
Latin
America and Caribbean(1)
|
|
|
|
|
|
Johnnie Walker
|
4
|
16
|
23
|
(3)
|
(3)
|
9
|
18
|
|
Buchanan’s
|
(5)
|
6
|
11
|
|
|
|
|
|
|
Don Julio
|
6
|
22
|
40
|
Brazil(2)
|
(1)
|
3
|
8
|
29
|
|
Old Parr
|
10
|
20
|
26
|
Mexico(1)
|
(4)
|
(3)
|
9
|
30
|
|
Smirnoff
|
3
|
18
|
24
|
CCA
|
1
|
1
|
14
|
21
|
|
Black & White
|
(7)
|
13
|
26
|
South
LAC(2)
|
(3)
|
(11)
|
21
|
—
|
|
Tanqueray
|
—
|
—
|
5
|
Andean(1)
|
(24)
|
(24)
|
(7)
|
(13)
|
|
Baileys
|
(18)
|
(5)
|
1
|
|
|
|
|
|
|
|
|
|
|
Spirits(1)
|
(3)
|
(3)
|
11
|
19
|
|
|
|
|
|
Beer
|
9
|
9
|
16
|
25
|
|
|
|
|
|
Ready to drink
|
(13)
|
(13)
|
(7)
|
—
|
|
|
|
|
|
|
|
|
Latin America and Caribbean contributed
|
|
Latin America and Caribbean organic net sales grew
|
11% of Diageo
reported net sales in fiscal 23
|
|
9% in fiscal
23
|
(1)Reported volume movement has been impacted by acquisitions
and/or disposals. For further details see pages 50-53.
(2)From 1 July 2022 Uruguay and Paraguay domestic channels moved on
a management basis from PUB (Paraguay, Uruguay and Brazil) to PEBAC
(Peru, Ecuador, Bolivia, Argentina and Chile) and the new cluster
has been called South LAC. This reflects how management reviews
performance.
(3)Spirits brands excluding ready to drink and non-alcoholic
variants.
(4)Organic equals reported volume movement.
Africa
●
Reported net sales
grew 1%, primarily driven by organic
growth and disposals, mostly offset by an unfavourable impact from
foreign exchange.
●
Organic net sales
grew 5%, with growth across all
markets, except East Africa. Growth was driven by price increases,
partially offset by a decline in volume.
●
Price/mix of 12% was driven by price increases across all
markets and positive mix. Volume declines were primarily in the
value and standard price tiers.
●
Spirits net sales
grew 8%, driven by growth in
international spirits particularly Johnnie Walker Black Label, and
Orijin.
●
Beer net sales
grew 3%, with strong growth in Africa
Regional Markets and Nigeria, partially offset by a decline in East
Africa. Growth was primarily driven by Malta Guinness and Guinness,
which grew 22% and 7% respectively.
●
Organic operating margin
expanded by 126bps, primarily driven
by price increases, productivity savings, positive category mix and
lapping prior year one-off costs. These impacts were partially
offset by cost inflation.
●
Marketing investment grew 2%, focused on supporting spirits
premiumisation and Guinness.
Market highlights:
●
East Africa net sales declined 2%. Growth in spirits was more
than offset by a volume decline in beer following price and duty
increases. Spirits growth was primarily driven by scotch,
particularly Johnnie Walker.
●
Africa Regional Markets net sales grew 22% led by growth in beer,
primarily driven by Malta Guinness supported by price increases.
Spirits growth was primarily driven by Johnnie Walker Black
Label.
●
Nigeria net sales grew 11%. Growth was led by Guinness and
Orijin.
●
South Africa net sales grew 1%, primarily driven by growth in
tequila and rum, which offset declines in vodka and gin.
Super-premium-plus brands grew strongly at 38%.
Key financials (£ million):
|
|
2022
|
Exchange
|
Acquisitions
and
disposals
|
Organic movement
|
2023
|
Reported movement
%
|
Net sales
|
1,682
|
(40)
|
(26)
|
83
|
1,699
|
1
|
Marketing
|
199
|
(3)
|
(5)
|
4
|
195
|
(2)
|
Operating profit before exceptional items
|
315
|
(141)
|
9
|
37
|
220
|
(30)
|
Exceptional
operating items(1)
|
—
|
|
|
|
(44)
|
|
Operating profit
|
315
|
|
|
|
176
|
(44)
|
(1)For further details on exceptional operating items see pages 22
and 34-35.
Markets and categories:
|
|
|
|
|
Global giants and local stars(2):
|
|
Organic
volume
movement
|
Reported
volume
movement
|
Organic
net sales
movement
|
Reported
net sales
movement
|
|
|
Organicvolumemovement(3)
|
Organic
net sales
movement
|
Reported
net sales
movement
|
|
%
|
%
|
%
|
%
|
|
|
%
|
%
|
%
|
Africa(1)
|
(7)
|
(8)
|
5
|
1
|
|
Guinness
|
(8)
|
7
|
1
|
|
|
|
|
|
|
Johnnie Walker
|
5
|
11
|
8
|
East Africa
|
(7)
|
(7)
|
(2)
|
—
|
|
Smirnoff
|
(23)
|
(6)
|
(9)
|
Nigeria
|
(4)
|
(4)
|
11
|
12
|
|
|
|
|
|
Africa
Regional Markets(1)
|
(1)
|
(9)
|
22
|
(5)
|
|
Other beer:
|
South Africa
|
(18)
|
(18)
|
1
|
(3)
|
|
|
|
|
|
|
|
|
|
|
|
Malta
Guinness
|
(7)
|
22
|
2
|
Spirits(1)
|
(2)
|
(2)
|
8
|
7
|
|
Senator
|
(17)
|
(4)
|
(4)
|
Beer(1)
|
(13)
|
(14)
|
3
|
(3)
|
|
Tusker
|
(8)
|
(5)
|
(4)
|
Ready
to drink(1)
|
—
|
(4)
|
11
|
5
|
|
Serengeti
|
(7)
|
(1)
|
8
|
|
|
|
Africa contributed
|
|
Africa organic net sales grew
|
10% of Diageo
reported net sales in fiscal 23
|
|
5% in fiscal
23
|
(1)Reported
volume movement has been impacted by acquisitions and/or disposals.
For further details see pages 50-53.
(2)Spirits
brands excluding ready to drink and non-alcoholic
variants.
(3)Organic equals reported volume movement, except for Guinness and
Malta Guinness, which had reported volume movement of (9)% and (9)%
respectively.
Category and brand review
●
Spirits net sales
grew 6%, with flat volume. Growth was
across most categories, including double-digit performance in
scotch, tequila and IMFL whisky.
●
Scotch net sales
grew 12%, with 2% volume growth.
Growth was led by Johnnie Walker, with strong growth of 15%, and
scotch malts also grew strongly at 16%.
-
Johnnie Walker Black
Label grew 16%, with
particularly strong growth in Asia Pacific, where it grew
30%.
-
Johnnie Walker Blue
Label grew 3%, supported by the
return of Travel Retail.
-
Johnnie Walker Red Label
grew 16%, with double-digit growth in
all regions except Africa.
-
Scotch malts
grew 16%, primarily driven by strong
double-digit growth in Asia Pacific and North
America.
●
Tequila net sales
grew 19%, reflecting strong
performance of Don Julio and Casamigos which grew 20% and 16%
respectively, driven by North America.
●
Vodka net sales
grew 1% with a volume decline of 3%.
Declines in North America and Africa were offset by double-digit
growth across all other regions.
●
Rum net sales
grew 2% driven by Captain Morgan
growth across all regions except North America. Rum volume declined
7%.
●
Liqueurs net sales
declined 1%, driven by
Godiva.
●
Beer net sales
grew 9%, with growth in all regions
driven by strong performance from Guinness in Great Britain,
Ireland, North America and Africa.
●
Ready to drink net sales
were flat, with growth in Europe and
Africa offset by a decline in North America.
Key categories
|
Organicvolumemovement(1)%
|
Organic
net sales
movement
%
|
Reported
net sales
movement
%
|
Reported
net sales
by category
%
|
Spirits(2)
|
—
|
6
|
12
|
79
|
Scotch
|
2
|
12
|
16
|
25
|
Tequila
|
10
|
19
|
32
|
12
|
Vodka(3)(4)
|
(3)
|
1
|
7
|
9
|
Canadian
whisky(5)
|
(10)
|
(9)
|
—
|
6
|
Rum(4)
|
(7)
|
2
|
9
|
5
|
Liqueurs
|
(4)
|
(1)
|
3
|
5
|
Gin(4)
|
—
|
5
|
8
|
5
|
IMFL
whisky(5)
|
8
|
15
|
—
|
4
|
Chinese
white spirits(5)
|
(15)
|
(14)
|
(12)
|
3
|
US
whiskey(5)
|
(8)
|
(4)
|
7
|
2
|
Beer
|
(7)
|
9
|
9
|
15
|
Ready to drink
|
(6)
|
—
|
3
|
4
|
(1)Organic
equals reported volume movement except for spirits (7)%, tequila
11%, vodka (4)%, gin (1)%, IMFL whisky (20)%, US whiskey (7)%, beer
(8)% and ready to drink (7)%.
(2)Spirits
brands excluding ready to drink and non-alcoholic
variants.
(3)Vodka
includes Ketel One Botanical.
(4)Vodka,
rum and gin include IMFL variants.
(5)See
pages 9-10 for details of Canadian whisky, US whiskey and pages
13-14 for details of IMFL whisky and Chinese white
spirits.
Global giants, local stars and
reserve(1):
|
Organicvolumemovement(2)%
|
Organic
net sales
movement
%
|
Reported
net sales
movement
%
|
Global giants
|
|
|
|
Johnnie Walker
|
9
|
15
|
19
|
Guinness
|
1
|
16
|
17
|
Smirnoff
|
(2)
|
8
|
14
|
Baileys
|
(5)
|
—
|
5
|
Captain Morgan
|
(2)
|
5
|
11
|
Tanqueray
|
(4)
|
1
|
6
|
Local stars
|
|
|
|
Crown Royal
|
(12)
|
(10)
|
—
|
Buchanan’s
|
(3)
|
7
|
15
|
McDowell's
|
(1)
|
4
|
6
|
Shui
Jing Fang(3)
|
(15)
|
(14)
|
(12)
|
Old Parr
|
9
|
18
|
24
|
Black & White
|
2
|
20
|
28
|
J&B
|
(9)
|
(3)
|
—
|
Yenì Raki
|
—
|
8
|
(10)
|
Windsor
|
29
|
41
|
42
|
Bundaberg
|
—
|
18
|
21
|
Ypióca
|
(9)
|
7
|
21
|
Reserve
|
|
|
|
Don Julio
|
11
|
20
|
32
|
Casamigos(4)
|
7
|
15
|
27
|
Scotch malts
|
3
|
16
|
19
|
Ketel
One(5)
|
(3)
|
1
|
11
|
Bulleit
whiskey(6)
|
(9)
|
(6)
|
4
|
Cîroc vodka
|
(23)
|
(23)
|
(17)
|
|
|
|
|
(1)Brands
excluding ready to drink, non-alcoholic variants and beer except
Guinness.
(2)Organic
equals reported volume movement except for Guinness 0% and
McDowell's (2)%.
(3)Growth
figures represent total Chinese white spirits of which Shui Jing
Fang is the principal brand.
(4)Casamigos
trademark includes both tequila and mezcal.
(5)Ketel
One includes Ketel One vodka and Ketel One Botanical.
(6)Bulleit whiskey excludes Bulleit Crafted Cocktails.
Global
giants
39% of Diageo’s reported net sales and grew 10%.
Local
stars
18% of Diageo’s reported net sales and declined
2%.
Reserve
29% of Diageo’s reported net sales and grew 7%.
Additional financial information
Year ended 30 June 2023
|
2022
|
Exchange
(a)
|
Acquisitions and disposals
(b)
|
Organic
movement(1)
|
Fair value remeasurement
(d)
|
Hyperinflation(1)
|
2023
|
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
Sales
|
22,448
|
588
|
(683)
|
1,091
|
—
|
71
|
23,515
|
Excise duties
|
(6,996)
|
114
|
569
|
(122)
|
—
|
33
|
(6,402)
|
Net sales
|
15,452
|
702
|
(114)
|
969
|
—
|
104
|
17,113
|
Cost of sales
|
(5,973)
|
(363)
|
84
|
(522)
|
5
|
(63)
|
(6,832)
|
Gross profit
|
9,479
|
339
|
(30)
|
447
|
5
|
41
|
10,281
|
Marketing
|
(2,721)
|
(151)
|
(15)
|
(152)
|
(1)
|
(11)
|
(3,051)
|
Other operating items
|
(1,961)
|
(66)
|
(16)
|
26
|
49
|
(8)
|
(1,976)
|
Operating profit before exceptional items
|
4,797
|
122
|
(61)
|
321
|
53
|
22
|
5,254
|
Exceptional operating items (c)
|
(388)
|
|
|
|
|
|
(622)
|
Operating profit
|
4,409
|
|
|
|
|
|
4,632
|
Non-operating items (c)
|
(17)
|
|
|
|
|
|
328
|
Net finance charges
|
(422)
|
|
|
|
|
|
(594)
|
Share of after tax results of associates and joint
ventures
|
417
|
|
|
|
|
|
370
|
Profit before taxation
|
4,387
|
|
|
|
|
|
4,736
|
Taxation (e)
|
(1,049)
|
|
|
|
|
|
(970)
|
Profit for the year
|
3,338
|
|
|
|
|
|
3,766
|
(1) For the definition of organic movement and
hyperinflation see pages 48-49.
(a) Exchange
The impact of movements in exchange rates on reported figures for
operating profit was principally in respect of the favourable
exchange impact of the strengthening of the US dollar and Mexican
peso against the sterling, partially offset by the weakening of the
Nigerian naira, Ghanaian cedi and the Turkish lira.
The effect of movements in exchange rates and other movements on
profit before exceptional items and taxation for the year ended 30
June 2023 is set out in the table below.
|
Gains/(losses)
|
|
£ million
|
Translation impact
|
246
|
Transaction impact
|
(124)
|
Operating profit before exceptional items
|
122
|
Net
finance charges – translation impact
|
(32)
|
Net
finance charges – transaction impact
|
6
|
Net finance charges
|
(26)
|
Associates – translation impact
|
8
|
Profit before exceptional items and taxation
|
104
|
|
Year ended
30 June 2023
|
Year ended
30 June 2022
|
Exchange rates
|
|
|
Translation
£1 =
|
$1.20
|
$1.33
|
Transaction
£1 =
|
$1.30
|
$1.29
|
Translation
£1 =
|
€1.15
|
€1.18
|
Transaction
£1 =
|
€1.16
|
€1.15
|
(b) Acquisitions and disposals
The acquisitions and disposals movement in the year ended 30 June
2023 was primarily attributable to the disposal of the United
Spirits Limited (USL) Popular brands and Guinness Cameroun
S.A.
See pages 23, 41, 43 and 48-53 for further details.
(c) Exceptional items
In the year ended 30 June 2023, exceptional operating items were a
loss of £622 million
(2022 – a loss of £388
million), mainly due to charges
related to brand impairment (£498 million) and the supply
chain agility programme (£100 million).
In the year ended 30 June 2023, exceptional non-operating items
were a gain of £328
million (2022
– a loss of £17
million), mainly driven by the
gain in relation to the sale of Guinness Cameroun S.A. (£310
million).
See pages 34-35 for further details.
(d) Fair value remeasurement
The adjustments to marketing and other operating expenses were the
elimination of fair value changes to contingent consideration
liabilities and earn out arrangements in respect of prior year
acquisitions of £113 million gain for the year ended 30 June
2023 and £65 million gain for the year ended 30 June
2022.
(e) Taxation
The reported tax rate for the year ended 30 June 2023 was 20.5%
compared with 23.9% for the year ended 30 June 2022.
Included in the tax charge of £970 million in the year ended
30 June 2023 is a net exceptional tax credit of £186 million,
including an exceptional tax credit of £124 million in
respect of brand impairments, mainly the McDowell's brand, a tax
credit of £57 million in respect of the deductibility of fees
paid to Diageo plc for guaranteeing externally issued debt of its
US group entities, a tax credit of £23 million in respect
of the supply chain agility programme, partly offset by a tax
charge of £42 million in respect of the sale of Guinness Cameroun
S.A.
The reported tax charge for the year ended 30 June 2022 included an
exceptional tax credit of £31 million, comprising
exceptional tax credits of £35 million and
£20 million on the impairment of the McDowell's and
Bell's brands respectively, partly offset by an exceptional tax
charge of £23 million in respect of the gain on the sale
of the Picon brand and a further tax charge of £3 million
in respect of winding down operations in Russia.
The tax rate before exceptional items for the year ended 30 June
2023 was 23.0% compared with 22.5% for the year ended 30 June
2022.
We expect the tax rate before exceptional items for the year ending
30 June 2024 to be in the region of 24%.
(f)
Dividend
The group aims to increase the dividend each year. The decision in
respect of the dividend is made with reference to the dividend
cover as well as current performance trends, including sales and
profit after tax together with cash generation. Diageo targets
dividend cover (the ratio of basic earnings per share before
exceptional items to dividend per share) within the range of
1.8-2.2 times. For the year ended 30 June 2023, dividend cover is 2.0 times. The recommended final
dividend for the year ended 30 June 2023, to be put to the
shareholders for approval at the Annual General Meeting is 49.17
pence, an increase of 5% on the prior year final dividend. This
would bring the full year dividend to 80.00 pence per share, an
increase of 5% on the prior year. The group will keep future
returns of capital, including dividends, under review through the
year ending 30 June 2024 to ensure Diageo’s capital is
allocated in the best way to maximize value for the business and
its stakeholders.
Subject to approval by shareholders, the final dividend will be
paid to holders of ordinary shares and US ADRs on the register as
of 25 August 2023. The ex-dividend date both for the holders of the
ordinary shares and for US ADR holders is 24 August 2023. The final
dividend, once approved by shareholders, will be paid to
shareholders on 12 October 2023 and payment to US ADR holders will
be made on 17 October 2023. A dividend reinvestment plan is
available to holders of ordinary shares in respect of the final
dividend and the plan notice date is 22 September
2023.
(g) Return of capital
Diageo completed a total of £1.4 billion return of capital for
the year ended 30 June 2023, which included £0.9 billion
related to the successful completion of Diageo’s previous
share buyback programme in which £4.5 billion of capital was
returned to shareholders, and returned an additional £0.5
billion of capital to shareholders which was announced as a new
share buyback programme on 16 February 2023 and completed on 2 June
2023.
In the year ended 30 June 2023, the company purchased 37.8 million
ordinary shares (2022 – 61.2 million) at a cost of
£1,381 million (including transaction costs of £13
million) (2022 – £2,284 million including transaction
costs of £16 million). All shares purchased under the share
buyback programme were cancelled.
Movements in net borrowings and equity
Movements in net borrowings
|
2023
|
2022
|
|
£ million
|
£ million
|
Net borrowings at the beginning of the
year
|
(14,137)
|
(12,109)
|
Free cash flow (1)
|
1,800
|
2,783
|
Acquisitions (2)
|
(342)
|
(206)
|
Investment in associates (2)
|
(93)
|
(65)
|
Sale of businesses and brands (3)
|
462
|
82
|
Share buyback programme (4)
|
(1,381)
|
(2,284)
|
Net sale of own shares for share schemes (5)
|
29
|
18
|
Purchase of treasury shares in respect of subsidiaries
|
—
|
(15)
|
Dividends paid to non-controlling interests
|
(97)
|
(81)
|
Net movements in bonds (6)
|
889
|
742
|
Purchase of shares of non-controlling interests (7)
|
(146)
|
—
|
Net movements in other borrowings (8)
|
59
|
79
|
Equity dividend paid
|
(1,761)
|
(1,718)
|
Net decrease in cash and cash
equivalents
|
(581)
|
(665)
|
Net
increase in bonds and other
borrowings
|
(950)
|
(825)
|
Exchange differences (9)
|
159
|
(334)
|
Other non-cash items (10)
|
(32)
|
(204)
|
Net borrowings at the end of the
year
|
(15,541)
|
(14,137)
|
(1) See page 54 for the
analysis of free cash flow.
(2) In the year ended 30 June 2023, acquisitions included upfront
payments of €246 million (£218 million) for Kanlaon
Limited and Chat Noir Co. Inc. (the owner of Don Papa Rum) and $102
million (£89 million) for Balcones Distilling.
In the year ended 30 June 2022, acquisitions included the final
earn-out payment in respect of the Casamigos acquisition amounting
to $113 million (£83 million) and upfront payment of £62
million for 21Seeds.
In the years ended 30 June 2023 and 2022, investment in associates
included additional investments in a number of Distill Ventures
associates.
(3) In the year ended 30 June 2023, sale of businesses and brands
included the disposal of Guinness Cameroun S.A. beer business for a
net cash consideration, net of disposal costs, of £354 million
and the disposal of the Popular brands of Diageo’s USL
business, for a cash consideration, net of disposal costs, of
£83 million.
In the year ended 30 June 2022, sale of businesses and brands
included the cash received on the disposal of Picon brand, net of
transaction costs.
(4) See page 22 for details of
Diageo's return of capital programmes.
(5) Net sale of own shares comprised receipts from employees on the
exercise of share options of £51 million (2022 –
£32 million) less purchase of own shares for the future
settlement of obligations under the employee share option schemes
of £22 million (2022 – £14
million).
(6) In the year ended 30 June 2023, the group issued bonds of
$2,000 million (£1,788 million – net of discount and
fee) and €500 million (£441 million – net of
discount and fee), and repaid bonds of $1,650 million (£1,340
million). In the year ended 30 June 2022, the group issued bonds of
€1,650 million (£1,371 million - net of discount and
fee) and £892 million (including £8 million discount and
fee), and repaid bonds of €900 million (£769 million)
and $1,000 million (£752 million).
(7) On 24 March 2023, Diageo completed the purchase of an
additional 14.97% of the share capital of East African Breweries
PLC (EABL). This increased Diageo's controlling shareholding
position in EABL from 50.03% to 65.00%.
(8) In the year ended 30 June 2023, the net movements in other
borrowings principally arose from the increase in commercial paper,
collateral and bank loan balances offset by cash outflows of
foreign currency swaps and forwards and repayment of lease
liabilities. In the year ended 30 June 2022, the net movements in
other borrowings principally arose from cash movements of foreign
currency swaps and forwards partially offset by the repayment of
lease liabilities.
(9) In the year ended 30 June 2023, exchange gains arising on net
borrowings of £159 million were primarily driven by favourable
exchange movements on US dollar and euro denominated borrowings and
unfavourable exchange movements on cash and cash equivalents,
foreign currency swaps and forwards. In the year ended 30 June
2022, exchange losses arising on net borrowings of £334
million were primarily driven by adverse exchange movements on US
dollar denominated borrowings, partially offset by favourable
movement on euro denominated borrowings, cash and cash equivalents,
foreign currency swaps and forwards.
(10) In the year ended 30 June 2023, other non-cash items were
principally in respect of additional leases entered into during the
year partially offset by fair value movements of interest rate
hedging instruments. In the year ended 30 June 2022, other non-cash
items were principally in respect of additional leases entered into
during the year.
Movements in equity
|
2023
|
2022
|
|
£ million
|
£ million
|
Equity at the beginning of the year
|
9,514
|
8,431
|
Adjustment to 2021 closing equity in respect of hyperinflation in
Turkey (1)
|
—
|
251
|
Adjusted equity at the beginning of the year
|
9,514
|
8,682
|
Profit
for the year
|
3,766
|
3,338
|
Exchange adjustments (2)
|
(686)
|
799
|
Remeasurement of post employment benefit plans net of
taxation
|
(469)
|
497
|
Purchase of shares of non-controlling interests (3)
|
(146)
|
—
|
Hyperinflation adjustments net of taxation (1)
|
143
|
291
|
Associates' transactions with non-controlling
interests
|
(7)
|
—
|
Dividend to non-controlling interests
|
(97)
|
(72)
|
Equity dividend paid
|
(1,762)
|
(1,718)
|
Share buyback programme (4)
|
(1,273)
|
(2,310)
|
Other reserve movements
|
309
|
7
|
Equity at the end of the year
|
9,292
|
9,514
|
(1) See page 36-37 for details of hyperinflation
adjustments.
(2) Exchange movements in the year ended 30 June 2023
primarily
arose from exchange loss driven by the Turkish lira, the Indian
rupee and the Chinese yuan, partially offset by gains in Mexican
peso and US dollar. Exchange movements in the year ended 30 June
2022 primarily arose from exchange gains driven by the US dollar
and the Indian rupee, partially offset by Turkish
lira.
(3) On 24 March 2023, Diageo completed the purchase of an
additional 14.97% of the share capital of East African Breweries
PLC (EABL). This increased Diageo's controlling shareholding
position in EABL from 50.03% to 65.00%.
(4) See page 22 for details of
Diageo's return of capital programmes.
Post employment benefit plans
The net surplus of the group’s post employment benefit plans
decreased by £564 million from £1,151 million at 30 June
2022 to £587 million at 30 June 2023. The decrease in net
surplus was predominantly attributable to the unfavourable change
in the market value of assets held by the post employment benefit
plans in the UK which was partially offset by the favourable change
in the discount rate assumptions in the UK due to the increase in
returns from ‘AA’ rated corporate bonds used to
calculate the discount rates on the liabilities of the post
employment benefit plans (from 3.8% to 5.2%). The net operating
profit charge before exceptional items increased by £36
million from £39 million for the year ended 30 June 2022
to £75 million for the year ended 30 June 2023.
During the year ended 30 June 2023, following a remeasurement of
the Diageo Lifestyle Plan, Diageo made a
£16 million one-off
deficit contribution to satisfy minimum funding
requirement.
Total cash contributions by the group to all post employment
benefit plans in the year ending 30 June 2024 are estimated to be
approximately £75 million
($95 million).
Condensed consolidated income statement
|
|
Year ended 30 June 2023
|
|
Year
ended 30 June 2022
|
|
Notes
|
£ million
|
|
£ million
|
Sales
|
2
|
23,515
|
|
22,448
|
Excise duties
|
|
(6,402)
|
|
(6,996)
|
Net sales
|
2
|
17,113
|
|
15,452
|
Cost of sales
|
|
(6,899)
|
|
(5,973)
|
Gross profit
|
|
10,214
|
|
9,479
|
Marketing
|
|
(3,051)
|
|
(2,721)
|
Other operating items
|
|
(2,531)
|
|
(2,349)
|
Operating profit
|
2
|
4,632
|
|
4,409
|
Non-operating items
|
3
|
328
|
|
(17)
|
Finance income
|
4
|
340
|
|
497
|
Finance charges
|
4
|
(934)
|
|
(919)
|
Share of after tax results of associates and joint
ventures
|
|
370
|
|
417
|
Profit before taxation
|
|
4,736
|
|
4,387
|
Taxation
|
5
|
(970)
|
|
(1,049)
|
Profit for the year
|
|
3,766
|
|
3,338
|
|
|
|
|
|
Attributable to:
|
|
|
|
|
Equity shareholders of the parent company
|
|
3,734
|
|
3,249
|
Non-controlling interests
|
|
32
|
|
89
|
|
|
3,766
|
|
3,338
|
|
|
|
|
|
Weighted average number of shares
|
|
million
|
|
million
|
Shares in issue excluding own shares
|
|
2,264
|
|
2,318
|
Dilutive potential ordinary shares
|
|
7
|
|
7
|
|
|
2,271
|
|
2,325
|
|
|
|
|
|
|
|
pence
|
|
pence
|
Basic earnings per share
|
|
164.9
|
|
140.2
|
Diluted earnings per share
|
|
164.4
|
|
139.7
|
|
|
|
|
|
Condensed consolidated statement of comprehensive
income
|
Year ended30 June 2023
|
Year ended30 June 2022
|
|
£ million
|
£ million
|
Other comprehensive income
|
|
|
Items that will not be recycled subsequently to the income
statement
|
|
|
Net remeasurement of post employment benefit plans
|
|
|
Group
|
(643)
|
616
|
Associates
and joint ventures
|
13
|
5
|
Non-controlling
interests
|
—
|
(1)
|
Tax on post employment benefit plans
|
161
|
(123)
|
Changes in the fair value of equity investments at fair value
through other comprehensive income
|
(4)
|
(12)
|
|
(473)
|
485
|
Items that may be recycled subsequently to the income
statement
|
|
|
Exchange differences on translation of foreign
operations
|
|
|
Group
|
(876)
|
1,128
|
Associates
and joint ventures
|
(59)
|
60
|
Non-controlling
interests
|
(148)
|
171
|
Net investment hedges
|
416
|
(623)
|
Exchange (gain)/loss recycled to the income statement
|
|
|
On
disposal of foreign operations
|
(18)
|
63
|
On
step acquisitions
|
(1)
|
—
|
Tax on exchange differences - group
|
(2)
|
(6)
|
Effective portion of changes in fair value of cash flow
hedges
|
|
|
Hedge
of foreign currency debt of the group
|
6
|
233
|
Transaction
exposure hedging of the group
|
273
|
(172)
|
Hedges
by associates and joint ventures
|
24
|
(15)
|
Commodity
price risk hedging of the group
|
(56)
|
78
|
Recycled
to income statement - hedge of foreign currency debt of the
group
|
54
|
(239)
|
Recycled
to income statement - transaction exposure hedging of the
group
|
(13)
|
42
|
Recycled
to income statement - commodity price risk hedging of the
group
|
(33)
|
(46)
|
Tax on effective portion of changes in fair value of cash flow
hedges
|
(39)
|
32
|
Hyperinflation adjustments
|
182
|
365
|
Tax on hyperinflation adjustments
|
(39)
|
(74)
|
|
(329)
|
997
|
Other comprehensive (loss)/income, net of tax, for the year
|
(802)
|
1,482
|
Profit for the year
|
3,766
|
3,338
|
Total comprehensive income for the year
|
2,964
|
4,820
|
|
|
|
Attributable to:
|
|
|
Equity shareholders of the parent company
|
3,080
|
4,561
|
Non-controlling interests
|
(116)
|
259
|
Total comprehensive income for the year
|
2,964
|
4,820
|
Condensed consolidated balance sheet
|
|
30 June 2023
|
30 June 2022
|
|
Notes
|
£ million
|
£ million
|
£ million
|
£ million
|
Non-current assets
|
|
|
|
|
|
Intangible assets
|
12
|
11,512
|
|
11,902
|
|
Property, plant and equipment
|
|
6,142
|
|
5,848
|
|
Biological assets
|
|
156
|
|
94
|
|
Investments in associates and joint ventures
|
|
3,829
|
|
3,652
|
|
Other investments
|
|
57
|
|
37
|
|
Other receivables
|
|
31
|
|
37
|
|
Other financial assets
|
|
394
|
|
345
|
|
Deferred tax assets
|
|
141
|
|
114
|
|
Post employment benefit assets
|
|
960
|
|
1,553
|
|
|
|
|
23,222
|
|
23,582
|
Current assets
|
|
|
|
|
|
Inventories
|
6
|
7,661
|
|
7,094
|
|
Trade and other receivables
|
|
2,720
|
|
2,933
|
|
Assets held for sale
|
14
|
—
|
|
222
|
|
Corporate tax receivables
|
5
|
232
|
|
149
|
|
Other financial assets
|
|
347
|
|
251
|
|
Cash and cash equivalents
|
7
|
1,439
|
|
2,285
|
|
|
|
|
12,399
|
|
12,934
|
Total assets
|
|
|
35,621
|
|
36,516
|
Current liabilities
|
|
|
|
|
|
Borrowings and bank overdrafts
|
7
|
(1,701)
|
|
(1,522)
|
|
Other financial liabilities
|
|
(359)
|
|
(444)
|
|
Share buyback liability
|
|
—
|
|
(117)
|
|
Trade and other payables
|
|
(5,300)
|
|
(5,887)
|
|
Liabilities held for sale
|
14
|
—
|
|
(61)
|
|
Corporate tax payables
|
5
|
(135)
|
|
(252)
|
|
Provisions
|
|
(119)
|
|
(159)
|
|
|
|
|
(7,614)
|
|
(8,442)
|
Non-current liabilities
|
|
|
|
|
|
Borrowings
|
7
|
(14,801)
|
|
(14,498)
|
|
Other financial liabilities
|
|
(747)
|
|
(703)
|
|
Other payables
|
|
(368)
|
|
(380)
|
|
Provisions
|
|
(243)
|
|
(258)
|
|
Deferred tax liabilities
|
|
(2,183)
|
|
(2,319)
|
|
Post employment benefit liabilities
|
|
(373)
|
|
(402)
|
|
|
|
|
(18,715)
|
|
(18,560)
|
Total liabilities
|
|
|
(26,329)
|
|
(27,002)
|
Net assets
|
|
|
9,292
|
|
9,514
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
Share capital
|
|
712
|
|
723
|
|
Share premium
|
|
1,351
|
|
1,351
|
|
Other reserves
|
|
1,861
|
|
2,174
|
|
Retained earnings
|
|
3,898
|
|
3,550
|
|
Equity attributable to equity shareholders of the parent
company
|
|
|
7,822
|
|
7,798
|
Non-controlling interests
|
|
|
1,470
|
|
1,716
|
Total equity
|
|
|
9,292
|
|
9,514
|
|
|
|
|
|
|
Condensed consolidated statement of changes in equity
|
|
|
|
Retained earnings/(deficit)
|
|
|
|
|
Share
capital
|
Share
premium
|
Other reserves
|
Own shares
|
Other retained earnings
|
Total
|
Equity attributable to parent company shareholders
|
Non-controlling interests
|
Total
equity
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
At 30 June 2021
|
741
|
1,351
|
1,621
|
(1,877)
|
5,061
|
3,184
|
6,897
|
1,534
|
8,431
|
Adjustment to 2021 closing equity in respect of hyperinflation in
Turkey
|
—
|
—
|
—
|
—
|
251
|
251
|
251
|
—
|
251
|
Adjusted opening balance
|
741
|
1,351
|
1,621
|
(1,877)
|
5,312
|
3,435
|
7,148
|
1,534
|
8,682
|
Profit for the year
|
—
|
—
|
—
|
—
|
3,249
|
3,249
|
3,249
|
89
|
3,338
|
Other comprehensive income
|
—
|
—
|
535
|
—
|
777
|
777
|
1,312
|
170
|
1,482
|
Total comprehensive income for the year
|
—
|
—
|
535
|
—
|
4,026
|
4,026
|
4,561
|
259
|
4,820
|
Employee share schemes
|
—
|
—
|
—
|
39
|
50
|
89
|
89
|
—
|
89
|
Share-based incentive plans
|
—
|
—
|
—
|
—
|
59
|
59
|
59
|
—
|
59
|
Share-based incentive plans in respect of associates
|
—
|
—
|
—
|
—
|
4
|
4
|
4
|
—
|
4
|
Tax on share-based incentive plans
|
—
|
—
|
—
|
—
|
9
|
9
|
9
|
—
|
9
|
Share based payments and purchase of own shares in respect of
subsidiaries
|
—
|
—
|
—
|
—
|
(11)
|
(11)
|
(11)
|
(6)
|
(17)
|
Unclaimed dividend
|
—
|
—
|
—
|
—
|
3
|
3
|
3
|
1
|
4
|
Change in fair value of put option
|
—
|
—
|
—
|
—
|
(34)
|
(34)
|
(34)
|
—
|
(34)
|
Share buyback programme
|
(18)
|
—
|
18
|
—
|
(2,310)
|
(2,310)
|
(2,310)
|
—
|
(2,310)
|
Dividend declared for the year
|
—
|
—
|
—
|
—
|
(1,720)
|
(1,720)
|
(1,720)
|
(72)
|
(1,792)
|
At 30 June 2022
|
723
|
1,351
|
2,174
|
(1,838)
|
5,388
|
3,550
|
7,798
|
1,716
|
9,514
|
Profit for the year
|
—
|
—
|
—
|
—
|
3,734
|
3,734
|
3,734
|
32
|
3,766
|
Other comprehensive loss
|
—
|
—
|
(324)
|
—
|
(330)
|
(330)
|
(654)
|
(148)
|
(802)
|
Total comprehensive income for the year
|
—
|
—
|
(324)
|
—
|
3,404
|
3,404
|
3,080
|
(116)
|
2,964
|
Employee share schemes
|
—
|
—
|
—
|
24
|
24
|
48
|
48
|
—
|
48
|
Share-based incentive plans
|
—
|
—
|
—
|
—
|
49
|
49
|
49
|
—
|
49
|
Share-based incentive plans in respect of associates
|
—
|
—
|
—
|
—
|
6
|
6
|
6
|
—
|
6
|
Tax on share-based incentive plans
|
—
|
—
|
—
|
—
|
6
|
6
|
6
|
—
|
6
|
Share based payments and purchase of own shares in respect of
subsidiaries
|
—
|
—
|
—
|
—
|
3
|
3
|
3
|
2
|
5
|
Purchase of non-controlling interests
|
—
|
—
|
—
|
—
|
(111)
|
(111)
|
(111)
|
(35)
|
(146)
|
Associates' transactions with non-controlling
interests
|
—
|
—
|
—
|
—
|
(7)
|
(7)
|
(7)
|
—
|
(7)
|
Unclaimed dividend
|
—
|
—
|
—
|
—
|
1
|
1
|
1
|
—
|
1
|
Change in fair value of put option
|
—
|
—
|
—
|
—
|
(16)
|
(16)
|
(16)
|
—
|
(16)
|
Share buyback programme
|
(11)
|
—
|
11
|
—
|
(1,273)
|
(1,273)
|
(1,273)
|
—
|
(1,273)
|
Dividend declared for the year
|
—
|
—
|
—
|
—
|
(1,762)
|
(1,762)
|
(1,762)
|
(97)
|
(1,859)
|
At 30 June 2023
|
712
|
1,351
|
1,861
|
(1,814)
|
5,712
|
3,898
|
7,822
|
1,470
|
9,292
|
Condensed consolidated statement of cash flows
|
Year
ended 30 June 2023
|
Year
ended 30 June 2022
|
|
£ million
|
£ million
|
£ million
|
£ million
|
Cash flows from operating activities
|
|
|
|
|
Profit for the year
|
3,766
|
|
3,338
|
|
Taxation
|
970
|
|
1,049
|
|
Share of after tax results of associates and joint
ventures
|
(370)
|
|
(417)
|
|
Net finance charges
|
594
|
|
422
|
|
Non-operating items
|
(328)
|
|
17
|
|
Operating profit
|
|
4,632
|
|
4,409
|
Increase in inventories
|
(675)
|
|
(740)
|
|
Decrease/(increase) in trade and other receivables
|
121
|
|
(378)
|
|
(Decrease)/increase in trade and other payables and
provisions
|
(621)
|
|
939
|
|
Net increase in working capital
|
|
(1,175)
|
|
(179)
|
Depreciation, amortisation and impairment
|
1,066
|
|
828
|
|
Dividends received
|
219
|
|
190
|
|
Post employment payments less amounts included in operating
profit
|
(25)
|
|
(89)
|
|
Other items
|
62
|
|
53
|
|
|
|
1,322
|
|
982
|
Cash generated from operations
|
|
4,779
|
|
5,212
|
Interest received
|
131
|
|
110
|
|
Interest paid
|
(685)
|
|
(438)
|
|
Taxation paid
|
(1,201)
|
|
(949)
|
|
|
|
(1,755)
|
|
(1,277)
|
Net cash inflow from operating activities
|
|
3,024
|
|
3,935
|
Cash flows from investing activities
|
|
|
|
|
Disposal of property, plant and equipment and computer
software
|
13
|
|
17
|
|
Purchase of property, plant and equipment and computer
software
|
(1,180)
|
|
(1,097)
|
|
Movements in loans and other investments
|
(57)
|
|
(72)
|
|
Sale of businesses and brands
|
462
|
|
82
|
|
Acquisition
of subsidiaries(1)
|
(342)
|
|
(206)
|
|
Investment
in associates and joint ventures(1)
|
(93)
|
|
(65)
|
|
Net cash outflow from investing activities
|
|
(1,197)
|
|
(1,341)
|
Cash flows from financing activities
|
|
|
|
|
Share buyback programme
|
(1,381)
|
|
(2,284)
|
|
Net sale of own shares for share schemes
|
29
|
|
18
|
|
Purchase of treasury shares in respect of subsidiaries
|
—
|
|
(15)
|
|
Dividends paid to non-controlling interests
|
(97)
|
|
(81)
|
|
Proceeds from bonds
|
2,229
|
|
2,263
|
|
Repayment of bonds
|
(1,340)
|
|
(1,521)
|
|
Purchase of shares of non-controlling interests
|
(146)
|
|
—
|
|
Cash inflow from other borrowings
|
433
|
|
503
|
|
Cash outflow from other borrowings
|
(374)
|
|
(424)
|
|
Equity dividend paid
|
(1,761)
|
|
(1,718)
|
|
Net cash outflow from financing activities
|
|
(2,408)
|
|
(3,259)
|
Net decrease in net cash and cash equivalents
|
|
(581)
|
|
(665)
|
Exchange differences
|
|
(227)
|
|
239
|
Net
cash and cash equivalents at beginning of the year
|
|
2,211
|
|
2,637
|
Net cash and cash equivalents at end of the year
|
|
1,403
|
|
2,211
|
|
|
|
|
|
Net cash and cash equivalents consist of:
|
|
|
|
|
Cash and cash equivalents
|
|
1,439
|
|
2,285
|
Bank overdrafts
|
|
(36)
|
|
(74)
|
|
|
1,403
|
|
2,211
|
(1)For the year ended 30 June 2022, the previously reported line
item of "Acquisition of businesses" has been replaced with
"Acquisition of subsidiaries" and "Investment in associates and
joint ventures" to show separately the amounts which had previously
been shown combined.
Notes
1. Basis of preparation
The consolidated financial statements are prepared in accordance
with international accounting standards in conformity with the
requirements of the Companies Act 2006 and International Financial
Reporting Standards (IFRSs) adopted by the UK and IFRSs, as issued
by the IASB, including interpretations issued by the IFRS
Interpretations Committee. IFRS as adopted by the UK differs in
certain respects from IFRS as issued by the IASB. The differences
have no impact on the group’s consolidated financial
statements for the years presented. The consolidated financial
statements are prepared on a going concern basis under the
historical cost convention, unless stated otherwise.
In preparing these condensed consolidated financial statements, the
significant judgements made by management when applying the
group’s accounting policies and the significant areas where
estimates were required were in respect of exceptional items,
taxation, brands, goodwill, other intangibles, contingent
considerations, post employment benefits, contingent liabilities
and legal proceedings.
The comparative figures for the financial year ended 30 June 2022
are not the company’s statutory accounts (within the meaning
of section 434 of the Companies Act 2006) for that financial year.
Those statutory accounts have been reported on by the
company’s auditor, PricewaterhouseCoopers LLP, and delivered
to the Registrar of Companies. The report of the auditor (i) was
unqualified, (ii) did not include a reference to any matters to
which the auditor drew attention by way of emphasis without
qualifying their report and (iii) did not contain a statement under
section 498 (2) or (3) of the Companies Act 2006.
The financial information for the year ended 30 June 2023 set out
in this document does not constitute the company’s statutory
accounts for that financial year, but is derived from those
accounts. Those statutory accounts have been reported on by the
company’s auditor, PricewaterhouseCoopers LLP, and will be
delivered to the Registrar of Companies in due course. The report
of the auditor (i) was unqualified, (ii) did not include a
reference to any matters to which the auditor drew attention by way
of emphasis without qualifying their report and (iii) did not
contain a statement under section 498 (2) or (3) of the Companies
Act 2006.
Going concern
Management prepared cash flow forecasts which were also sensitised
to reflect severe but plausible downside scenarios taking into
consideration the group's principal risks. In the base case
scenario, management included assumptions for mid-single digit net
sales growth, operating margin improvement and global TBA market
share growth. In light of the ongoing geopolitical volatility, the
base case outlook and severe but plausible downside scenarios
incorporated considerations for a prolonged global recession,
supply chain disruptions, higher inflation and further geopolitical
deterioration. Even under these scenarios, the group’s
liquidity is still expected to remain strong, as it was protected
by issuing €500 million of fixed rate euro and
$2 billion of fixed rate dollar-denominated bonds in the year
ended 30 June 2023. Mitigating actions, should they be required,
are all within management’s control and could include
reductions in discretionary spending such as acquisitions and
capital expenditure, as well as a temporary suspension of the share
buyback programme and dividend payments in the next 12 months, or
drawdowns on committed facilities. Having considered the outcome of
these assessments, the Directors are comfortable that the company
is a going concern for at least 12 months from the date of signing
the group's consolidated financial statements.
Exchange rates
Weighted average exchange rates used in the translation of income
statements were US dollar – £1 = $1.2 (2022 –
£1 = $1.33) and euro – £1 = €1.15 (2022
– £1 = €1.18). Exchange rates used to translate
assets and liabilities at the balance sheet date were US dollar
– £1 = $1.26 (30 June 2022 – £1 = $1.21) and
euro – £1 = €1.17 (30 June 2022 – £1 =
€1.16). The group uses foreign exchange transaction hedges to
mitigate the effect of exchange rate movements.
New accounting standards and interpretations
The following amendments to the accounting standards, issued by the
IASB and endorsed by the UK, were adopted by the group from 1 July
2022 with no impact on the group’s consolidated results,
financial position or disclosures:
-
Amendments
to IFRS 3 Updating a Reference to the Conceptual
Framework
-
Amendments
to IAS 16 Property, Plant and Equipment - Proceeds before Intended
Use
-
Amendments
to IAS 37 Onerous Contracts - Cost of Fulfilling a
Contract
-
Amendments
to Annual improvements 2018-2020 - IFRS 9 - Fees in the '10 per
cent' Test, IFRS 16 - Lease incentive, IAS 41 - Taxation in Fair
Value Measurements
-
Amendments
to IAS 12 International Tax Reform – Pillar Two Model
Rules
The following standard and amendments issued by the IASB have been
endorsed by the UK and have not been adopted by the
group:
-
IFRS
17 – Insurance contracts (effective from the year ending 30
June 2024) is ultimately intended to replace IFRS 4. Based on a
preliminary assessment, the group believes that the adoption of
IFRS 17 will not have a significant impact on its consolidated
results or financial position.
-
Amendments
to IAS 12 – Income taxes (effective from the year ending 30
June 2024) requires an entity to recognise deferred tax on initial
recognition of particular transactions to the extent that the
transaction gives rise to equal amounts of deferred tax assets and
liabilities. The proposed amendments would apply to transactions
such as leases and decommissioning obligations for which an entity
recognises both an asset and a liability. The group believes that
the adoption of these amendments will not have a significant impact
on its consolidated results and financial position.
There are a number of other amendments and clarifications to IFRSs,
effective in future years, which are not expected to significantly
impact the group’s consolidated results or financial
position.
2. Segmental information
The segmental information presented is consistent with management
reporting provided to the Executive Committee (the chief operating
decision maker).
The Executive Committee considers the business principally from a
geographical perspective based on the location of third-party sales
and the business analysis is presented by geographical segment. In
addition to these geographical selling segments, a further segment
reviewed by the Executive Committee is the Supply Chain and
Procurement (SC&P) segment, which manufactures products for
other group companies and includes production sites in the United
Kingdom, Ireland, Italy, Guatemala and Mexico, and comprises the
global procurement function.
The group's operations also include the Corporate segment.
Corporate costs are in respect of central costs, including finance,
marketing, corporate relations, human resources and legal, as well
as certain information systems, facilities and employee costs that
are not allocable to the geographical segments or to the
SC&P.
Diageo uses shared services operations to deliver transaction
processing activities for markets and operational entities. These
centres are located in India, Hungary, Colombia and the
Philippines. These captive business service centres also perform
certain central finance activities, including elements of financial
planning and reporting, treasury and HR services. The costs of
shared services operations are recharged to the
regions.
For planning and management reporting purposes, Diageo uses
budgeted exchange rates that are set at the prior year's weighted
average exchange rate. In order to ensure a consistent basis on
which performance is measured through the year, prior period
results are also restated to the budgeted exchange rate. Segmental
information for net sales and operating profit before exceptional
items are reported on a consistent basis with management reporting.
The adjustments required to retranslate the segmental information
to actual exchange rates and to reconcile it to the group’s
reported results are shown in the tables below. The comparative
segmental information, prior to retranslation, has not been
restated at the current year’s budgeted exchange rates but is
presented at the budgeted rates for the respective
year.
In addition, for management reporting purposes, Diageo presents the
result of acquisitions and disposals completed in the current and
prior year separately from the results of the geographical
segments. The impact of acquisitions and disposals on net sales and
operating profit is disclosed under the appropriate geographical
segments in the tables below at budgeted exchange
rates.
(a) Segmental information for the consolidated income
statement
|
North America
|
Europe
|
Asia
Pacific
|
Latin America and Caribbean
|
Africa
|
SC&P
|
Eliminate
inter-
segment
sales
|
Total
operating
segments
|
Corporate
and other
|
Total
|
Year ended 30 June 2023
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
Sales
|
7,382
|
5,996
|
5,403
|
2,260
|
2,386
|
3,073
|
(3,073)
|
23,427
|
88
|
23,515
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
At
budgeted exchange rates(1)
|
6,052
|
3,377
|
3,084
|
1,642
|
1,631
|
2,942
|
(2,876)
|
15,852
|
87
|
15,939
|
Acquisitions and disposals
|
20
|
20
|
35
|
3
|
104
|
—
|
—
|
182
|
—
|
182
|
SC&P allocation
|
8
|
38
|
8
|
9
|
3
|
(66)
|
—
|
—
|
—
|
—
|
Retranslation to actual exchange rates
|
678
|
(41)
|
73
|
145
|
(39)
|
197
|
(197)
|
816
|
1
|
817
|
Hyperinflation
|
—
|
175
|
—
|
—
|
—
|
—
|
—
|
175
|
—
|
175
|
Net sales
|
6,758
|
3,569
|
3,200
|
1,799
|
1,699
|
3,073
|
(3,073)
|
17,025
|
88
|
17,113
|
Operating profit/(loss)
|
|
|
|
|
|
|
|
|
|
|
At
budgeted exchange rates(1)
|
2,337
|
1,076
|
886
|
597
|
347
|
(32)
|
—
|
5,211
|
(292)
|
4,919
|
Acquisitions and disposals
|
(18)
|
(13)
|
5
|
—
|
27
|
—
|
—
|
1
|
(6)
|
(5)
|
SC&P allocation
|
3
|
(24)
|
(6)
|
(3)
|
(2)
|
32
|
—
|
—
|
—
|
—
|
Fair value remeasurements
|
87
|
25
|
—
|
1
|
—
|
—
|
—
|
113
|
—
|
113
|
Retranslation to actual exchange rates
|
280
|
18
|
20
|
66
|
(152)
|
—
|
—
|
232
|
(28)
|
204
|
Hyperinflation
|
—
|
23
|
—
|
—
|
—
|
—
|
—
|
23
|
—
|
23
|
Operating profit/(loss) before exceptional items
|
2,689
|
1,105
|
905
|
661
|
220
|
—
|
—
|
5,580
|
(326)
|
5,254
|
Exceptional operating items
|
(97)
|
(8)
|
(473)
|
—
|
(44)
|
—
|
—
|
(622)
|
—
|
(622)
|
Operating profit/(loss)
|
2,592
|
1,097
|
432
|
661
|
176
|
—
|
—
|
4,958
|
(326)
|
4,632
|
Non-operating items
|
|
|
|
|
|
|
|
|
|
328
|
Net finance charges
|
|
|
|
|
|
|
|
|
|
(594)
|
Share of after tax results of associates and joint
ventures
|
|
|
|
|
|
|
|
|
|
370
|
Profit before taxation
|
|
|
|
|
|
|
|
|
|
4,736
|
|
North America
|
Europe
|
Asia
Pacific
|
Latin America and Caribbean
|
Africa
|
SC&P
|
Eliminate
inter-
segment
sales
|
Total
operating
segments
|
Corporate
and other
|
Total
|
Year ended 30 June 2022
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
Sales
|
6,682
|
5,740
|
5,624
|
1,945
|
2,403
|
2,010
|
(2,010)
|
22,394
|
54
|
22,448
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
At
budgeted exchange rates(1)
|
5,955
|
3,258
|
2,879
|
1,486
|
1,699
|
2,095
|
(2,016)
|
15,356
|
55
|
15,411
|
Acquisitions and disposals
|
34
|
23
|
—
|
3
|
15
|
—
|
—
|
75
|
—
|
75
|
SC&P allocation
|
9
|
46
|
9
|
12
|
3
|
(79)
|
—
|
—
|
—
|
—
|
Retranslation to actual exchange rates
|
97
|
(304)
|
(4)
|
24
|
(35)
|
(6)
|
6
|
(222)
|
(1)
|
(223)
|
Hyperinflation
|
—
|
189
|
—
|
—
|
—
|
—
|
—
|
189
|
—
|
189
|
Net sales
|
6,095
|
3,212
|
2,884
|
1,525
|
1,682
|
2,010
|
(2,010)
|
15,398
|
54
|
15,452
|
Operating profit/(loss)
|
|
|
|
|
|
|
|
|
|
|
At
budgeted exchange rates(1)
|
2,388
|
1,086
|
703
|
528
|
346
|
(22)
|
—
|
5,029
|
(256)
|
4,773
|
Acquisitions and disposals
|
(28)
|
11
|
—
|
—
|
(10)
|
—
|
—
|
(27)
|
—
|
(27)
|
SC&P allocation
|
(1)
|
(18)
|
(2)
|
—
|
(1)
|
22
|
—
|
—
|
—
|
—
|
Fair value remeasurements
|
32
|
36
|
—
|
(8)
|
—
|
—
|
—
|
60
|
—
|
60
|
Retranslation to actual exchange rates
|
63
|
(108)
|
10
|
18
|
(20)
|
—
|
—
|
(37)
|
18
|
(19)
|
Hyperinflation
|
—
|
10
|
—
|
—
|
—
|
—
|
—
|
10
|
—
|
10
|
Operating profit/(loss) before exceptional items
|
2,454
|
1,017
|
711
|
538
|
315
|
—
|
—
|
5,035
|
(238)
|
4,797
|
Exceptional items
|
(1)
|
(146)
|
(241)
|
—
|
—
|
—
|
—
|
(388)
|
—
|
(388)
|
Operating profit/(loss)
|
2,453
|
871
|
470
|
538
|
315
|
—
|
—
|
4,647
|
(238)
|
4,409
|
Non-operating items
|
|
|
|
|
|
|
|
|
|
(17)
|
Net finance charges
|
|
|
|
|
|
|
|
|
|
(422)
|
Share of after tax results of associates and joint
ventures
|
|
|
|
|
|
|
|
|
|
417
|
Profit before taxation
|
|
|
|
|
|
|
|
|
|
4,387
|
(1)These items represent the IFRS 8 performance measures for the
geographical and SC&P segments.
(i)The net sales figures for SC&P reported to the Executive
Committee primarily comprise inter-segment sales and these are
eliminated in a separate column in the above segmental analysis.
Apart from sales by the SC&P segment to the geographical
segments, inter-segment sales are not material.
(ii)Approximately 38% of annual net sales occurred in the last four
months of calendar year 2022.
(b) Category and geographical analysis
|
Category analysis
|
Geographical analysis
|
Year ended 30 June 2023
|
Spirits
£ million
|
Beer
£ million
|
Ready to drink
£ million
|
Other
£ million
|
Total
£ million
|
United
States
£ million
|
India
£ million
|
Great
Britain
£ million
|
Rest of
world
£ million
|
Total
£ million
|
Sales(1)
|
19,004
|
3,355
|
899
|
257
|
23,515
|
6,972
|
2,751
|
2,138
|
11,654
|
23,515
|
Year ended 30 June 2022
|
|
|
|
|
|
|
|
|
|
|
Sales(1)
|
18,164
|
3,128
|
882
|
274
|
22,448
|
6,327
|
3,219
|
2,142
|
10,760
|
22,448
|
(1)The
geographical analysis of sales is based on the location of
third-party sales.
3. Exceptional items
Exceptional items are those that in management’s judgement
need to be disclosed separately. See pages 48-49 for the definition
of exceptional items and the criteria used to determine whether an
exceptional item is accounted for as operating or
non-operating.
|
Year ended
30 June 2023
|
Year
ended
30 June 2022
|
|
£ million
|
£ million
|
Exceptional operating items
|
|
|
Brand
and goodwill impairment (1)
|
(498)
|
(336)
|
Supply
chain agility programme (2)
|
(100)
|
—
|
Distribution
termination fee (3)
|
(44)
|
—
|
Winding
down Russian operations (4)
|
20
|
(50)
|
Other exceptional operating items (5)
|
—
|
(2)
|
|
(622)
|
(388)
|
Non-operating items
|
|
|
Sale
of businesses and brands
|
|
|
Guinness
Cameroun S.A. (6)
|
310
|
—
|
Archers
brand (7)
|
20
|
—
|
USL
Popular brands (8)
|
4
|
—
|
USL
businesses (9)
|
1
|
—
|
Tyku
brand (10)
|
(3)
|
—
|
Picon
brand (11)
|
—
|
91
|
Meta
Abo Brewery (12)
|
—
|
(95)
|
Windsor
business (13)
|
—
|
(19)
|
Step
acquisition - Mr Black (14)
|
(8)
|
—
|
Other non-operating exceptional items (15)
|
4
|
6
|
|
328
|
(17)
|
|
|
|
Exceptional items before taxation
|
(294)
|
(405)
|
|
|
|
Items included in taxation
|
|
|
Tax on exceptional operating items
|
158
|
54
|
Tax on exceptional non-operating items
|
(29)
|
(23)
|
Exceptional taxation
|
57
|
—
|
|
186
|
31
|
|
|
|
Total exceptional items
|
(108)
|
(374)
|
|
|
|
Attributable to:
|
|
|
Equity shareholders of the parent company
|
33
|
(271)
|
Non-controlling interests
|
(141)
|
(103)
|
Total exceptional items
|
(108)
|
(374)
|
|
|
|
Exceptional items included in operating profit are charged
to:
|
|
|
Cost of sales
|
(67)
|
—
|
Other operating expenses
|
(555)
|
(388)
|
|
(622)
|
(388)
|
(1) In the year ended 30 June 2023, an impairment charge of
£498 million was recognised in exceptional operating
items mainly driven by the McDowell's brand in India.
In the year ended 30 June 2022, an impairment charge of
£336 million was recognised in exceptional operating
items in respect of the McDowell's brand (£240 million),
the Bell's brand (£77 million) and goodwill related to
Smirnov (£19 million).
For further information, see note 12.
(2) In the year ended 30 June 2023, an exceptional charge of
£100 million was accounted for in respect of the supply chain
agility programme announced in July 2022. With this five-year
spanning programme, Diageo expects to strengthen its supply chain,
improve its resilience and agility, drive efficiencies, deliver
additional productivity savings and make its supply operations more
sustainable. Total implementation cost of the programme is expected
to be up to £500 million over the five-year period, which will
comprise non-cash items and one-off expenses, the majority of which
are expected to be recognised as exceptional operating items. The
exceptional charge for the year ended 30 June 2023 was primarily in
respect of accelerated depreciation, being additional depreciation
of assets in the period directly attributable to the programme, and
impairment of property, plant and equipment in respect of North
America and India. Restructuring cash expenditure was £12
million in the year ended 30 June 2023.
(3) In the year ended 30 June 2023, Diageo agreed with one of its
distributors in Africa to terminate the distribution license of one
of its spirits brands, in respect of which a provision of
£44 million was provided for and was recognised as an
operating exceptional charge. No payment was made in the
period.
(4) In the year ended 30 June 2023, Diageo released unutilised
provisions of £20 million from the £50 million
exceptional charge taken in the year ended 30 June 2022, in respect
of winding down its operations in Russia.
(5) Other exceptional operating items include subsequent gains and
charges of items that were originally recognised as exceptional at
inception. In the year ended 30 June 2022, other exceptional
operating items resulted in a loss of £2 million, driven
by the reinvestment of 'Raising the Bar' corporate tax
benefits.
(6) On 26 May 2023, Diageo announced the completion of the sale of
its wholly owned subsidiary in Cameroon, Guinness Cameroun S.A., to
the Castel Group for an aggregate consideration of
£384 million resulting in an exceptional gain of
£310 million, including cumulative translation gain in
the amount of £17 million recycled to the income
statement.
(7) On 26 October 2022, Diageo completed the sale of its Archers
brand. The transaction resulted in an exceptional gain of £20
million.
(8) On 30 September 2022, Diageo announced the completion of the
sale of the Popular brands of its United Spirits Limited (USL)
business. The transaction resulted in an exceptional gain of
£4 million.
(9) Certain subsidiaries of USL were sold in the year ended 30 June
2023. The sale of these subsidiaries resulted in an exceptional
gain of £1 million.
(10) In the year ended 30 June 2023, Diageo sold its Tyku brand.
The transaction resulted in an exceptional loss of
£3 million.
(11) In May 2022, Diageo sold its Picon brand. The sale resulted in
an exceptional non-operating gain of £91 million, net of
disposal costs.
(12) In the year ended 30 June 2022, a loss of £95 million
was recognised as a non-operating item
attributable to the sale of Meta Abo Brewery Share Company in
Ethiopia.
(13) On 25 March 2022, Diageo agreed to the sale of its Windsor
business in Korea. At 30 June 2022, assets and liabilities
attributable to Windsor business were classified as held for sale
and were measured at the lower of their cost and fair value less
cost of disposal. In the year ended 30 June 2022, a loss of
£19 million was recognised as a non-operating item,
mainly in relation to transaction and other costs directly
attributable to the prospective sale of the business. The
conditional agreement was terminated in the year ended 30 June 2023
as the buyer was unable to meet certain conditions to
completion.
(14) On 29 September 2022, the group acquired the part of the
entire issued share capital of Mr Black Spirits Pty Ltd, owner of
Mr Black, the Australian premium cold brew coffee liqueur, that it
did not already own. As a result of Mr Black becoming a subsidiary
of the group in the year ended 30 June 2023, a loss of
£8 million arose, being the difference between the book
value of the associate prior to the transaction and its fair value
plus transaction costs.
(15) Other exceptional non-operating items include subsequent gains
and charges of items that were originally recognised as exceptional
at inception. In the year ended 30 June 2023, other exceptional
non-operating items resulted in a net gain of £4 million
(2022 – £6 million), mainly driven by the deferred
consideration received in respect of the sale of United National
Breweries.
4. Finance income and charges
|
Year ended
30 June 2023
|
Year
ended
30 June 2022
|
|
£ million
|
£ million
|
Interest income
|
160
|
127
|
Fair value gain on financial instruments
|
103
|
341
|
Total interest income
|
263
|
468
|
Interest charge on bank loans, bonds and overdrafts
|
(470)
|
(371)
|
Interest charge on leases
|
(15)
|
(12)
|
Fair value loss on financial instruments
|
(102)
|
(346)
|
Interest charge on other borrowings
|
(271)
|
(92)
|
Total interest charges
|
(858)
|
(821)
|
Net interest charges
|
(595)
|
(353)
|
|
|
|
Net finance income in respect of post employment plans in
surplus
|
59
|
22
|
Hyperinflation adjustment in respect of Turkey (1)
|
10
|
—
|
Hyperinflation adjustment in respect of Venezuela (1)
|
—
|
1
|
Interest income in respect of direct and indirect tax
|
8
|
2
|
Unwinding of discounts
|
—
|
4
|
Total other finance income
|
77
|
29
|
Net finance charge in respect of post employment plans in
deficit
|
(15)
|
(12)
|
Hyperinflation adjustment in respect of Turkey (1)
|
—
|
(34)
|
Hyperinflation adjustment in respect of Venezuela (1)
|
(2)
|
—
|
Foreign exchange revaluation of monetary items in respect of
Lebanon (1)
|
—
|
(3)
|
Unwinding of discounts
|
(13)
|
(11)
|
Interest charge in respect of direct and indirect tax
|
(25)
|
(16)
|
Change in financial liability (Level 3)
|
(8)
|
(20)
|
Guarantee
fees
|
(1)
|
(1)
|
Other finance charges
|
(12)
|
(1)
|
Total other finance charges
|
(76)
|
(98)
|
Net other finance income/(charges)
|
1
|
(69)
|
(1) Hyperinflation adjustment
The group applied hyperinflationary accounting for its operations
in Turkey, Venezuela and Lebanon.
Turkey has been a hyperinflationary economy where cumulative
inflation for the three years ended 30 June 2022 exceeded 100%.
Consequently, since March 2022, the group applies hyperinflationary
accounting for its Turkish operations. The group’s
consolidated financial statements for the years ended 30 June 2023
and 30 June 2022 include the results and financial position of its
Turkish operations restated to the measuring unit current at the
end of each period, with hyperinflationary gains and losses in
respect of monetary items being reported in finance income and
charges. The inflation rate used by the group is the official rate
published by the Turkish Statistical Institute. The movement in the
publicly available official price index for the year ended 30 June
2023 was 38% (2022 – 79%).
Venezuela is a hyperinflationary economy where the government
maintains a regime of strict currency controls with multiple
foreign currency rate systems. The exchange rate used to translate
the results of the group’s Venezuelan operations was
VES/£ 3,807 for the year
ended 30 June 2023 (2022 – VES/£ 759). This rate reflects management’s
estimate of the exchange rate considering inflation and the most
appropriate official exchange rate. Movement in the price index for
the year ended 30 June 2023 was 382% (2022 – 268%). The
inflation rate used by the group is provided by an independent
valuer because no reliable, officially published rate is available
for Venezuela.
The following table presents the contribution of the group’s
Venezuelan operations to consolidated net sales, operating profit,
operating cash flow and assets for the years ended 30 June
2023 and 30 June 2022 and with
the amounts that would have resulted if the official reference
exchange rate had been applied:
|
Year ended 30 June 2023
|
Year ended 30 June 2022
|
|
At estimated exchange rate
|
At official reference exchange rate
|
At estimated
exchange rate
|
At official reference
exchange rate
|
|
3,807 VES/£
|
36 VES/£
|
759 VES/£
|
7 VES/£
|
|
£ million
|
£ million
|
£ million
|
£ million
|
Net sales
|
—
|
9
|
—
|
15
|
Operating loss
|
—
|
—
|
(1)
|
(1)
|
Other finance (charges)/income - hyperinflation
adjustment
|
(2)
|
(212)
|
1
|
157
|
Net cash outflow from operating activities
|
—
|
(3)
|
—
|
(5)
|
Net assets
|
6
|
657
|
41
|
4,606
|
Sterling amounts presented at the official reference exchange rate
are results of simple mathematical conversion.
The impact of hyperinflationary accounting for Lebanon was
immaterial both in the current and comparative
periods.
5. Taxation
For the year ended 30 June 2023, the tax charge of
£970 million (2022 – £1,049 million)
comprises a UK tax charge of £224 million (2022 –
£186 million) and a foreign tax charge of £746 million
(2022 – £863 million).
The group has a number of ongoing tax audits worldwide for which
provisions are recognised in line with the relevant accounting
standard, taking into account best estimates and management’s
judgements concerning the ultimate outcome of the tax audits. For
the year ended 30 June 2023, ongoing audits that are provided for
individually are not expected to result in a material tax
liability. The current tax asset of £232 million (30 June 2022
– £149 million) and tax liability of £135 million
(30 June 2022 – £252 million) include £173 million
(30 June 2022 – £156 million) of provisions for tax
uncertainties.
In December 2021, the OECD released a framework for Pillar Two
Model Rules which will introduce a global minimum corporate tax
rate of 15% applicable to multinational enterprise groups with
global revenue over €750 million. The legislation
implementing the rules in the UK was substantively enacted on 20
June 2023 and will apply to Diageo from the financial year ending
30 June 2025 onwards. Diageo is reviewing this legislation and also
monitoring the status of implementation of the model rules outside
of the UK to understand the potential impact on the group. Diageo
has applied the temporary exception under IAS 12 in relation to the
accounting for deferred taxes arising from the implementation of
the Pillar Two rules.
The tax rate before exceptional items for the year ended 30 June
2023 was 23.0% compared with 22.5% for the year ended 30 June
2022.
6. Inventories
|
30 June 2023
|
30 June 2022
|
|
£ million
|
£ million
|
Raw materials and consumables
|
543
|
489
|
Work in progress
|
132
|
86
|
Maturing inventories
|
5,794
|
5,229
|
Finished goods and goods for resale
|
1,192
|
1,290
|
|
7,661
|
7,094
|
7. Net borrowings
|
30 June 2023
|
30 June 2022
|
|
£ million
|
£ million
|
Borrowings due within one year and bank overdrafts
|
(1,701)
|
(1,522)
|
Borrowings due after one year
|
(14,801)
|
(14,498)
|
Fair value of foreign currency forwards and swaps
|
347
|
356
|
Fair value of interest rate hedging instruments
|
(377)
|
(283)
|
Lease liabilities
|
(448)
|
(475)
|
|
(16,980)
|
(16,422)
|
Cash and cash equivalents
|
1,439
|
2,285
|
|
(15,541)
|
(14,137)
|
8. Reconciliation of movement in net borrowings
|
Year ended
30 June 2023
|
Year
ended
30 June 2022
|
|
£ million
|
£ million
|
Net
decrease in cash and cash
equivalents before exchange
|
(581)
|
(665)
|
Net
increase in bonds and other
borrowings(1)
|
(950)
|
(825)
|
Net
increase in net borrowings from
cash flows
|
(1,531)
|
(1,490)
|
Exchange differences on net borrowings
|
159
|
(334)
|
Other
non-cash items(2)
|
(32)
|
(204)
|
Net
borrowings at beginning of the year
|
(14,137)
|
(12,109)
|
Net
borrowings at end of the year
|
(15,541)
|
(14,137)
|
(1)In
the year ended 30 June 2023, net increase in bonds and other
borrowings excludes £2 million cash outflow in respect of
derivatives designated in forward point hedges (2022 –
£4 million).
(2)In
the year ended 30 June 2023, other non-cash items were principally
in respect of additional leases entered into during the year
partially offset by fair value movements of interest rate hedging
instruments. In the year ended 30 June 2022, other non-cash items
were principally in respect of additional leases entered into
during the period.
In the year ended 30 June 2023, the group issued bonds of $2,000 million
(£1,788 million - net
of discount and fee) consisting of $500 million
5.2% fixed rate notes due 2025,
$750 million 5.3%
fixed rate notes due 2027,
$750 million 5.5% fixed
rate notes due 2033 and €500 million 3.5% fixed rate notes due 2025
(£441 million - net discount and fee), and repaid bonds
of $300 million
(£254 million) and
$1,350 million
(£1,086 million).
In the year ended 30 June 2022, the
group issued bonds of €1,650 million (£1,371 million - net of discount
and fee) and £892 million (including £8
million discount and fee), and repaid
bonds of €900 million (£769 million) and $1,000 million
(£752 million).
All bonds and commercial paper issued by Diageo plc's wholly owned
subsidiaries are fully and unconditionally guaranteed by Diageo
plc.
9. Financial instruments
Fair value measurements of financial instruments are presented
through the use of a three-level fair value hierarchy that
prioritises the valuation techniques used in fair value
calculations.
The group maintains policies and procedures to value instruments
using the most relevant data available. If multiple inputs that
fall into different levels of the hierarchy are used in the
valuation of an instrument, the instrument is categorised on the
basis of the most subjective input.
Foreign currency forwards and swaps, cross currency swaps and
interest rate swaps are valued using discounted cash flow
techniques. These techniques incorporate inputs at levels 1 and 2,
such as foreign exchange rates and interest rates. These market
inputs are used in the discounted cash flow calculation
incorporating the instrument’s term, notional amount and
discount rate, and taking credit risk into account. As significant
inputs to the valuation are observable in active markets, these
instruments are categorised as level 2 in the
hierarchy.
Other financial liabilities include a put option, which does not
have an expiry date, held by Industrias Licoreras de Guatemala
(ILG) to sell the remaining 50% equity stake in Rum Creation &
Products Inc., the owner of the Zacapa rum brand, to Diageo. The
liability is fair valued using the discounted cash flow
method and
as at 30 June 2023, an amount of £218 million
(30 June 2022 –
£216 million)
is recognised as a liability with changes in the fair value of the
put option included in retained earnings. As the valuation of this
option uses assumptions not observable in the market, it is
categorised as level 3 in the hierarchy. As at 30 June 2023,
because it is unknown when or if ILG will exercise the option, the
liability is measured as if the exercise date is on the last day of
the next financial year considering forecast future performance.
The option is sensitive to reasonably possible changes in
assumptions; if the option were to be exercised as at 30 June 2025,
the fair value of the liability would increase by
approximately £30 million.
Included in other financial liabilities, the contingent
consideration on acquisition of businesses represents the present
value of payments up to £422 million, which are expected
to be paid over the next eight years. Contingent considerations linked to certain volume
targets at 30 June 2023 included £113 million in respect of
the acquisition of Aviation Gin and Davos Brands (2022 –
£157 million), £59 million in respect of the acquisition
of 21Seeds (2022 – £59 million) and £18 million in
respect of the acquisition of Lone River Ranch Water (2022 –
£57 million). Contingent consideration of £70 million in
respect of the acquisition of Don Papa Rum (2022 – £nil)
is linked to certain financial performance targets. Contingent
considerations are fair valued based on discounted cash flow method
using assumptions not observable in the market. Contingent
considerations are sensitive to possible changes in assumptions; a
10% increase or decrease in volume would increase or decrease the
fair value of contingent considerations linked to certain volume
targets by approximately £30 million and
£50 million, respectively, and a 10% increase or decrease
in cash flows would increase or decrease the fair value of
contingent considerations linked to certain financial performance
targets by approximately £25 million.
There
were no significant changes in the measurement and valuation
techniques, or significant transfers between the levels of the
financial assets and liabilities in the year ended 30 June
2023.
The group’s financial assets and liabilities measured at fair
value are categorised as follows:
|
30 June 2023
|
30 June 2022
|
|
£ million
|
£ million
|
Derivative assets
|
594
|
480
|
Derivative liabilities
|
(440)
|
(456)
|
Valuation techniques based on observable market input (Level
2)
|
154
|
24
|
Financial assets - other
|
192
|
184
|
Financial liabilities - other
|
(529)
|
(587)
|
Valuation techniques based on unobservable market input (Level
3)
|
(337)
|
(403)
|
In the years ended 30 June 2023 and 30 June 2022, the increase in
financial assets - other of £8 million
(2022 – £46 million)
is principally in respect of acquisitions.
The movements in level 3 instruments, measured on a recurring
basis, are as follows:
|
Zacapafinancial liability
|
Contingent consideration recognised on acquisition of
businesses
|
Zacapa financial liability
|
Contingent consideration recognised on acquisition of
businesses
|
|
Year ended
30 June 2023
|
Year ended
30 June 2023
|
Year ended
30 June 2022
|
Year ended
30 June 2022
|
|
£ million
|
£ million
|
£ million
|
£ million
|
At the
beginning of the year
|
(216)
|
(371)
|
(149)
|
(429)
|
Net (losses)/gains included in the income statement
|
(8)
|
117
|
(20)
|
62
|
Net gains/(losses) included in exchange in other comprehensive
income
|
9
|
11
|
(26)
|
(39)
|
Net losses included in retained earnings
|
(16)
|
—
|
(34)
|
—
|
Acquisitions
|
—
|
(76)
|
—
|
(70)
|
Settlement of liabilities
|
13
|
8
|
13
|
105
|
At the end of the year
|
(218)
|
(311)
|
(216)
|
(371)
|
The carrying amount of the group’s financial assets and
liabilities is generally the same as their fair value apart from
borrowings. At 30 June 2023, the fair value of gross borrowings
(excluding lease liabilities and the fair value of derivative
instruments) was £15,641 million
and the carrying value was
£16,502 million
(30 June 2022 – £15,628 million and
£16,020 million,
respectively).
10. Dividends and other reserves
|
Year ended
30 June 2023
|
|
Year ended
30 June 2022
|
|
£ million
|
|
£ million
|
Amounts recognised as distributions to equity shareholders in the
year
|
|
|
|
Final
dividend for the year ended 30 June 2022 of
46.82 pence per share (2021 – 44.59 pence)
|
1,066
|
|
1,040
|
Interim
dividend for the year ended 30 June
2023 of
30.83
pence per share (2022
– 29.36
pence)
|
696
|
|
680
|
|
1,762
|
|
1,720
|
A final dividend of 49.17 pence
per share was recommended by a duly authorised committee of the
Board of Directors on 31 July 2023 for approval by
shareholders at the Annual General Meeting scheduled to be held on
28 September 2023 bringing the full year dividend to 80.00 pence
per
share for the year ended 30 June 2023. As the approval will be
after the balance sheet date, the final dividend has not been
included as a liability.
Other reserves of £1,861
million at 30 June 2023 (2022
– £2,174 million) include a capital redemption reserve
of £3,231
million (2022 –
£3,220 million), a hedging reserve surplus of
£242
million (2022– £26
million surplus) and an exchange reserve deficit of
£1,612
million (2022 –
£1,072 million deficit). Currency basis spreads included in
the hedging reserve represent the cost of hedging arising as a
result of imperfections of foreign exchange markets. Exclusion of
currency basis spreads would result in a £20 million
credit (2022 – £22 million
credit) to the hedging reserve.
11. Acquisition of businesses
Fair value of assets and liabilities acquired and cash
consideration paid in respect of acquisition of
subsidiaries in the year ended 30 June 2023 were as
follows:
|
Don Papa
|
Other
|
Total
|
|
£ million
|
£ million
|
£ million
|
Brands and other intangibles
|
293
|
45
|
338
|
Property, plant and equipment
|
1
|
24
|
25
|
Inventories
|
6
|
21
|
27
|
Other working capital
|
(2)
|
(1)
|
(3)
|
Deferred tax
|
(67)
|
(4)
|
(71)
|
(Overdraft)/Cash
|
(1)
|
1
|
—
|
Fair value of assets and liabilities
|
230
|
86
|
316
|
Goodwill arising on acquisition
|
64
|
28
|
92
|
Step acquisitions
|
—
|
(11)
|
(11)
|
Consideration payable
|
294
|
103
|
397
|
Satisfied by:
|
|
|
|
Cash
consideration paid
|
(218)
|
(98)
|
(316)
|
Contingent
consideration payable
|
(72)
|
(4)
|
(76)
|
Deferred
consideration payable
|
(4)
|
(1)
|
(5)
|
|
(294)
|
(103)
|
(397)
|
Cash consideration paid in respect of the acquisition of businesses
and purchase of shares of non-controlling interests in the year
ended 30 June 2023 were as follows:
|
Consideration
|
|
£ million
|
Acquisitions in the year - subsidiaries
|
|
Cash
consideration paid
|
(316)
|
Prior year acquisitions - subsidiaries
|
|
Other
consideration
|
(26)
|
Investments in associates
|
|
Cash
consideration paid
|
(14)
|
Capital
injection
|
(79)
|
Net cash outflow on acquisition of businesses
|
(435)
|
Purchase of shares of non-controlling interests
|
(146)
|
Total net cash outflow
|
(581)
|
On 10 March 2023, Diageo completed the acquisition of Kanlaon
Limited and Chat Noir Co. Inc., (the owner of Don Papa Rum) to
support Diageo’s participation in the super-premium dark rum
segment for upfront cash consideration of €246 million
(£218 million), deferred consideration of
€4 million (£4 million) and contingent
consideration of up to €178 million
(£158 million) through to 2028 subject to certain
financial performance targets, reflecting the brand’s
expected growth potential. The fair value of the contingent
consideration of €82 million (£72 million) was
estimated by calculating the present value of the future expected
cash flows which is dependent on management’s estimates in
respect of the forecasting of future cash flows and the discount
rates applicable to the future cash flows. The goodwill arising on
the acquisition of Don Papa Rum represents expected revenue
synergies and the acquired workforce. Don Papa Rum contributed
£10 million to net sales and £15 million
operating loss to the period, out of which
£15 million is related to
acquisition transaction and integration costs in the year ended 30
June 2023. The fair value measurement of assets and liabilities
acquired is in progress. The fair values of assets and liabilities
acquired are provisional and will be finalised in the year ending
30 June 2024.
Diageo completed further acquisitions in the year ended 30 June
2023: (i) on 29 September 2022, the acquisition of the remaining
issued share capital of Mr Black Spirits Pty Ltd, owner of Mr
Black, the Australian premium cold brew coffee liqueur, that it did
not already own; and (ii) on 2 November 2022, the acquisition of
the entire issued share capital of Balcones Distilling, a Texas
craft distiller and one of the leading producers of American single
malt whiskey in the United States. The aggregate up-front cash
consideration paid on completion of these transactions in the year
ended 30 June 2023 was £98 million.
Purchase of shares of non-controlling interests
On 24 March 2023, Diageo completed the purchase of 14.97% of the
share capital of EABL for an aggregate consideration of KES 22,732
million (£142 million) in cash and transaction costs of
£4 million. This took Diageo’s shareholding in EABL
from 50.03% to 65%. EABL was already controlled and therefore
consolidated prior to this transaction.
12. Intangible assets
As a result of the impairment review, in the year ended 30 June
2023, an impairment charge of £420 million in respect of the
McDowell's brand and £24 million in respect of the
Director’s Special brand were recognised in exceptional
operating items. Value in use and fair value less costs of disposal
methodologies were both considered to assess the recoverable
amount. The value in use that was calculated exceeded the fair
value less costs of disposal. The charge is mainly driven by the
adverse inflationary environment and the reduction in forecast cash
flow assumptions in Lower Prestige and Popular segments in India.
The brand impairment reduced the deferred tax liability by
£111 million. The recoverable
amount is £379 million in respect of the
McDowell's brand and £11 million in respect of the
Director’s Special brand cash-generating
units.
As a result of the impairment review, in the year ended 30 June
2023, an additional impairment charge of £54 million was recognised in
exceptional operating items in respect of some brands where book
value was not recoverable. The charge is mainly driven by strategic
change in some categories as a result of the challenging operating
environment and premiumisation. Value in use and fair value less
costs of disposal methodologies were both considered to assess the
recoverable amount. The value in use that was calculated exceeded
the fair value less costs of disposal. The brand impairment reduced
the deferred tax liability by £13 million.
In the year ended 30 June 2022, an impairment charge of
£240 million in respect of the
McDowell's brand was recognised in exceptional operating items,
based on its value in use. The brand impairment reduced the
deferred tax liability by £35 million.
Further, in the year ended 30 June 2022, an impairment charge
of £77 million in respect
of the Bell’s brand was recognised in exceptional operating
items, based on its value in use. The impairment reduced the
deferred tax liability attributable to the brand by £20
million.
In the year ended 30 June 2022, Diageo decided to wind down its
operations in Russia. As a result, an impairment charge of £19
million in respect of the Smirnov goodwill was recognised in
exceptional operating items.
The Turkish economy became hyperinflationary for the year ended 30
June 2022, and an impairment
charge of TRY 3,760
million (£312 million) on the opening
carrying amount of the Turkey cash-generating unit was recognised
in retained earnings. From this impairment charge,
TRY 1,627 million (£135 million) was directly
attributable to the Yenì Raki brand and the remaining
TRY 2,133 million (£177 million) impairment charge was
recognised on the Turkey goodwill.
Impairment testing for the year ended 30 June 2023 has identified
the following cash-generating units as being sensitive to
reasonably possible changes in assumptions. The table below shows
the headroom at 30 June 2023 and the impairment charge that would
be required if the assumptions in the calculation of their value in
use were changed:
|
|
|
Increase in discount rate
|
Decrease in terminal growth rate
|
Decrease in annual growth rate in forecast period
2024-2029
|
Decrease in cash flows(1)
|
|
Carrying value of CGU
£ million
|
Headroom
£ million
|
Reasonably possible change
|
Potential impairment charge
£ million
|
Reasonably possible change
|
Potential impairment charge
£ million
|
Reasonably possible change
|
Potential impairment charge
£ million
|
Reasonably possible change
|
Potential impairment charge
£ million
|
McDowell's
|
379
|
—
|
1ppt
|
(38)
|
1ppt
|
(26)
|
2ppt
|
(67)
|
10%
|
(76)
|
(1)Including reasonably possible changes in productivity saving
assumptions
13. Sale of businesses and brands
Cash consideration received and net assets disposed of in respect
of sale of businesses and brands in the year ended 30 June 2023
were as follows:
|
Guinness Cameroun S.A.
|
Other
|
Total
|
|
£ million
|
£ million
|
£ million
|
Sale consideration
|
|
|
|
Cash received
|
384
|
115
|
499
|
Cash disposed of
|
(13)
|
—
|
(13)
|
Transaction and other directly attributable costs paid
|
(17)
|
(7)
|
(24)
|
Net cash received
|
354
|
108
|
462
|
Transaction costs payable
|
(8)
|
3
|
(5)
|
|
346
|
111
|
457
|
Net assets disposed of
|
|
|
|
Property, plant and equipment
|
(103)
|
(3)
|
(106)
|
Assets and liabilities held for sale
|
—
|
(79)
|
(79)
|
Inventories
|
(24)
|
(4)
|
(28)
|
Other working capital
|
69
|
—
|
69
|
Other borrowings
|
2
|
—
|
2
|
Corporation tax
|
(3)
|
—
|
(3)
|
Deferred tax
|
5
|
—
|
5
|
Post employment benefit liabilities
|
4
|
—
|
4
|
|
(50)
|
(86)
|
(136)
|
Impairment charge recognised up until the date of sale
|
(3)
|
—
|
(3)
|
Exchange recycled from other comprehensive income
|
17
|
1
|
18
|
Gain on disposal before taxation
|
310
|
26
|
336
|
Taxation
|
(42)
|
13
|
(29)
|
Gain on disposal after taxation
|
268
|
39
|
307
|
On 26 May 2023, Diageo completed the sale of Guinness Cameroun
S.A., its brewery in Cameroon. The aggregate consideration for the
disposal was £384 million, the disposed net asset of
£63 million mainly included property, plant and equipment
and trade and other payables. The transaction resulted in a
non-operating exceptional gain of £310 million. The
disposed Cameroon operations contributed net sales of
£101 million (2022 – £124 million; 2021
– £113 million), operating profit of
£26 million (2022– £27 million;
2021– £22 million) in the year ended 30 June
2023.
On 30 September 2022, Diageo completed the sale of the Popular
brands of its USL business. The aggregate consideration for the
disposal was £87 million, the disposed net assets
included net working capital of £31 million and brands of
£22 million, and £16 million goodwill was
derecognised. The transaction resulted in a non-operating
exceptional gain of £4 million. Popular brands
contributed net sales of £34 million (2022–
£139 million; 2021 – £148 million),
operating profit of £5 million (2022–
£26 million; 2021– £30 million) in the
year ended 30 June 2023.
14. Assets and liabilities held for sale
Assets and liabilities held for sale at 30 June 2022 included
Diageo’s Windsor business in Korea and the portfolio of
Popular brands of USL.
In March 2022, Diageo agreed to sell its Windsor business in Korea
to Bayside/Metis Private Equity Consortium. On 27 September 2022,
Diageo announced the termination of the conditional agreement.
Consequently, the recoverable assets and liabilities attributable
to the business were reclassified out of held for
sale.
On 27 May 2022, USL reached agreement with Inbrew Beverages Pvt
Limited for the sale of Popular brands. On 30 September 2022,
Diageo announced the completion of the sale of the selected Popular
brands, accordingly the assets and liabilities attributable to the
business were disposed from held for sale.
15. Contingent liabilities and legal proceedings
(a) Guarantees and related matters
As of 30 June 2023, the group has no material unprovided guarantees
or indemnities in respect of liabilities of third
parties.
(b) Acquisition of USL shares from UBHL and related proceedings in
relation to the USL transaction
On 4 July 2013, Diageo completed its acquisition, under a share
purchase agreement with United Breweries (Holdings) Limited (UBHL)
and various other sellers (the SPA), of shares representing 14.98%
in USL, including shares representing 6.98% from UBHL. The SPA was
signed on 9 November 2012 as part of the transaction announced by
Diageo in relation to USL on that day (the Original USL
Transaction). Following a series of further transactions, as of 30
June 2023, Diageo has a 55.88% investment in USL (excluding 2.38%
owned by the USL Benefit Trust).
Prior to the acquisition from UBHL on 4 July 2013, the High Court
of Karnataka (High Court) had granted leave to UBHL under the
Indian Companies Act 1956 (the Leave Order) to enable the sale by
UBHL to Diageo to take place (the UBHL Share Sale) notwithstanding
the continued existence of certain winding-up petitions that were
pending against UBHL on the date of the SPA. At the time of the
completion of the UBHL Share Sale, the Leave Order remained subject
to review on appeal. However, as stated by Diageo at the time of
closing, it was considered unlikely that any appeal process in
respect of the Leave Order would definitively conclude on a timely
basis and, accordingly, Diageo waived the conditionality under the
SPA relating to the absence of insolvency proceedings in relation
to UBHL and acquired the 6.98% stake in USL from UBHL at that
time.
Following appeal and counter-appeal in respect of the Leave Order,
this matter is now before the Supreme Court of India which has
issued an order that the status quo be maintained with regard to
the UBHL Share Sale pending a hearing on the matter before it.
Following a number of adjournments, the next date for a substantive
hearing is yet to be fixed.
In separate proceedings, the High Court passed a winding-up order
against UBHL on 7 February 2017, and appeals filed by UBHL against
that order have since been dismissed, initially by a division bench
of the High Court and subsequently by the Supreme Court of
India.
Diageo continues to believe that the acquisition price of INR 1,440
per share paid to UBHL for the USL shares is fair and reasonable as
regards UBHL, UBHL’s shareholders and UBHL’s secured
and unsecured creditors. However, adverse results for Diageo in the
proceedings referred to above could, absent leave or relief in
other proceedings, ultimately result in Diageo losing title to the
6.98% stake in USL acquired from UBHL. Diageo
believes,
including
by reason of its rights under USL’s articles of association
to nominate USL’s CEO and CFO and the right to appoint,
through USL, a majority of the directors on the boards of
USL’s subsidiaries as well as its ability as promoter to
nominate for appointment up to two-thirds of USL’s directors
for so long as the chairperson of USL is an independent
director,
that it
would remain in control of USL and would continue to be able to
consolidate USL as a subsidiary for accounting purposes regardless
of the outcome of this litigation.
There can be no certainty as to the outcome of the existing or any
further related legal proceedings or the time frame within which
they would be concluded.
(c) Continuing matters relating to Dr Vijay Mallya and
affiliates
On 25 February 2016, Diageo and USL each announced that they had
entered into arrangements with Dr Mallya under which he had agreed
to resign from his position as a director and as chairman of USL
and from his positions in USL’s subsidiaries.
Diageo’s agreement with Dr Mallya (the February 2016
Agreement) provided for a payment of $75 million
(£60 million) to Dr Mallya over a five-year period of
which $40 million (£32 million) was paid on signing
of the February 2016 Agreement with the balance being payable in
equal instalments of $7 million (£6 million) a year
over five years (2017-2021). All payments were subject to and
conditional on Dr Mallya’s compliance with the agreement. The
February 2016 Agreement also provided for the release of Dr
Mallya’s personal obligations to indemnify Diageo Holdings
Netherlands B.V. (DHN) in respect of its earlier liability
($141 million (£112 million)) under a backstop
guarantee of certain borrowings of Watson Limited (Watson) (a
company affiliated with Dr Mallya).
On account of various breaches and other provisions of agreements
between Dr Mallya and persons connected with him and Diageo and/or
USL, Diageo did not make the five instalment payments due during
the five-year period between 2017 and 2021. In addition, Diageo has
also demanded that Dr Mallya repay the $40 million (£32
million) paid by Diageo in February 2016 and sought compensation
for various losses incurred by the relevant members of the Diageo
group.
On 16 November 2017, Diageo and other relevant members of the
Diageo group commenced claims in the High Court of Justice in
England and Wales (the English High Court) against Dr Mallya in
relation to these matters. At the same time DHN also commenced
claims in the English High Court against Dr Mallya, his son
Sidhartha Mallya, Watson and Continental Administration Services
Limited (CASL) (a company affiliated with Dr Mallya and understood
to hold assets on trust for him and certain persons affiliated with
him) for in excess of $142 million (£113 million) (plus
interest) in relation to Watson’s liability to DHN in respect
of its borrowings referred to above and the breach of associated
security documents. Dr Mallya, Sidhartha Mallya and the relevant
affiliated companies filed a defence to these claims, and Dr Mallya
also filed a counterclaim for payment of the two instalment
payments that had by that time been withheld as described
above.
Diageo continues to prosecute its claims and to defend the
counterclaim. As part of these proceedings, Diageo and the other
relevant members of its group filed an application for strike out
and/or summary judgement in respect of certain aspects of the
defence filed by Dr Mallya and the other defendants, including
their defence in relation to Watson and CASL’s liability to
repay DHN. The application was successful resulting in Watson being
ordered to pay approximately $135 million (£107 million) plus
various amounts in respect of interest to DHN, with CASL being held
liable as co-surety for 50% of any such amount unpaid by Watson.
These amounts were, contrary to the relevant orders, not paid by
the relevant deadlines and Watson and CASL’s remaining
defences in the proceedings were struck out. Diageo and DHN have
accordingly sought asset disclosure and are considering further
enforcement steps against Watson and CASL, both in the United
Kingdom and in other jurisdictions where they are present or hold
assets.
A trial of the remaining elements of these claims was due to
commence on 21 November 2022. However, on 26 July 2021 Dr Mallya
was declared bankrupt by the English High Court pursuant to a
bankruptcy petition presented by a consortium of Indian banks.
Diageo and the relevant members of its group have informed the
Trustee in Bankruptcy of their position as creditors in the
bankruptcy and have engaged with the Trustee regarding their claims
and the status of the current proceedings. An appeal by Dr Mallya
against his bankruptcy (and an appeal by the bank consortium
against orders made in the course of the bankruptcy proceedings)
are pending. In light of the uncertainty posed by the ongoing
bankruptcy proceedings, the trial of Diageo’s claim was
initially relisted to take place in February 2024. However, Dr Mallya’s appeal against his
bankruptcy and the banks’ cross appeal will not now be heard
until April 2024, and thus the trial of Diageo’s claim has
been deferred from February 2024 until after those appeals have
been determined.
At this stage, it is not possible to assess the extent to which the
various ongoing proceedings related to the bankruptcy will affect
the remaining elements of the claims by Diageo and the relevant
members of its group.
Upon completion of an initial inquiry in April 2015 into past
improper transactions which identified references to certain
additional parties and matters, USL carried out an additional
inquiry into these transactions (Additional Inquiry) which was
completed in July 2016. The Additional Inquiry, prima facie,
identified transactions indicating actual and potential diversion
of funds from USL and its Indian and overseas subsidiaries to, in
most cases, entities that appeared to be affiliated or associated
with Dr Mallya. All amounts identified in the Additional Inquiry
have been provided for or expensed in the financial statements of
USL or its subsidiaries in the respective prior periods. USL has
filed recovery suits against relevant parities identified pursuant
to the Additional Inquiry. Further, at this stage, it is not
possible for the management of USL to estimate the financial impact
on USL, if any, arising out of potential non-compliance with
applicable laws in relation to such fund diversions.
(d) Other matters in relation to USL
In respect of the Watson backstop guarantee arrangements, the
Securities and Exchange Board of India (SEBI) issued a notice to
Diageo on 16 June 2016 that if there is any net liability incurred
by Diageo (after any recovery under relevant security or other
arrangements, which matters remain pending) on account of the
Watson backstop guarantee, such liability, if any, would be
considered to be part of the price paid for the acquisition of USL
shares under the SPA which formed part of the Original USL
Transaction and that, in that case, additional equivalent payments
would be required to be made to those shareholders (representing
0.04% of the shares in USL) who tendered in the open offer made as
part of the Original USL Transaction. Diageo believes that the
Watson backstop guarantee arrangements were not part of the price
paid or agreed to be paid for any USL shares under the Original USL
Transaction and that therefore SEBI's decision was not consistent
with applicable law, and Diageo appealed against it before the
Securities Appellate Tribunal, Mumbai (SAT). On 1 November 2017,
SAT issued an order in respect of Diageo’s appeal in which,
amongst other things, it observed that the relevant officer at SEBI
had neither considered Diageo’s earlier reply nor provided
Diageo with an opportunity to be heard, and accordingly directed
SEBI to pass a fresh order after giving Diageo an opportunity to be
heard. Following SAT’s order, Diageo made its further
submissions in the matter, including at a personal hearing before a
Deputy General Manager of SEBI. On 26 June 2019, SEBI issued an
order reiterating the directions contained in its previous notice
dated 16 June 2016. As with the
previous SEBI notice, Diageo believes that SEBI's latest order is
not consistent with applicable law. Diageo appealed against this
order before SAT and, after a hearing in March 2023, SAT allowed
Diageo’s appeal on 26 July 2023. Accordingly, SEBI’s
order dated 26 June 2019 stands quashed. Under applicable law, SEBI
is entitled to file an appeal against SAT’s order before the
Supreme Court of India. Therefore, pending any appeal which may be
filed by SEBI, there can be no certainty as to its outcome or the
timeframe within which any such appeal would be
concluded.
(e) USL’s dispute with IDBI Bank Limited
Prior to the acquisition by Diageo of a controlling interest in
USL, USL had prepaid a term loan of INR 6,280 million (£60
million) taken through IDBI Bank Limited (IDBI), an Indian bank,
which was secured on certain fixed assets and brands of USL, as
well as by a pledge of certain shares in USL held by the USL
Benefit Trust (of which USL is the sole beneficiary). The maturity
date of the loan was 31 March 2015. IDBI disputed the prepayment,
following which USL filed a writ petition in November 2013 before
the High Court of Karnataka (the High Court) challenging the
bank’s actions.
Following the original maturity date of the loan, USL received
notices from IDBI seeking to recall the loan, demanding a further
sum of INR 459 million (£4 million) on account of the
outstanding principal, accrued interest and other amounts, and also
threatening to enforce the security in the event that USL did not
make these further payments. Pursuant to an application filed by
USL before the High Court in the writ proceedings, the High Court
directed that, subject to USL depositing such further amount with
the bank (which amount was duly deposited by USL), the bank should
hold the amount in a suspense account and not deal with any of the
secured assets including the shares until disposal of the original
writ petition filed by USL before the High Court.
On 27 June 2019, a single judge bench of the High Court issued an
order dismissing the writ petition filed by USL, amongst other
things, on the basis that the matter involved an issue of breach of
contract by USL and was therefore not maintainable in exercise of
the court’s writ jurisdiction. USL filed an appeal against
this order before a division bench of the High Court, which on 30
July 2019 issued an interim order directing the bank to not deal
with any of the secured assets until the next date of hearing. On
13 January 2020, the division bench of the High Court admitted the
writ appeal and extended the interim stay. This appeal is currently
pending. Based on the assessment of USL’s management
supported by external legal opinions, USL continues to believe that
it has a strong case on the merits and therefore continues to
believe that the secured assets will be released to USL and the
aforesaid amount of INR 459 million (£4 million) remains
recoverable from IDBI.
(f) Tax
The international tax environment has seen increased scrutiny and
rapid change over recent years bringing with it greater uncertainty
for multinationals. Against this backdrop, Diageo has been
monitoring developments and continues to engage transparently with
the tax authorities in the countries where Diageo operates to
ensure that the group manages its arrangements on a sustainable
basis.
The group operates in a large number of markets with complex tax
and legislative regimes that are open to subjective
interpretation, and for which
tax audits can take several years to resolve. In the context of these
operations, it is possible that tax exposures which have not yet
materialised (including those which could arise as a result of tax
assessments) may result in losses to the group. In the
circumstances where tax authorities have raised assessments,
challenging interpretations which may lead to a possible material
outflow, these have been included as contingent liabilities. Where
the potential tax exposures are known to us and have not been
assessed, the group considers disclosure of such matters taking
into account their size and nature, relevant regulatory
requirements and potential prejudice of the future resolution or
assessment thereof.
Diageo has a large number of ongoing tax cases in Brazil and India.
Since assessing an accurate value of contingent liabilities in
these markets requires a high degree of judgement, contingent
liabilities are disclosed on the basis of the current known
possible exposure from tax assessment values. While not all of
these cases are individually significant, the current aggregate
known possible exposure from tax assessment values is up to
approximately £616 million for Brazil and up to
approximately £90 million for India. The group
believes that the likelihood that the tax authorities will
ultimately prevail is lower than probable but higher than remote.
Due to the fiscal environment in Brazil and in India, the
possibility of further tax assessments related to the same matters
cannot be ruled out and the judicial processes may take extended
periods to conclude. Based on its current assessment, Diageo
believes that no provision is required in respect of these
issues.
Payments were made under protest in India in respect of the periods 1 April 2006 to 31 March
2019 in relation to tax assessments where the risk is considered to
be remote or possible. These payments have to be made in order to
be able to challenge the assessments and as such have been
recognised as a receivable in the group's balance sheet. The total
amount of payments under protest recognised as a receivable as at
30 June 2023 is £116 million (corporate tax payments of
£104 million and indirect tax payments of
£12 million).
(g) Other disputes
On 31 May 2023, a complaint against Diageo North America, Inc (DNA)
was filed in the Supreme Court of New York by Combs Wine and
Spirits LLC (an entity associated with Mr Sean Combs) alleging,
inter alia, breach of contract in respect of a joint venture
agreement related to DeLeón tequila. DNA has also served
notice of material breaches and termination to Mr Combs and his
relevant associated entities of certain agreements related to
services provided by Mr Combs and these entities in respect of
Cîroc, and notice of material breaches and an intent to
arbitrate in respect of the DeLeón joint venture agreement.
Diageo categorically denies the allegations that have been made by
Mr Combs and his associated parties in the complaint and will
defend itself vigorously. Diageo will refrain from making any
further disclosures given the inherent uncertainties of these
matters and the prejudicial nature any such disclosures may have on
the potential outcomes related thereto or other associated
matters.
(h) Other
The group has extensive international operations and routinely
makes judgements on a range of legal, customs and tax matters which
are incidental to the group's operations. Some of these judgements
are or may become the subject of challenges and involve
proceedings, the outcome of which cannot be foreseen. In
particular, the group is currently a defendant in various customs
proceedings that challenge the declared customs value of products
imported by certain Diageo companies. Diageo continues to defend
its position vigorously in these proceedings.
Save as disclosed above, neither Diageo, nor any member of the
Diageo group, is or has been engaged in, nor (so far as Diageo is
aware) is there pending or threatened by or against it, any legal
or arbitration proceedings which may have a significant effect on
the financial position of the Diageo group.
16. Related party transactions
The group’s significant related parties are its associates,
joint ventures, key management personnel and post employment
benefit plans.
In October 2022, Diageo plc provided an interim credit facility to
Diageo Pension Trust Limited, consisting of £850 million
for the Diageo Pension Scheme, to support temporary liquidity
challenges until 29 December 2022. In December 2022, the maturity
date was extended to 29 June 2023. The facility amount was reduced
on 22 May 2023 to £350 million and on 14 June 2023 the
maturity date was extended to 11 October 2023. The facility was
subsequently cancelled on 25 July 2023.
There were no transactions with these related parties during the
year ended 30 June 2023 on terms other than those that prevail in
arm’s length transactions.
17. Post balance sheet events
Starting 1 July 2023, in line with reporting requirements the
functional currency of Diageo plc has changed from sterling to US
dollar which is applied prospectively. This is because the group's
share of net sales and expenses in the US and other countries whose
currencies correlate closely with the US dollar has been increasing
over the years, and that trend is expected to continue in line with
the group's strategic focus. Diageo has also decided to change its
presentation currency to US dollar with effect from 1 July 2023,
applied retrospectively, as it believes that this change will
provide better alignment of the reporting of performance with its
business exposures.
Diageo will propose adopting new Articles of Association (New
Articles) at the AGM to be held on 28 September 2023 which reflects
the change in the functional currency of Diageo plc and
presentation currency of the group from sterling to US dollar. The
New Articles shall, among other things, empower the Board to
declare and/or pay dividends in any currency or currencies and
enable the Board to make provisions for shareholders to receive
dividends in a different currency to the currency in which
dividends were declared. Subject to the approval of the New
Articles by shareholders at the AGM and commencing with the interim
dividend that is expected to be declared in January 2024,
Diageo’s future dividends will be declared in US dollar.
Holders of ordinary shares will continue to receive their dividends
in sterling but will have the option to elect to receive it in US
dollar. Holders of ADRs will continue to receive dividends in US
dollar.
On 31 July 2023, the Board approved plans for a further return of
capital programme of $1.0 billion to
shareholders.
Additional information
Explanatory notes
Comparisons are to the year ended 30 June 2022 (2022) unless
otherwise stated. Unless otherwise stated, percentage movements
given throughout this document for volume, sales, net sales,
marketing spend, operating profit and operating margin are organic
movements after retranslating current period reported numbers at
prior period exchange rates and after adjusting for the effect of
exceptional operating items and acquisitions and disposals,
excluding fair value remeasurements.
This document includes names of Diageo’s products which
constitute trademarks or trade names which Diageo owns or which
others own and license to Diageo for use.
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, and some of them
are used for incentive purposes. The group’s management
believes that these measures provide valuable additional
information for users of the financial statements in understanding
the group’s performance. These non-GAAP measures should be
viewed as complementary to, and not replacements for, the
comparable GAAP measures and reported movements
therein.
It is not possible to reconcile the forecast tax rate before
exceptional items, forecast organic net sales growth and forecast
organic operating profit growth to the most comparable GAAP measure
as it is not possible to predict, without unreasonable effort, with
reasonable certainty, the future impact of changes in exchange
rates, acquisitions and disposals and potential exceptional
items.
Volume
Volume is a performance indicator that is measured on an equivalent
units basis to nine-litre cases of spirits. An equivalent unit
represents one nine-litre case of spirits, which is approximately
272 servings. A serving comprises 33ml of spirits, 165ml of wine,
or 330ml of ready to drink or beer. Therefore, to convert volume of
products other than spirits to equivalent units, the following
guide has been used: beer in hectolitres, divide by 0.9; wine in
nine-litre cases, divide by five; ready to drink and certain
pre-mixed products that are classified as ready to drink in
nine-litre cases, divide by ten.
Organic movements
Organic information is presented using sterling amounts on a
constant currency basis excluding the impact of exceptional items,
certain fair value remeasurement, hyperinflation and acquisitions
and disposals. Organic measures enable users to focus on the
performance of the business which is common to both years and which
represents those measures that local managers are most directly
able to influence.
Calculation of organic movements
The organic movement percentage is the amount in the row titled
‘Organic movement’ in the tables below, expressed as a
percentage of the relevant absolute amount in the row titled
‘2022 adjusted’. Organic operating margin is calculated
by dividing operating profit before exceptional items by net sales
after excluding the impact of exchange rate movements, certain fair
value remeasurements, hyperinflation and acquisitions and
disposals.
(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 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 to the geographical segment to which they relate.
Residual exchange impacts are reported as part of the Corporate
segment. Results from hyperinflationary economies are translated at
forward-looking rates.
(b) Acquisitions and disposals
For acquisitions in the current period, the post-acquisition
results are excluded from the organic movement calculations. For
acquisitions in the prior period, post-acquisition results are
included in full in the prior period but are included in the
organic movement calculation from the anniversary of the
acquisition date in the current period. The acquisition row also
eliminates the impact of transaction costs that have been charged
to operating profit in the current or prior period in respect of
acquisitions that, in management’s judgement, are expected to
be completed.
Where a business, brand, brand distribution right or agency
agreement was disposed of or terminated in the reporting period,
the group, in the organic movement calculations, excludes the
results for that business from the current and prior period. In the
calculation of operating profit, the overheads included in
disposals are only those directly attributable to the businesses
disposed of, and do not result from subjective judgements of
management.
(c) Exceptional items
Exceptional items are those that in management’s judgement
need to be disclosed separately. Such items are included within the
income statement caption to which they relate, and are excluded
from the organic movement calculations. Management believes that that separate
disclosure of exceptional items and the classification between
operating and non-operating items further
helps investors to understand the performance of the group. Changes in estimates
and reversals in relation to items previously recognised as
exceptional are presented consistently as exceptional in the
current year.
Exceptional operating items are those that are considered to be
material and unusual or non-recurring in nature and are part of the
operating activities of the group, such as one-off global
restructuring programmes which can be multi-year, impairment of
intangible assets and fixed assets, indirect tax settlements,
property disposals and changes in post employment
plans.
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 subsidiary and other material,
unusual non-recurring items that are not in respect of the
production, marketing and distribution of premium drinks, are
disclosed as exceptional non-operating items below operating profit
in the income statement.
Exceptional current and deferred tax items comprise material and
unusual or non-recurring items that impact taxation. Examples
include direct tax provisions and settlements in respect of prior
years and the remeasurement of
deferred tax assets and liabilities following tax rate
changes.
(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 relating to
contingent consideration liabilities and equity options that arose
on acquisitions recognised in the income statement.
Growth on a constant basis
Growth on a constant basis is a measure used by the group to
understand the trends of the business and its recovery towards
pre-Covid-19 performance.
2019 to 2023 growth on a constant basis for volume, sales, net
sales and operating profit before exceptional items is calculated
by adding up the respective periods’ organic movement in the
row titled ‘Organic movement’ in the tables below,
expressed as a percentage of the relevant absolute amount in the
row titled '2019 adjusted’. The most comparable GAAP
financial measure is '2019 to 2023 reported movement %' in the
tables below which is calculated by combining the reported
movements for the respective periods, expressed as a percentage of
the 2019 reported amount.
Adjustment in respect of hyperinflation
The group's experience is that hyperinflationary conditions result
in price increases that include both normal pricing actions
reflecting changes in demand, commodity and other input costs or
considerations to drive commercial competitiveness, as well as
hyperinflationary elements and that for the calculation of organic
movements, the distortion from hyperinflationary elements should be
excluded.
Cumulative inflation over 100% (2% per month compounded) over three
years is one of the key indicators within IAS 29 to assess whether
an economy is deemed to be hyperinflationary. As a result, the
definition of 'Organic movements' includes price growth in markets
deemed to be hyperinflationary economies, up to a maximum of 2% per
month while also being on a constant currency basis. Corresponding
adjustments have been made to all income statement related lines in
the organic movement calculations.
In the tables presenting the calculation of organic movements,
'hyperinflation' is included as a reconciling item between reported
and organic movements and that also includes the relevant IAS 29
adjustments.
Organic movement calculations for the year ended 30 June 2023 were
as follows:
|
North America
million
|
Europe
million
|
Asia
Pacific
million
|
Latin America
and Caribbean
million
|
Africa
million
|
Corporate
million
|
Total
million
|
Volume (equivalent units)
|
|
|
|
|
|
|
|
2019 reported
|
49.4
|
45.4
|
95.1
|
22.4
|
33.6
|
—
|
245.9
|
Disposals
|
(2.1)
|
(0.1)
|
—
|
—
|
(2.7)
|
—
|
(4.9)
|
2019 adjusted
|
47.3
|
45.3
|
95.1
|
22.4
|
30.9
|
—
|
241.0
|
Organic movement (2020)
|
0.1
|
(5.2)
|
(14.5)
|
(3.4)
|
(4.0)
|
—
|
(27.0)
|
Organic movement (2021)
|
5.1
|
2.9
|
7.0
|
4.1
|
4.8
|
—
|
23.9
|
Organic movement (2022)
|
1.4
|
8.5
|
6.6
|
4.0
|
4.0
|
—
|
24.5
|
2020, 2021 and 2022 movement on a constant basis
|
6.6
|
6.2
|
(0.9)
|
4.7
|
4.8
|
—
|
21.4
|
|
|
|
|
|
|
|
|
Volume (equivalent units)
|
|
|
|
|
|
|
|
2022 reported
|
54.8
|
51.2
|
94.2
|
27.1
|
35.7
|
—
|
263.0
|
Disposals(2)
|
—
|
(0.8)
|
(23.3)
|
—
|
(1.9)
|
—
|
(26.0)
|
2022 adjusted
|
54.8
|
50.4
|
70.9
|
27.1
|
33.8
|
—
|
237.0
|
Organic movement
|
(2.5)
|
0.1
|
3.9
|
(0.9)
|
(2.4)
|
—
|
(1.8)
|
Acquisitions and disposals(2)
|
0.1
|
0.8
|
6.0
|
—
|
1.3
|
—
|
8.2
|
2023 reported
|
52.4
|
51.3
|
80.8
|
26.2
|
32.7
|
—
|
243.4
|
Organic movement %
|
(5)
|
—
|
5
|
(3)
|
(7)
|
—
|
(1)
|
|
|
|
|
|
|
|
|
2019 to 2023 reported growth %
|
6
|
13
|
(15)
|
17
|
(3)
|
—
|
(1)
|
2019 to 2023 growth on a constant basis %
|
9
|
14
|
3
|
17
|
8
|
—
|
8
|
|
North America
£ million
|
Europe
£ million
|
Asia
Pacific
£ million
|
Latin America
and Caribbean
£ million
|
Africa
£ million
|
Corporate
£ million
|
Total
£ million
|
Sales
|
|
|
|
|
|
|
|
2022 reported
|
6,682
|
5,740
|
5,624
|
1,945
|
2,403
|
54
|
22,448
|
Exchange
|
(51)
|
(149)
|
(4)
|
(19)
|
(1)
|
—
|
(224)
|
Disposals(2)
|
—
|
(36)
|
(884)
|
—
|
(195)
|
—
|
(1,115)
|
Hyperinflation
|
—
|
(213)
|
—
|
—
|
—
|
—
|
(213)
|
2022 adjusted
|
6,631
|
5,342
|
4,736
|
1,926
|
2,207
|
54
|
20,896
|
Organic movement
|
(15)
|
553
|
317
|
132
|
71
|
33
|
1,091
|
Acquisitions and disposals(2)
|
23
|
22
|
225
|
6
|
156
|
—
|
432
|
Exchange
|
743
|
(205)
|
125
|
196
|
(48)
|
1
|
812
|
Hyperinflation
|
—
|
284
|
—
|
—
|
—
|
—
|
284
|
2023 reported
|
7,382
|
5,996
|
5,403
|
2,260
|
2,386
|
88
|
23,515
|
Organic movement %
|
—
|
10
|
7
|
7
|
3
|
61
|
5
|
|
North America
£ million
|
Europe
£ million
|
Asia
Pacific
£ million
|
Latin America
and Caribbean
£ million
|
Africa
£ million
|
Corporate
£ million
|
Total
£ million
|
Net sales
|
|
|
|
|
|
|
|
2019 reported
|
4,460
|
2,939
|
2,688
|
1,130
|
1,597
|
53
|
12,867
|
Exchange
|
(34)
|
(19)
|
1
|
4
|
(2)
|
2
|
(48)
|
Reclassification
|
—
|
—
|
—
|
(10)
|
—
|
—
|
(10)
|
Disposals
|
(75)
|
(1)
|
(1)
|
(1)
|
(91)
|
—
|
(169)
|
2019 adjusted
|
4,351
|
2,919
|
2,688
|
1,123
|
1,504
|
55
|
12,640
|
Organic movement (2020)
|
105
|
(358)
|
(423)
|
(169)
|
(200)
|
(16)
|
(1,061)
|
Organic movement (2021)
|
929
|
108
|
308
|
275
|
258
|
(18)
|
1,860
|
Organic movement (2022)
|
754
|
766
|
402
|
451
|
308
|
35
|
2,716
|
2020, 2021 and 2022 movement on a constant basis
|
1,788
|
516
|
287
|
557
|
366
|
1
|
3,515
|
|
|
|
|
|
|
|
|
Net sales
|
|
|
|
|
|
|
|
2022 reported
|
6,095
|
3,212
|
2,884
|
1,525
|
1,682
|
54
|
15,452
|
Exchange(1)
|
(46)
|
(44)
|
(8)
|
(16)
|
(1)
|
—
|
(115)
|
Disposals(2)
|
—
|
(29)
|
(137)
|
—
|
(130)
|
—
|
(296)
|
Hyperinflation
|
—
|
(71)
|
—
|
—
|
—
|
—
|
(71)
|
2022 adjusted
|
6,049
|
3,068
|
2,739
|
1,509
|
1,551
|
54
|
14,970
|
Organic movement
|
11
|
347
|
353
|
142
|
83
|
33
|
969
|
Acquisitions and disposals(2)
|
20
|
20
|
35
|
3
|
104
|
—
|
182
|
Exchange(1)
|
678
|
(41)
|
73
|
145
|
(39)
|
1
|
817
|
Hyperinflation
|
—
|
175
|
—
|
—
|
—
|
—
|
175
|
2023 reported
|
6,758
|
3,569
|
3,200
|
1,799
|
1,699
|
88
|
17,113
|
Organic movement %
|
—
|
11
|
13
|
9
|
5
|
61
|
6
|
|
|
|
|
|
|
|
|
2019 to 2023 reported growth %
|
52
|
21
|
19
|
59
|
6
|
66
|
33
|
2019 to 2023 growth on a constant basis %
|
41
|
30
|
24
|
62
|
30
|
62
|
35
|
|
North America
£ million
|
Europe
£ million
|
Asia
Pacific
£ million
|
Latin America
and Caribbean
£ million
|
Africa
£ million
|
Corporate
£ million
|
Total
£ million
|
Marketing
|
|
|
|
|
|
|
|
2022 reported
|
1,200
|
577
|
490
|
243
|
199
|
12
|
2,721
|
Exchange
|
(12)
|
5
|
(2)
|
(3)
|
(2)
|
(1)
|
(15)
|
Fair value remeasurement of contingent considerations, equity
option and earn out arrangements
|
1
|
—
|
—
|
—
|
—
|
—
|
1
|
Disposals(2)
|
—
|
(1)
|
—
|
—
|
(9)
|
—
|
(10)
|
Hyperinflation
|
—
|
(6)
|
—
|
—
|
—
|
—
|
(6)
|
2022 adjusted
|
1,189
|
575
|
488
|
240
|
188
|
11
|
2,691
|
Organic movement
|
22
|
42
|
46
|
34
|
4
|
4
|
152
|
Acquisitions and disposals(2)
|
15
|
3
|
—
|
1
|
4
|
2
|
25
|
Exchange
|
134
|
(2)
|
12
|
21
|
(1)
|
2
|
166
|
Hyperinflation
|
—
|
17
|
—
|
—
|
—
|
—
|
17
|
2023 reported
|
1,360
|
635
|
546
|
296
|
195
|
19
|
3,051
|
Organic movement %
|
2
|
7
|
9
|
14
|
2
|
36
|
6
|
|
North America
£ million
|
Europe
£ million
|
Asia
Pacific
£ million
|
Latin America
and Caribbean
£ million
|
Africa
£ million
|
Corporate
£ million
|
Total
£ million
|
Operating profit before exceptional items
|
|
|
|
|
|
|
|
2019 reported
|
|
|
|
|
|
|
4,116
|
Disposal
|
|
|
|
|
|
|
(29)
|
2019 adjusted
|
|
|
|
|
|
|
4,087
|
Organic movement (2020)
|
|
|
|
|
|
|
(589)
|
Organic movement (2021)
|
|
|
|
|
|
|
627
|
Organic movement (2022)
|
|
|
|
|
|
|
995
|
2020, 2021 and 2022 movement on a constant basis
|
|
|
|
|
|
|
1,033
|
|
|
|
|
|
|
|
|
Operating profit before exceptional items
|
|
|
|
|
|
|
|
2022 reported
|
2,454
|
1,017
|
711
|
538
|
315
|
(238)
|
4,797
|
Exchange(1)
|
(31)
|
(13)
|
(5)
|
(14)
|
11
|
(30)
|
(82)
|
Fair value remeasurement of contingent considerations and equity
option
|
(32)
|
(36)
|
—
|
8
|
—
|
—
|
(60)
|
Acquisitions
and disposals(2)
|
6
|
(18)
|
(26)
|
—
|
(18)
|
—
|
(56)
|
Hyperinflation
|
—
|
(1)
|
—
|
—
|
—
|
—
|
(1)
|
2022 adjusted
|
2,397
|
949
|
680
|
532
|
308
|
(268)
|
4,598
|
Organic movement
|
(57)
|
103
|
200
|
62
|
37
|
(24)
|
321
|
Acquisitions and disposals(2)
|
(18)
|
(13)
|
5
|
—
|
27
|
(6)
|
(5)
|
Fair value remeasurement of contingent considerations, equity
option and earn out arrangements
|
87
|
25
|
—
|
1
|
—
|
—
|
113
|
Exchange(1)
|
280
|
18
|
20
|
66
|
(152)
|
(28)
|
204
|
Hyperinflation
|
—
|
23
|
—
|
—
|
—
|
—
|
23
|
2023 reported
|
2,689
|
1,105
|
905
|
661
|
220
|
(326)
|
5,254
|
Organic movement %
|
(2)
|
11
|
29
|
12
|
12
|
(9)
|
7
|
|
|
|
|
|
|
|
|
Organic operating margin % (3)
|
|
|
|
|
|
|
|
2023
|
38.6
|
30.8
|
28.5
|
36.0
|
21.1
|
n/a
|
30.9
|
2022
|
39.6
|
30.9
|
24.8
|
35.3
|
19.9
|
n/a
|
30.7
|
Organic operating margin movement (bps)
|
(101)
|
(13)
|
363
|
72
|
126
|
n/a
|
15
|
|
|
|
|
|
|
|
|
2019 to 2023 reported growth %
|
|
|
|
|
|
|
28
|
2019 to 2023 growth on a constant basis %
|
|
|
|
|
|
|
33
|
(i)For the reconciliation of sales to net sales, see page
21.
(ii)Percentages and margin movements are calculated on rounded
figures.
Notes: Information in respect of the organic movement
calculations
(1)The impact of movements in exchange rates on reported figures
for operating profit was principally in respect of the favourable
exchange impact of the strengthening of the US dollar and Mexican
peso against the sterling, partially offset by the weakening of the
Nigerian naira, Ghanaian cedi and the Turkish lira.
(2)Acquisitions and disposals that had an effect on volume, sales,
net sales, marketing and operating profit in the year ended 30 June
2023, are detailed on page 53.
(3)Organic operating margin calculated by dividing Operating profit
before exceptional items by net sales.
In the year ended 30 June
2023, the acquisitions and
disposals that affected volume, sales, net sales, marketing and
operating profit were as follows, as per footnote (2) on the
previous page:
|
Volume
|
Sales
|
Net sales
|
Marketing
|
Operating
profit
|
|
EUm
|
£ million
|
£ million
|
£ million
|
£ million
|
Year ended 30 June 2022
|
|
|
|
|
|
Acquisitions
|
|
|
|
|
|
Chase
Distillery
|
—
|
—
|
—
|
—
|
1
|
Lone
River Ranch Water
|
—
|
—
|
—
|
—
|
6
|
|
—
|
—
|
—
|
—
|
7
|
Disposals
|
|
|
|
|
|
USL
Popular brands
|
(23.3)
|
(884)
|
(137)
|
—
|
(26)
|
Archers
brand
|
(0.1)
|
(16)
|
(10)
|
—
|
(7)
|
Meta
Abo Brewery
|
(0.3)
|
(16)
|
(12)
|
(1)
|
8
|
Picon
brand
|
(0.7)
|
(20)
|
(19)
|
(1)
|
(12)
|
Guinness
Cameroun S.A.
|
(1.6)
|
(179)
|
(118)
|
(8)
|
(26)
|
|
(26.0)
|
(1,115)
|
(296)
|
(10)
|
(63)
|
|
|
|
|
|
|
Acquisitions and disposals
|
(26.0)
|
(1,115)
|
(296)
|
(10)
|
(56)
|
|
|
|
|
|
|
Year ended 30 June 2023
|
|
|
|
|
|
Acquisitions
|
|
|
|
|
|
Mr
Black
|
—
|
8
|
7
|
3
|
(2)
|
Balcones
Distilling
|
—
|
4
|
4
|
4
|
(12)
|
Mezcal
Unión
|
—
|
8
|
4
|
3
|
(1)
|
21Seeds
|
0.1
|
9
|
8
|
8
|
(9)
|
Don
Papa Rum
|
0.1
|
10
|
10
|
3
|
(15)
|
|
0.2
|
39
|
33
|
21
|
(39)
|
Disposals
|
|
|
|
|
|
USL
Popular brands
|
6.0
|
225
|
35
|
—
|
5
|
Archers
brand
|
0.7
|
12
|
10
|
—
|
2
|
Guinness
Cameroun S.A.
|
1.3
|
156
|
104
|
4
|
27
|
|
8.0
|
393
|
149
|
4
|
34
|
|
|
|
|
|
|
Acquisitions and disposals
|
8.2
|
432
|
182
|
25
|
(5)
|
Earnings per share before exceptional items
Earnings per share before exceptional items is calculated by
dividing profit attributable to equity shareholders of the parent
company before exceptional items by the weighted average number of
shares in issue.
Earnings per share before exceptional items for the years ended 30
June 2023 and 30 June 2022 are set out in the table
below:
|
2023
|
2022
|
|
£ million
|
£ million
|
Profit attributable to equity shareholders of the parent
company
|
3,734
|
3,249
|
Exceptional operating and non-operating items
|
294
|
405
|
Exceptional tax items and tax in respect of exceptional operating
and non-operating items
|
(186)
|
(31)
|
Exceptional items attributable to non-controlling
interests
|
(141)
|
(103)
|
Profit attributable to equity shareholders of the parent company
before exceptional items
|
3,701
|
3,520
|
|
|
|
Weighted average number of shares
|
million
|
million
|
Shares in issue excluding own shares
|
2,264
|
2,318
|
Dilutive potential ordinary shares
|
7
|
7
|
Diluted shares in issue excluding own shares
|
2,271
|
2,325
|
|
|
|
|
pence
|
pence
|
Basic earnings per share before exceptional items
|
163.5
|
151.9
|
Diluted earnings per share before exceptional items
|
163.0
|
151.4
|
Free cash flow
Free cash flow comprises the net cash flow from operating
activities aggregated with the net cash received/paid for working
capital loans receivable, cash paid or received for investments and
the net cash expenditure paid for property, plant and equipment and
computer software that are included in net cash flow from investing
activities.
The remaining components of net cash flow from investing activities
that do not form part of free cash flow, as defined by the
group’s management, are in respect of the acquisition and
sale of businesses and non-working capital loans to and from
associates.
The group’s management regards a portion of the purchase and
disposal of property, plant and equipment and computer software as
ultimately non-discretionary since ongoing investment in plant,
machinery and technology is required to support the day-to-day
operations, whereas acquisition and sale of businesses are
discretionary.
Where appropriate, separate explanations are given for the impacts
of acquisition and sale of businesses, dividends paid and the
purchase of own shares, each of which arises from decisions that
are independent from the running of the ongoing underlying
business.
Free cash flow reconciliations for the years ended 30 June 2023 and
30 June 2022 are set out in the table below:
|
2023
|
2022
|
|
£ million
|
£ million
|
Net cash inflow from operating activities
|
3,024
|
3,935
|
Disposal of property, plant and equipment and computer
software
|
13
|
17
|
Purchase of property, plant and equipment and computer
software
|
(1,180)
|
(1,097)
|
Movements in loans and other investments
|
(57)
|
(72)
|
Free cash flow
|
1,800
|
2,783
|
Operating cash conversion
Operating cash conversion is calculated by dividing cash generated
from operations excluding cash inflows and outflows in respect of
exceptional items, dividends received from associates, maturing
inventories, provisions, other items and post employment payments
in excess of the amount charged to operating profit by operating
profit before depreciation, amortisation, impairment and
exceptional operating items.
The measure is excluding any hyperinflation adjustment above the
organic treatment of hyperinflationary economies. The ratio is
stated at the budgeted exchange rates for the respective year and
is expressed as a percentage.
Operating cash conversion for the years ended 30 June 2023 and 30
June 2022 were as follows:
|
2023
|
2022
|
|
£ million
|
£ million
|
Profit for the year
|
3,766
|
3,338
|
Taxation
|
970
|
1,049
|
Share of after tax results of associates and joint
ventures
|
(370)
|
(417)
|
Net finance charges
|
594
|
422
|
Non-operating items
|
(328)
|
17
|
Operating profit
|
4,632
|
4,409
|
Exceptional operating items
|
622
|
388
|
Fair value remeasurement
|
(124)
|
(60)
|
Depreciation,
amortisation and impairment(1)
|
496
|
489
|
Hyperinflation adjustment
|
(28)
|
(10)
|
Retranslation to budgeted exchange rates
|
(198)
|
27
|
|
5,400
|
5,243
|
|
|
|
Cash generated from operations
|
4,779
|
5,212
|
Net
exceptional cash paid(2)
|
25
|
15
|
Post
employment payments less amounts included in operating
profit(1)
|
25
|
89
|
Net
movement in maturing inventories(3)
|
577
|
360
|
Provision
movement
|
65
|
58
|
Dividends received from associates
|
(219)
|
(190)
|
Other
items(1)
|
14
|
(53)
|
Hyperinflation adjustment
|
(29)
|
(22)
|
Retranslation to budgeted exchange rates
|
(198)
|
42
|
|
5,039
|
5,511
|
|
|
|
Operating
cash conversion
|
93.3%
|
105.1%
|
(1)Excluding
exceptional items.
(2)Exceptional
cash payments for winding down our Russian operations was £13
million (2022 – £13 million) and for Supply chain
agility programme was £12 million (2022 - £nil). In
the year ended 30 June 2022 exceptional cash payments for other
donations were £2 million.
(3)Excluding
non-cash movements such as exchange and the impact of acquisitions
and disposals.
Return on average invested capital
Return on average invested capital is used by management to assess
the return obtained from the group’s asset base and is
calculated to aid evaluation of the performance of the
business.
The profit used in assessing the return on average invested capital
reflects operating profit before exceptional items attributable to
equity shareholders of the parent company plus share of after tax
results of associates and joint ventures after applying the tax
rate before exceptional items for the fiscal year. Average invested
capital is calculated using the average derived from the
consolidated balance sheets at the beginning, middle and end of the
year. Average capital employed comprises average net assets
attributable to equity shareholders of the parent company for the
year, excluding net post employment benefit assets/liabilities (net
of deferred tax) and average net borrowings. This average capital
employed is then aggregated with the average restructuring and
integration costs net of tax, and goodwill written off to reserves
at 1 July 2004, the date of transition to IFRS, to obtain
the average total invested capital.
Calculations for the return on average invested capital for the
years ended 30 June 2023 and 30
June 2022 are set out in the table below:
|
2023
|
2022
|
|
£ million
|
£ million
|
Operating profit
|
4,632
|
4,409
|
Exceptional operating items
|
622
|
388
|
Profit before exceptional operating items attributable to
non-controlling interests
|
(173)
|
(192)
|
Share of after tax results of associates and joint
ventures
|
370
|
417
|
Tax at
the tax rate before exceptional items of 23.0% (2022 –
22.5%)
|
(1,294)
|
(1,173)
|
|
4,157
|
3,849
|
|
|
|
Average net assets (excluding net post employment benefit
assets/liabilities)
|
8,924
|
8,428
|
Average non-controlling interests
|
(1,638)
|
(1,641)
|
Average net borrowings
|
14,949
|
12,859
|
Average integration and restructuring costs (net of
tax)
|
1,639
|
1,639
|
Goodwill at 1 July 2004
|
1,562
|
1,562
|
Average invested capital
|
25,436
|
22,847
|
|
|
|
Return on average invested capital
|
16.3%
|
16.8%
|
Adjusted net borrowings to adjusted EBITDA
Diageo manages its capital structure with the aim of achieving
capital efficiency, providing flexibility to invest through the
economic cycle and giving efficient access to debt markets at
attractive cost levels. The group regularly assesses its debt and
equity capital levels to enhance its capital structure by reviewing
the ratio of adjusted net borrowings to adjusted EBITDA (earnings
before exceptional operating items, non-operating items, interest,
tax, depreciation, amortisation and
impairment).
Calculations for the ratio of adjusted net borrowings to adjusted
EBITDA for the years ended 30
June 2023 and 30 June 2022 are set out in the table
below:
|
2023
|
2022
|
|
£ million
|
£ million
|
Borrowings due within one year
|
1,701
|
1,522
|
Borrowings due after one year
|
14,801
|
14,498
|
Fair value of foreign currency derivatives and interest rate
hedging instruments
|
30
|
(73)
|
Lease liabilities
|
448
|
475
|
Less: Cash and cash equivalents
|
(1,439)
|
(2,285)
|
Net borrowings
|
15,541
|
14,137
|
Post employment benefit liabilities before tax
|
373
|
402
|
Adjusted net borrowings
|
15,914
|
14,539
|
|
|
|
Profit for the year
|
3,766
|
3,338
|
Taxation
|
970
|
1,049
|
Net finance charges
|
594
|
422
|
Depreciation, amortisation and impairment (excluding exceptional
impairment)
|
496
|
492
|
Exceptional impairment
|
570
|
336
|
EBITDA
|
6,396
|
5,637
|
Exceptional operating items (excluding impairment)
|
52
|
49
|
Non-operating items
|
(328)
|
17
|
Adjusted EBITDA
|
6,120
|
5,703
|
Adjusted net borrowings to adjusted EBITDA
|
2.6
|
2.5
|
Tax rate before exceptional items
Tax rate before exceptional items is calculated by dividing the
total tax charge before tax charges and credits in respect of
exceptional items, by profit before taxation adjusted to exclude
the impact of exceptional operating and non-operating items,
expressed as a percentage. The measure is used by management to
assess the rate of tax applied to the group’s operations
before tax on exceptional items.
The tax rates from operations before exceptional and after
exceptional items for the years ended 30 June 2023 and 30 June 2022
are set out in the table below:
|
2023
|
2022
|
|
£ million
|
£ million
|
|
|
|
Taxation on profit (a)
|
970
|
1,049
|
Tax in respect of exceptional items
|
129
|
31
|
Exceptional tax credit
|
57
|
—
|
Tax before exceptional items (b)
|
1,156
|
1,080
|
|
|
|
Profit before taxation (c)
|
4,736
|
4,387
|
Non-operating items
|
(328)
|
17
|
Exceptional operating items
|
622
|
388
|
Profit before taxation and exceptional items (d)
|
5,030
|
4,792
|
|
|
|
Tax rate after exceptional items (a/c)
|
20.5%
|
23.9%
|
Tax rate before exceptional items (b/d)
|
23.0%
|
22.5%
|
|
|
|
Other definitions
Volume share is a brand’s retail volume expressed as a
percentage of the retail volume of all brands in its segment. Value
share is a brand’s retail sales value expressed as a
percentage of the retail sales value of all brands in its segment.
Unless otherwise stated, share refers to value share.
Net sales are sales less excise duties. Diageo incurs excise duties
throughout the world. In the majority of countries, excise duties
are effectively a production tax which becomes payable when the
product is removed from bonded premises and is not directly related
to the value of sales. It is generally not included as a separate
item on external invoices; increases in excise duties are not
always passed on to the customer and where a customer fails to pay
for a product received, the group cannot reclaim the excise duty.
The group therefore recognises excise duty as a cost to the
group.
Price/mix is the number of percentage points difference between the
organic movement in net sales and the organic movement in volume.
The difference arises because of changes in the composition of
sales between higher and lower priced variants/markets or as price
changes are implemented.
Shipments comprise the volume of products sold to Diageo’s
immediate (first tier) customers. Depletions are the estimated
volume of the onward sales made by Diageo's immediate customers.
Both shipments and depletions are measured on an equivalent units
basis.
References to emerging markets include Poland, Eastern Europe,
Turkey, Latin America and Caribbean, Africa and Asia Pacific
(excluding Australia, Korea and Japan).
References to reserve brands include, but are not limited to,
Johnnie Walker Blue Label, Johnnie Walker Green Label, Johnnie
Walker Gold Label Reserve, Johnnie Walker Aged 18 Years, John
Walker & Sons Collection and other Johnnie Walker super and
ultra-premium brands; The Singleton, Cardhu, Talisker, Lagavulin,
Oban and other malt brands; Buchanan’s Special Reserve,
Buchanan’s Red Seal; Haig Club whisky; Copper Dog whisky; Roe
& Co; Bulleit Bourbon, Bulleit Rye; Orphan Barrel whiskey;
Balcones whisky and rum; Tanqueray No. TEN and Tanqueray Malacca
gin; Aviation, Chase, Jinzu and Villa Ascenti gin; Cîroc,
Ketel One vodka, Ketel One Botanical; Don Julio, Casamigos,
DeLeón and 21Seeds tequila; Mezcal Unión mezcal; Zacapa,
Bundaberg Master Distillers' Collection, Pampero Aniversario and
Don Papa rum; Shui Jing Fang, Seedlip, Belsazar and Pierde
Almas.
References to global giants include the following brand families:
Johnnie Walker, Smirnoff, Captain Morgan, Baileys, Tanqueray and
Guinness. Local stars include Buchanan’s, Bundaberg, Crown
Royal, J&B, McDowell’s, Old Parr, Yenì Raki, Black
& White, Shui Jing Fang, Windsor and Ypióca. Global giants
and local stars exclude ready to drink, non-alcoholic variants and
beer except Guinness. References to Shui Jing Fang represent total
Chinese white spirits of which Shui Jing Fang is the predominant
brand.
References to ready to drink also include ready to serve products,
such as pre-mixed cans in some markets.
References to beer include cider, flavoured malt beverages and some
non-alcoholic products such as Malta Guinness.
The results of Hop House 13 Lager are included in the Guinness
figures.
There is no industry-agreed definition for price tiers and for data
providers such as IWSR, definitions can vary by market. Diageo
bases price tier definitions on a methodology that uses external
metrics (including market pricing data from Nielsen, IRI etc., as
well as the IWSR segmentation) for benchmarking and internal
pricing metrics for a consistent segmentation.
References to the disposal of the USL Popular brands include
non-exhaustively the Haywards, Old Tavern, White Mischief, Honey
Bee, Green Label and Romanov brands.
References to the group include Diageo plc and its consolidated
subsidiaries.
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 and may generally, but
not always, be identified by the use of words such as
“’will”, “anticipates”,
“should”, “could”, “would”,
“targets”, “aims”, “may”,
“expects”, “intends” or similar expressions
or statements. In this document, such statements include those that
express forecasts, expectations, plans, outlook, objectives and
projections with respect to future matters, including information
related to Diageo’s fiscal 24 outlook, Diageo’s
medium-term guidance for fiscal 23 to fiscal 25, Diageo’s
supply chain agility programme, future TBA market share ambitions
and any other statements relating to Diageo’s performance for
the year ending 30 June 2024 or thereafter.
Forward-looking statements involve risk and uncertainty because
they relate to events and depend on circumstances that will occur
in the future. There is a number of factors that could cause actual
results and developments to differ materially from those expressed
or implied by these forward-looking statements, including factors
that are outside Diageo's control, which include (but are not
limited to): (i) economic, political, social or other developments
in countries and markets in which Diageo operates, including
macroeconomic events that may affect Diageo’s customers,
suppliers and/or financial counterparties; (ii) the effects of
climate change, or legal, regulatory or market measures intended to
address climate change; (iii) changes in consumer preferences and
tastes, including as a result of disruptive market forces, changes
in demographics and evolving social trends (including any shifts in
consumer tastes towards at-home occasions, premiumisation,
small-batch craft alcohol, or lower or no alcohol products and/or
developments in e-commerce); (iv) changes in the domestic and
international tax environment that could lead to uncertainty around
the application of existing and new tax laws and unexpected tax
exposures; (v) changes in the cost of production, including as a
result of increases in the cost of commodities, labour and/or
energy due to inflation and/or supply chain disruptions; (vi) any
litigation or other similar proceedings (including with tax,
customs, competition, environmental, anti-corruption or other
regulatory authorities); (vii) legal and regulatory developments,
including changes in regulations relating to environmental issues
and/or e-commerce; (viii) the consequences of any failure of
internal controls; (ix) the consequences of any failure by Diageo
or its associates to comply with anti-corruption, sanctions, trade
restrictions or similar laws and regulations, or any failure of
Diageo’s related internal policies and procedures to comply
with applicable law or regulation; (x) Diageo’s ability to
make sufficient progress against or achieve its ESG ambitions; (xi)
cyber-attacks and IT threats or any other disruptions to core
business operations; (xii) contamination, counterfeiting or other
circumstances which could harm the level of customer support for
Diageo’s brands and adversely impact its sales; (xiii)
Diageo’s ability to maintain its brand image and corporate
reputation or to adapt to a changing media environment; (xiv)
fluctuations in exchange rates and/or interest rates; (xv)
Diageo’s ability to derive the expected benefits from its
business strategies, including Diageo’s investments in
e-commerce and its luxury portfolio; (xvi) increased competitive
product and pricing pressures, including as a result of
introductions of new products or categories that are competitive
with Diageo’s products and consolidations by competitors and
retailers; (xvii) increased costs for, or shortages of, talent, as
well as labour strikes or disputes; (xviii) movements in the value
of the assets and liabilities related to Diageo’s pension
plans; (xix) Diageo’s ability to renew supply, distribution,
manufacturing or licence agreements (or related rights) and
licences on favourable terms, or at all, when they expire; or (xx)
any failure by Diageo to protect its intellectual property
rights.
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 cautionary statements contained
or referred to in this section. Further details of potential risks
and uncertainties affecting Diageo are described in our filings
with the London Stock Exchange and the US Securities and Exchange
Commission (SEC), including in our Annual Report for the year ended
30 June 2022 and in our Annual Report on Form 20-F for the year
ended 30 June 2022.
Any forward-looking statements made by or on behalf of Diageo speak
only as of the date they are made. Diageo expressly disclaims any
obligation or undertaking to publicly update or revise these
forward-looking statements other than as required by applicable
law. The reader should, however, consult any additional disclosures
that Diageo may make in any documents which it publishes and/or
files with the SEC.
This document includes names of Diageo’s products, which
constitute trademarks or trade names which Diageo owns, or which
others own and license to Diageo for use. All rights reserved.
© Diageo plc 2023.
Statement of directors’ responsibilities
The responsibility statement set out below has been prepared in
connection with (and will be set out in) the Annual Report and
consolidated financial statements for the year ended 30 June 2023,
which will be published on 3 August 2023 (and which can be found
thereafter at www.diageo.com).
The Directors consider that the Annual Report and consolidated
financial statements, taken as a whole, is fair, balanced and
understandable and provides the information necessary for
shareholders to assess the group's and parent company's position
and performance, business model and strategy.
Each of the Directors of Diageo plc confirms that, to the best of
his or her knowledge:
-
the
consolidated financial statements contained in the Annual Report
for the year ended 30 June 2023, which have been prepared in
accordance with the requirements of (i) the Companies Act 2006,
(ii) the UK-adopted international accounting standards, (iii) IFRSs
adopted by the IASB and (iv) the IFRSs adopted pursuant to
Regulation (EC) No 1606/2002 as it applies in the European Union,
give a true and fair view of the assets, liabilities, financial
position and profit and loss of the group; and
-
the
Strategic Report contained in the annual report and accounts for
the year ended 30 June 2023 includes a fair review of the
development and performance of the business and the position of the
group and parent company, together with a description of the
principal risks and uncertainties that they face.
The Directors of Diageo plc are as follows: Javier Ferrán
(Chairman), Debra Crew (Chief Executive), Lavanya Chandrashekar
(Chief Financial Officer), Susan Kilsby (Senior Independent
Director and Chair of the Remuneration Committee), Alan Stewart
(Non-Executive Director and Chairman of the Audit Committee) and
Non-Executive Directors: Melissa Bethell, Karen Blackett,
Valérie Chapoulaud-Floquet, Sir John Manzoni, Lady Mendelsohn
and Ireena Vittal.
Webcast and presentation slides
At 07:15 (UK time) on Tuesday 1 August 2023, Debra Crew, Chief
Executive and Lavanya Chandrashekar, Chief Financial Officer will
present Diageo’s preliminary results as a webcast. This will
be available to view at www.diageo.com. The presentation slides and
script will also be available to download at this
time.
Live Q&A conference call
Debra Crew and Lavanya Chandrashekar will be hosting a Q&A
conference call on Tuesday
1 August 2023 at 09:30 (UK time).
If you would like to listen to the
call or ask a question, please use the dial in details
below.
From the UK:
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+44 (0) 20 3936 2999
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From the UK (free call):
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0800 358 1035
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From the USA:
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+1 646 787 9445
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From the USA (free call):
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+1 855 979 6654
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The conference call is for analysts and investors only. To join the
call please use the conference ID code already sent to you or
email investor.relations@diageo.com.
Transcript and recording
Following the Q&A conference call, a transcript and recording
will be available from the link below:
https://www.diageo.com/en/investors/results-reports-and-presentations
Investor enquiries to:
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Durga Doraisamy
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+44 (0) 79 021 26906
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Andy Ryan
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+44 (0) 78 038 54842
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Brian Shipman
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+1 917 710 3007
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investor.relations@diageo.com
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Media enquiries to:
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Dominic Redfearn
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+44 (0) 79 719 77759
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Clare Cavana
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+44 (0) 77 517 42072
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Isabel Batchelor
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+44 (0) 77 319 88857
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|
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press@diageo.com
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Diageo plc LEI:
213800ZVIELEA55JMJ32
SIGNATURE
Pursuant
to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
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Diageo plc
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(Registrant)
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Date:
01 August 2023
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By:___/s/
James Edmunds
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James Edmunds
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Deputy Company Secretary
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