Form 6-K DIAGEO PLC For: Jan 28
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
28 January 2021
Commission File Number: 001-10691
DIAGEO plc
(Translation
of registrant’s name into English)
Lakeside Drive, Park Royal, London NW10 7HQ
(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
Indicate
by check mark whether the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule
101(b)(1):
Indicate
by check mark whether the registrant is submitting the Form 6-K in
paper as permitted by Regulation S-T Rule
101(b)(7):
Diageo PLC – Interim results, six months ended 31 December
2020
Dated
28 January 2021
|
Interim results, six months ended 31 December 2020
28 January 2021
|
Encouraging return to growth, good cash generation and increased
dividend
|
Financial highlights
●
|
Reported
net sales (£6.9 billion) down 4.5%, as organic growth of 1.0%
was more than offset by unfavourable exchange. Reported operating
profit (£2.2 billion) declined 8.3%, driven by unfavourable
exchange and a decline in organic operating profit.
|
●
|
Organic
net sales up 1.0%, despite a significant impact from Travel Retail
and on-trade restrictions. North America was up 12.3%, offsetting
declines in other regions, except for Africa which was broadly
flat.
|
●
|
North
America growth was driven by resilient consumer demand, share
growth of total beverage alcohol, positive category mix and the
replenishment of stock levels by distributors and
retailers
|
●
|
Organic
operating profit down 3.4%, driven by channel and category mix.
Productivity benefits from everyday cost efficiencies largely
offset cost of goods sold inflation
|
●
|
Net
cash from operating activities up £0.7 billion to £2.0
billion, and free cash flow up £0.8 billion to £1.8
billion. This primarily reflects a lower tax payment and working
capital benefit driven by reduced creditor balances at the end of
fiscal 20, as a result of reduced sales demand and cost control
measures triggered in response to Covid-19. Creditor balances
have now recovered to more normalised levels.
|
●
|
Basic
eps of 67.6 pence decreased 14.6%. Pre-exceptional eps declined
12.8% to 69.9 pence, driven primarily by unfavourable exchange and
lower operating profit.
|
●
|
Interim
dividend increased 2% to 27.96 pence per share.
|
●
|
Strong
sequential performance improvement in all regions compared to the
second half of fiscal 20. Expecting continued impact in the second
half of fiscal 21 from on-trade restrictions and disruption to
Travel Retail.
|
Strategic and operational highlights in F21 H1
●
|
Supported
the recovery of the hospitality sector through 'Raising the Bar,'
our $100 million global two-year programme, which has already
reached around 30,000 outlets in seven countries
|
●
|
Rapidly
responded to increased consumer demand in the off-trade channel,
leading to market share gains.
|
●
|
Delivered
broad-based growth across most categories, including tequila, gin,
Canadian whisky, US whiskey, liqueurs and ready to
drink.
|
●
|
Leveraged
deep understanding of consumer behaviour, innovating across our
brands to recruit new consumers and unlock new occasions in
convenience and at-home.
|
●
|
Increased
investment in digital capabilities, including
e-commerce.
|
●
|
Continued
capex investment in capacity, consumer experiences and
sustainability.
|
●
|
Completed
acquisition of Aviation American Gin and Davos Brands, further
premiumising our portfolio.
|
●
|
Leveraged
our embedded culture of everyday efficiency to drive continued
productivity savings.
|
●
|
Launched
'Society 2030: Spirit of Progress', our 10-year sustainability
action plan, building on our strong track record in sustainability
and responsibility.
|
See
Explanatory Notes for explanation and reconciliation of non-GAAP
measures.
Ivan Menezes, Chief Executive, said:
|
"We delivered a strong performance in a challenging operating
environment, returning to top line organic sales growth during the
half. We rapidly pivoted to the channels and occasions most
relevant to consumers and invested behind new opportunities. This
more than offset the impact of on-trade restrictions and the
decline in Travel Retail.
North America, our largest market, performed particularly strongly
and ahead of our expectations. Consumer demand has been resilient
and the spirits category continues to gain share of total beverage
alcohol. Across other regions we delivered strong sequential
improvement compared to the second half of fiscal 20. This reflects
improved market share performance through excellent execution in
the off-trade channel, and the partial re-opening of the on-trade
channel in certain markets.
Organic operating margin improved compared to the second half of
fiscal 20 driven by increased operating leverage and tight control
of discretionary expenditure. The decline compared to the first
half of fiscal 20 reflected an adverse channel and portfolio mix.
We expect margins to improve as the on-trade and Travel Retail
recover and with the continued benefit of everyday
efficiency.
Our proprietary tools and data-led insights are enabling us to
invest smartly in effective marketing and innovation. We continue
to strengthen brand equity, premiumise our portfolio and expand our
digital capabilities.
I am proud of the creativity and adaptability of our people and
their exemplary commitment to supporting our customers and
communities. Our $100 million global commitment to support the
recovery of the hospitality sector has already reached around
30,000 outlets in seven countries. We expect ongoing volatility and
disruption in the second half of the year, particularly in the
on-trade channel, which will make performance more challenging. The
medium and long-term growth drivers and opportunities for our
business remain intact and I am confident in our strategy, the
resilience of our business and Diageo's ability to emerge
stronger.
Key financial information
Six months ended 31 December 2020
Summary financial information
|
|
|
F21 H1
|
F20 H1
|
Organic growth%
|
Reported growth%
|
Volume
|
EUm
|
128.3
|
130.5
|
-
|
(2)
|
Net
sales
|
£
million
|
6,874
|
7,200
|
1
|
(5)
|
Marketing
|
£
million
|
1,085
|
1,116
|
1
|
(3)
|
Operating
profit before exceptional items
|
£
million
|
2,256
|
2,501
|
(3)
|
(10)
|
Exceptional
operating items(i)
|
£
million
|
(17)
|
(59)
|
|
|
Operating
profit
|
£
million
|
2,239
|
2,442
|
|
(8)
|
Share
of associate and joint venture profit after tax
|
£
million
|
154
|
176
|
|
(13)
|
Non-operating
exceptional items(i)
|
£
million
|
5
|
-
|
|
|
Net
finance charges
|
£
million
|
(200)
|
(154)
|
|
|
Exceptional
taxation (charge)/credit(i)
|
£
million
|
(42)
|
14
|
|
|
Tax
rate including exceptional items
|
%
|
24.4
|
21.5
|
|
13
|
Tax
rate before exceptional items
|
%
|
22.4
|
21.6
|
|
4
|
Profit
attributable to parent company's shareholders
|
£
million
|
1,580
|
1,865
|
|
(15)
|
Basic
earnings per share
|
pence
|
67.6
|
79.2
|
|
(15)
|
Earnings
per share before exceptional items
|
pence
|
69.9
|
80.2
|
|
(13)
|
Interim dividend
|
pence
|
27.96
|
27.41
|
|
2
|
(i) For further details on exceptional items see
Summary Income Statement (c) Exceptional items and Notes,
Exceptional items.
Outlook for net sales
We are not providing specific guidance due to the ongoing
volatility. However, we will be lapping the second half of fiscal
20, which was significantly impacted by the onset of Covid-19 and
therefore expect to see improvement over this weak comparator
period across all regions. We expect to see continued momentum in
North America, augmented by a lapping of inventory reductions by
distributors. The pace of recovery in other regions will be more
closely aligned with the gradual reopening of the on-trade and the
degree to which restrictions continue to be in place. We expect
Travel Retail to continue to be heavily impacted by the reduction
in travellers.
Outlook for operating margin
We expect organic operating profit growth in the second half of
fiscal 21 will be ahead of organic net sales growth in all regions
due to the weak comparator period, except North America, where we
experienced strong organic operating margin gains in the second
half of fiscal 20. Organic operating margin in the second half of
fiscal 21 will continue to be pressured from channel and product
mix as Travel Retail will continue to be heavily impacted and
restrictions on the on-trade continue. We expect to continue
investing in advertising and promotion to emerge stronger from the
crisis.
Outlook for working capital
We closed the first half with a negative net working capital
position more like the level we typically see at fiscal year end.
We expect some net working capital build in the second half as we
move back to a more normalised profile reverting to pre Covid-19
levels at June 2021.
Outlook for exchange
Given the continued uncertainty caused by the ongoing Covid-19
pandemic, we are not able to provide specific financial guidance
and, therefore, the expected impact of exchange for the year ending
30 June 2021.
Outlook for tax
The tax rate before exceptional items for the six months ended 31
December 2020 was 22.4% compared with 21.6% for the six months
ended 31 December 2019. We expect the tax rate before exceptional
items for the year ending 30 June 2021 to be in the upper end of
the 21-22% range. For further details on taxation see Summary
Income Statement (e) Taxation and Notes, Taxation.
Return of capital
On 25 July 2019, the Board approved plans for a further return of
capital programme of up to £4.5 billion to shareholders over
the three-year period to 30 June 2022.
On 1 August 2019, Diageo entered into a non-discretionary agreement
with a third party bank to execute the first phase of this return
of capital programme to enable the company to buy back shares up to
a maximum of £1.25 billion by 31 January 2020. This agreement
was executed in full with 38.7 million shares repurchased to a
value of £1.25 billion. All shares purchased under the share
buyback programme were cancelled. On 9 April 2020, Diageo announced
that it had not initiated the next phase of the three-year
programme. Given our elevated leverage ratio we have paused the
programme until the leverage ratio is back within target
range.
At 31 December 2020, the leverage ratio, calculated as adjusted net
debt to adjusted EBITDA, was 3.4x, in-line with the leverage ratio
at 30 June 2020. Diageo anticipates leverage to be above the target
range of 2.5-3.0x through the year ending 30 June
2021.
(i)See Explanatory Notes for
explanation and reconciliation of non-GAAP
measures.
Net sales (£ million)
|
Reported net sales declined 4.5%
Organic net sales grew 1.0%
(i
Net sales
|
£ million
|
F20 H1
|
7,200
|
Exchange(i)
|
(328)
|
Acquisitions and disposals
|
(60)
|
Reclassification(ii)
|
(6)
|
Volume
|
(17)
|
Price/mix
|
85
|
F21 H1
|
6,874
|
(i)
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.
(ii)
In the six months ended 31 December 2020, £6 million has been
reclassified from marketing to sales.
Reported net sales declined 4.5%, as growth in organic net sales
was impacted by unfavourable foreign exchange and to a lesser
extent by the negative impact of acquisitions and
disposals.
Organic net sales grew 1.0% driven by 1.2% positive price/mix,
partially offset by a 0.2% reduction in volume. Price/mix was
positive in North America and Africa. Strong growth in North
America was offset by declines in all other regions except for
Africa, which was roughly flat. Net sales benefitted from the
replenishment of stock levels by distributors and retailers in
certain markets, mainly North America. This was partially offset by
continued customer de-stocking in Travel Retail.
Operating profit (£ million)
|
Reported operating profit declined 8.3%
Organic operating profit declined 3.4%
Operating profit
|
£ million
|
F20 H1
|
2,442
|
Exceptional
operating items(i)
|
42
|
Exchange
|
(134)
|
Acquisitions and disposals
|
(18)
|
FVA(ii)
|
(8)
|
Organic movement
|
(85)
|
F21 H1
|
2,239
|
(i)
For further details on exceptional items see Summary Income
Statement (c) Exceptional Items.
(ii)
Fair value adjustments. For further details on fair value
remeasurement see Summary Income Statement (d) Fair value
remeasurement.
Reported operating profit was down 8.3% mainly driven by
unfavourable exchange, decline in organic operating profit, the
impact of acquisitions and disposals and fair value adjustments
partially offset by lower exceptional operating items.
Organic operating profit declined 3.4%, with the impact of lower
organic operating margin only partially offset by higher
sales.
Operating margin (%)
|
Reported operating margin declined 134bps
Organic operating margin declined 153bps
Operating margin
|
ppt
|
F20 H1
|
33.9
|
Exceptional operating items
|
0.58
|
Exchange
|
(0.36)
|
Acquisitions and disposals
|
0.05
|
Other(i)
|
(0.08)
|
Gross margin
|
(1.74)
|
Marketing
|
0.04
|
Other operating items
|
0.17
|
F21 H1
|
32.6
|
(i)
Fair value adjustments and reclassification.
Reported operating margin declined 134bps mainly driven by decline
in organic operating margin and unfavourable exchange partially
offset by lower exceptional operating items.
Organic operating margin declined 153bps driven by unfavourable
channel and category mix, with productivity benefits from everyday
cost efficiencies largely offsetting cost of goods sold
inflation.
Basic earnings per share (pence)
|
Basic eps declined 14.6% from 79.2 pence to 67.6 pence
Eps before exceptional items declined 12.8% from 80.2 pence to 69.9
pence
(
Basic earnings per share
|
pence
|
F20 H1
|
79.2
|
Exceptional items after tax
|
(1.3)
|
Exchange on operating profit
|
(5.7)
|
Acquisitions
and disposals(i)
|
(0.8)
|
Organic operating profit
|
(3.7)
|
Associates and joint ventures
|
(1.0)
|
Finance
charges(ii)
|
(1.4)
|
Tax(iii)
|
1.8
|
Share
buyback(i)
|
0.4
|
Non-controlling interests
|
0.4
|
Other(iv)
|
(0.3)
|
F21 H1
|
67.6
|
(i)
Includes finance charges net of tax.
(ii)
Excludes finance charges related to acquisitions, disposals and
share buyback.
(iii)
Excludes tax related to acquisitions, disposals and share
buyback.
(iv)
Fair value adjustments.
Basic eps decreased 11.6 pence as unfavourable exchange, decline in
organic operating profit, finance charges and exceptional items
after tax more than offset the lower tax charge.
Eps before exceptional items declined 10.3 pence driven by
unfavourable exchange, decline in organic operating profit,
increased finance charges and a reduction in profit from associates
and joint ventures. These were partially offset by tax, lower
non-controlling interests and the impact of the share buyback
programme in fiscal 20.
Free cash flow (£ million)
|
Generated £1,998 million from
operating activities(i) and
£1,753 million free cash flow.
Free cash flow
|
£ million
|
F20 H1
|
966
|
Exchange(ii)
|
(134)
|
Operating
profit(iii)
|
(109)
|
Working
capital(iv)
|
649
|
Capex
|
80
|
Tax
|
231
|
Interest
|
(29)
|
Other(v)
|
99
|
F21 H1
|
1,753
|
(i)
Net cash from operating activities excludes net capex and movements
in loans and other investments (F21 H1 - £(245) million; F20
H1 - £(322) million).
(ii)
Exchange on operating profit before exceptional items.
(iii)
Operating profit excludes exchange, depreciation and amortisation,
post employment charges and other non-cash
items.
(iv)
Working capital movement includes maturing
inventory.
(v)
Other items include post employment payments, dividends received
from associates and joint ventures, and movements in loans and
other investments.
Net
cash from operating activities was £1,998 million, an increase
of £710 million compared to the prior period. Free cash flow
was £1,753 million, £787 million higher compared to the
prior period. This was primarily driven by working capital benefits
as a result of a large increase in creditors relative to the end of
June 2020, where we saw a particularly low creditor balance as a
result of reduced sales and lower discretionary spend. We also saw
benefits from lapping one-off tax payments, higher dividends from
joint ventures and associates, and decreased capital expenditure.
This increase was partially offset by an unfavourable movement in
exchange and a decline in operating profit.
Return on average invested capital (%)(i)
|
ROIC decreased 175bps
Return on average invested capital
|
ppt
|
F20 H1
|
17.5
|
Exchange
|
(0.84)
|
Acquisitions and disposals
|
(0.31)
|
Organic operating profit
|
(0.74)
|
Associates and joint ventures
|
(0.29)
|
Tax
|
(0.25)
|
Other
|
0.68
|
F21 H1
|
15.8
|
(i)
ROIC calculation excludes exceptional operating items from
operating profit.
ROIC decreased 175bps against the prior comparable period driven
mainly by unfavourable exchange and decline in organic operating
profit.
Reported growth by region
|
|
Volume
|
Net sales
|
Marketing
|
Operating profit(i)
|
||||
|
%
|
EUm
|
%
|
£
million
|
%
|
£
million
|
%
|
£
million
|
North
America
|
6
|
1.6
|
8
|
199
|
10
|
39
|
9
|
106
|
Europe
and Turkey
|
(6)
|
(1.4)
|
(13)
|
(223)
|
(6)
|
(16)
|
(27)
|
(169)
|
Africa
|
(8)
|
(1.5)
|
(12)
|
(103)
|
(13)
|
(13)
|
(40)
|
(64)
|
Latin
America and Caribbean
|
4
|
0.5
|
(15)
|
(101)
|
(31)
|
(35)
|
(23)
|
(60)
|
Asia
Pacific
|
(3)
|
(1.4)
|
(6)
|
(82)
|
(2)
|
(5)
|
(11)
|
(46)
|
Corporate
|
-
|
-
|
(59)
|
(16)
|
(50)
|
(1)
|
(15)
|
(12)
|
Diageo
|
(2)
|
(2.2)
|
(5)
|
(326)
|
(3)
|
(31)
|
(10)
|
(245)
|
Organic growth by region
|
|
Volume
|
Net sales
|
Marketing
|
Operating profit(i)
|
||||
|
%
|
EUm
|
%
|
£
million
|
%
|
£
million
|
%
|
£
million
|
North America
|
8
|
2.0
|
12
|
307
|
10
|
42
|
14
|
164
|
Europe and Turkey
|
(5)
|
(1.2)
|
(10)
|
(163)
|
(4)
|
(10)
|
(23)
|
(139)
|
Africa
|
(1)
|
(0.2)
|
-
|
(3)
|
(6)
|
(6)
|
(22)
|
(35)
|
Latin America and Caribbean
|
4
|
0.5
|
(1)
|
(9)
|
(15)
|
(15)
|
(5)
|
(12)
|
Asia Pacific
|
(3)
|
(1.4)
|
(3)
|
(48)
|
(1)
|
(3)
|
(11)
|
(48)
|
Corporate
|
-
|
-
|
(59)
|
(16)
|
-
|
-
|
(18)
|
(15)
|
Diageo
|
-
|
(0.3)
|
1
|
68
|
1
|
8
|
(3)
|
(85)
|
(i) Before operating exceptional items.
Notes to the business and financial review
|
Unless otherwise stated:
● commentary
below refers to organic movements
● volume
is in millions of equivalent units (EUm)
● net
sales are sales after deducting excise duties
● percentage
movements are organic movements
● share
refers to value share
See Explanatory Notes for explanation of the calculation and use of
non-GAAP measures.
BUSINESS REVIEW
Six months ended 31 December 2020
North America
|
North America delivered net sales growth of 12%, with growth across
all three key markets. US Spirits net sales increased 15%, with
growth across all categories, driven by resilient consumer demand,
spirits continuing to take share of total beverage alcohol and
positive category mix. It also reflects the replenishment of
stock levels by distributors and retailers. Tequila net sales grew
80% driven by strong growth of Don Julio and Casamigos. Net sales
of Crown Royal increased 4%, primarily driven by the continued
strong performance of innovation. Bulleit grew net sales 17%.
Scotch grew 6% driven by good performances from Johnnie Walker and
Buchanan's partially offset by a decline in malts. Vodka net sales
grew 6% with Cîroc delivering net sales growth of 17% and
Smirnoff net sales increasing 3%. Baileys net sales increased 12%
driven by a combination of pricing, new innovation and a continued
focus on Baileys' positioning as a year-round, indulgent treat.
Captain Morgan net sales grew 9% driven by growth in Captain Morgan
Spiced and innovations. Diageo Beer Company USA net sales grew 7%,
with strong growth in Smirnoff flavoured malt beverages, partially
offset by a decline in Guinness which continued to be impacted by
on-trade channel restrictions due to Covid-19. Net sales in Canada
increased 7% with broad-based growth in spirits and ready to drink
more than offsetting a decline in beer due to its on-trade
exposure. North America operating margin increased 80bps. This
reflects strong operating leverage and lower discretionary
expenditure, partially offset by dilutive category and channel
mix.
Key financials £ million:
|
||||||
|
F20 H1
|
FX
|
Acquisitions and disposals
|
Organic movement
|
F21 H1
|
Reported movement%
|
Net
sales
|
2,502
|
(101)
|
(7)
|
307
|
2,701
|
8
|
Marketing
|
404
|
(6)
|
3
|
42
|
443
|
10
|
Operating profit
|
1,120
|
(47)
|
(11)
|
164
|
1,226
|
9
|
Markets:
|
|
|
|
|
|
Global giants, local stars and reserve(i):
|
|||
|
Organic
volume movement
|
Reported
volume movement
|
Organic
net sales movement
|
Reported
net sales movement
|
|
|
Organic
volume movement(ii)
|
Organic
net sales movement
|
Reported
net sales movement
|
|
%
|
%
|
%
|
%
|
|
|
%
|
%
|
%
|
North
America(iii)
|
8
|
6
|
12
|
8
|
|
Crown
Royal
|
3
|
3
|
-
|
|
|
|
|
|
|
Smirnoff
|
5
|
3
|
(2)
|
US Spirits
|
10
|
10
|
15
|
11
|
|
Johnnie Walker
|
(1)
|
5
|
1
|
DBC
USA
|
4
|
4
|
7
|
3
|
|
Captain Morgan
|
10
|
8
|
4
|
Canada
|
8
|
8
|
7
|
4
|
|
Don Julio
|
52
|
55
|
54
|
|
|
|
|
|
|
Ketel
One(iv)
|
11
|
-
|
(5)
|
Spirits
|
8
|
7
|
13
|
9
|
|
Guinness
|
(18)
|
(16)
|
(19)
|
Beer(v)
|
3
|
3
|
5
|
1
|
|
Baileys
|
5
|
12
|
7
|
Ready
to drink(v)
|
25
|
4
|
47
|
26
|
|
Bulleit
|
13
|
16
|
12
|
|
|
|
|
|
|
Cîroc vodka
|
15
|
16
|
12
|
|
|
|
|
|
|
Casamigos
|
112
|
137
|
128
|
|
|
|
|
|
|
Tanqueray
|
7
|
6
|
1
|
(i)
Spirits brands excluding ready to drink and flavoured malt
beverages.
(ii)
Organic equals reported volume movement.
(iii)
Reported volume and net sales growth include impacts from the
disposal of a portfolio of 19 brands to Sazerac in the prior period
and the acquisition of Aviation Gin LLC ('Aviation Gin') and Davos
Brands LLC ('Davos Brands') in the six months ended 31 December
2020.
(iv)
Ketel One includes Ketel One vodka and Ketel One
Botanical.
(v)
Flavoured malt beverages have been reclassified from ready to drink
to beer from 1 July 2020. This reflects the nature of these
products and how management reviews performance. Movements reported
in the table above are on a like for like basis.
●
|
US Spirits net sales were
up 15% with depletions behind shipments by approximately 3
percentage points, due to the replenishment of stock levels by
distributors. Tequila sales increased 80% with Don Julio growing
56% and Casamigos growing 139% with both gaining spirits market and
tequila category share. The acceleration of growth in our tequila
portfolio reflects strong activations in the at-home occasion and
some benefit from pricing taken on Casamigos. Crown Royal net sales
were up 4% largely driven by continued momentum in Crown Royal
Regal Apple, Crown Royal Peach and Crown Royal Vanilla growing
strongly. Bulleit net sales grew 17% with upweighted marketing
investment driving a strong performance in the off-trade
channel. In scotch,
Johnnie Walker grew net sales 11%, with strong growth across
Johnnie Walker super deluxe, Johnnie Walker Red Label and Johnnie
Walker Black Label. Buchanan's increased net sales 23% and grew
category share. Our malt portfolio declined 33% due to its greater
reliance on the on-trade channel. Vodka net sales grew 6%.
Cîroc net sales increased 17% driven by growth in Cîroc
core variant as well as key flavour variants resulting from
refreshed activations to re-engage consumers. Smirnoff sales
increased 3%. Ketel One performance was flat. Captain Morgan net
sales increased 9%, largely driven by growth in Captain Morgan
Spiced and a strong contribution from the launch of Captain Morgan
Sliced Apple. Baileys net sales increased 12% due to pricing taken
on Baileys Original and the successful launch of limited time offer
Baileys Apple Pie.
|
●
|
Diageo Beer Company USA net sales grew 7%. Flavoured malt beverages net
sales increased 26%. Beer net sales, excluding flavoured malt
beverages, were down 15% as Guinness performance was impacted by
on-trade restrictions due to Covid-19.
|
●
|
Net
sales in Canada grew 7% with broad-based
growth in spirits, particularly Baileys, and continued growth of
ready to drink. This more than offset the decline in beer due to
its higher on-trade exposure.
|
●
|
Marketing investment grew 10% driven by upweighted
investment in at-home consumption opportunities to gain quality
market share growth and redeployed investment to align with the
shift in consumer behaviour, aided by the use of marketing
analytics tools to maximise effectiveness.
|
Europe and Turkey
|
|
Europe and Turkey net sales declined 10%. The business achieved
good net sales growth in Turkey, Northern Europe and Great Britain,
reflecting strong momentum in off-trade channels. Ireland, Southern
Europe and Eastern Europe were significantly impacted due to their
high exposure to the on-trade channel. Recovery of the on-trade in
the first quarter was not enough to offset the impact of severe
restrictions in the second quarter. Reduced levels of international
travel continued to severely impact Travel Retail Europe, which
declined 72%. Beer net sales in Europe and Turkey declined 34%,
driven primarily by Guinness, which was impacted by on-trade
restrictions and closures particularly in Ireland and Great
Britain. Scotch declined 10%. Growth of scotch in Turkey, Great
Britain and Northern Europe was not enough to offset declines in
Southern Europe, Travel Retail Europe and Eastern Europe. This was
mainly driven by Johnnie Walker due to on-trade restrictions and
closures as well as significant reduction in international tourism.
Baileys and ready to drink grew 8% and 4% respectively driven by
Great Britain, Northern Europe and Ireland. Gin declined 2%. Double
digit growth in Gordon's in GB and Tanqueray in Northern Europe was
not enough to offset declines in Southern Europe and Travel Retail
Europe, where Covid-19 restrictions significantly impacted travel
and tourism. Captain Morgan grew 7% driven by Great Britain and
Southern Europe. Vodka declined 11% driven by Smirnoff in Southern
Europe, Northern Europe, Travel Retail Europe and Eastern Europe.
Total operating margin declined 539bps driven by adverse mix impact
from on-trade closures and marketing investment ahead of net
sales.
Key financials £ million:
|
|||||||
|
F20 H1
|
FX
|
Acquisitions and disposals
|
Organic movement
|
Other(iii)
|
F21 H1
|
Reported movement%
|
Net sales
|
1,666
|
(40)
|
(20)
|
(163)
|
-
|
1,443
|
(13)
|
Marketing
|
268
|
(5)
|
(1)
|
(10)
|
-
|
252
|
(6)
|
Operating profit before exceptional items
|
615
|
(16)
|
(7)
|
(139)
|
(7)
|
446
|
(27)
|
Exceptional
operating items(iv)
|
-
|
|
|
|
|
(17)
|
|
Operating profit
|
615
|
|
|
|
|
429
|
(30)
|
Markets:
|
|
|
|
|
|
Global giants and local stars(i):
|
||||
|
Organic
volume movement
|
Reported
volume movement
|
Organic
net sales movement
|
Reported
net sales movement
|
|
|
Organic
volume movement(ii)
|
Organic
net sales movement
|
Reported
net sales movement
|
|
|
%
|
%
|
%
|
%
|
|
|
%
|
%
|
%
|
|
Europe
and Turkey(vi)
|
|
|
|
|
|
Guinness
|
(26)
|
(33)
|
(32)
|
|
(5)
|
|
|
|
|
Johnnie
Walker
|
(11)
|
|
|
|
|
|
|
|
|
|
|
Baileys
|
6
|
8
|
8
|
|
Great Britain
|
10
|
10
|
2
|
2
|
|
Smirnoff
|
(14)
|
(12)
|
(13)
|
|
Ireland
|
(17)
|
(23)
|
(37)
|
(40)
|
|
Captain Morgan
|
7
|
7
|
6
|
|
Northern
Europe
|
-
|
-
|
7
|
10
|
|
Yenì Raki
|
-
|
(4)
|
(26)
|
|
Southern
Europe
|
(18)
|
(18)
|
(21)
|
(17)
|
|
Tanqueray
|
(9)
|
(8)
|
(7)
|
|
Eastern
Europe
|
(6)
|
(7)
|
(13)
|
(21)
|
|
JƐB
|
(13)
|
(16)
|
(16)
|
|
Turkey(vii)
|
12
|
12
|
18
|
(11)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spirits
|
(2)
|
(2)
|
(4)
|
(7)
|
|
|
|
|
|
|
Beer(v)
|
(24)
|
(29)
|
(34)
|
(37)
|
|
|
|
|
|
|
Ready
to drink(v)
|
1
|
1
|
4
|
5
|
|
|
|
|
|
(i) Spirits brands excluding ready to drink and
flavoured malt beverages.
(ii)
Organic equals reported volume movement.
(iii)
The adjustment to other operating expenses is the elimination of
fair value changes to contingent consideration liabilities in
respect of prior year acquisitions.
(iv)
For further details on exceptional operating items see Summary
Income Statement (c) Exceptional items and Notes, Exceptional
items.
(v) Flavoured malt beverages have
been reclassified from ready to drink to beer from 1 July 2020.
This reflects the nature of these products and how management
reviews performance. Movements reported in the table above are on a
like for like basis.
(vi)
From 1 July 2020, Europe and Turkey are managed as six individual
markets: Great Britain, Ireland, Northern Europe, Southern Europe,
Eastern Europe and Turkey, each with end-to-end accountability.
This reflects how management reviews performance.
(vii)Variances
between organic net sales movement and reported net sales movement
are primarily a result of foreign exchange.
.
●
|
In Great
Britain, net sales increased
2%. Strong momentum in the off-trade more than offset declines due
to on-trade restrictions and closures. Spirits growth of 15%,
driven by a strong market and market share gains across all
categories in the off-trade. Beer declined in the on-trade. Despite
this we saw beer on-trade share gains when restrictions were
eased.
|
●
|
Ireland net sales declined 37%. Beer net sales were
down 44% driven by on-trade restrictions and closures particularly
impacting Guinness keg. Total spirits grew 4%, driven by Baileys,
Gordon's and Captain Morgan. Both spirits and beer gained market
share in the off-trade.
|
●
|
Northern Europe net sales increased 7%, reflecting
strong off-trade growth primarily driven by liqueurs and scotch.
Baileys grew 18%, benefitting from the successful launch of the
Baileys Apple Pie limited time offer and Baileys Salted Caramel.
Scotch sales were up 9% driven by scotch malts and Johnnie Walker.
Gin sales increased 12% driven by Tanqueray and Gordon's. Vodka
declined 24% driven by Smirnoff primarily as a result of exposure
to the on-trade.
|
●
|
Southern Europe net sales were down 21% driven by
reduced tourism and ongoing on-trade restrictions. Scotch declined
20% driven by Johnnie Walker and J&B.
|
●
|
In Eastern
Europe net sales were down 13%. Scotch declined 18%
driven by Johnnie Walker as a result of on-trade impacts and
instability in Lebanon.
|
●
|
In Turkey,
net sales were up 18% benefitting from strong off-trade momentum,
particularly in scotch and raki. Growth in raki was driven by
Tekirdağ raki.
|
●
|
Travel Retail Europe net sales declined 72% due to
continued international travel restrictions.
|
●
|
Marketing investment declined 4%. A proportion of
on-trade investment was redeployed into off-trade, e-commerce and
gifting.
|
Africa
|
|
Africa net sales were flat. Growth in Nigeria and Africa Regional
Markets was not enough to offset declines in East Africa and South
Africa. East Africa declined 5% driven by Kenya, which was
significantly impacted by on-trade restrictions, partly offset by
growth in Tanzania and Uganda. Net sales in Nigeria grew 10%,
driven by double digit growth of mainstream spirits and Malta
Guinness, as well as strong growth in Guinness. In South Africa,
net sales declined 10%, as a result of periodic bans on alcohol
sales and other severe Covid-19 related restrictions impacting
sales across all categories. Africa Regional Markets grew 7% driven
by double digit growth of beer in Ghana and Cameroon. Total Beer
declined 1% driven by Senator Keg and Tusker due to on-trade
restrictions in Kenya, partly offset by growth in Guinness, Malta
Guinness and Serengeti. Spirits performance was flat. Strong
performance of mainstream spirits offset declines in scotch.
Operating margin declined 434bps, driven by lower fixed cost
absorption, one-off charges and input cost inflation partially
offset by productivity initiatives.
Key financials £ million:
|
||||||
|
F20 H1
|
FX
|
Acquisitions and disposals
|
Organic movement
|
F21 H1
|
Reported movement %
|
Net
sales
|
848
|
(68)
|
(32)
|
(3)
|
745
|
(12)
|
Marketing
|
97
|
(7)
|
-
|
(6)
|
84
|
(13)
|
Operating profit
|
159
|
(29)
|
-
|
(35)
|
95
|
(40)
|
Markets:
|
|
|
|
|
|
Global giants and local stars(i):
|
|||
|
Organic
volume movement
|
Reported
volume movement
|
Organic
net sales movement
|
Reported
net sales movement
|
|
|
Organic
volume movement(ii)
|
Organic
net sales movement
|
Reported
net sales movement
|
|
%
|
%
|
%
|
%
|
|
|
%
|
%
|
%
|
Africa(iii)
|
(1)
|
(8)
|
-
|
(12)
|
|
Guinness
|
8
|
9
|
4
|
|
|
|
|
|
|
Johnnie
Walker
|
(18)
|
(18)
|
(22)
|
East
Africa
|
(5)
|
(5)
|
(5)
|
(12)
|
|
Smirnoff
|
2
|
(4)
|
(15)
|
Africa
Regional Markets(iii)
|
4
|
(24)
|
7
|
(10)
|
|
|
|
|
|
Nigeria
|
10
|
10
|
10
|
-
|
|
Other
beer:
|
|||
South
Africa(iii)
|
(7)
|
(12)
|
(10)
|
(28)
|
|
|
|
|
|
|
|
|
|
|
|
Malta
|
12
|
13
|
3
|
Spirits
|
4
|
4
|
-
|
(9)
|
|
Senator
|
(28)
|
(25)
|
(31)
|
Beer(iv)
|
(6)
|
(6)
|
(1)
|
(8)
|
|
Tusker
|
(12)
|
(14)
|
(20)
|
Ready
to drink(iii)(iv)
|
14
|
(12)
|
10
|
(21)
|
|
Serengeti
|
9
|
11
|
6
|
(i)
Spirits brands excluding ready to drink and flavoured malt
beverages.
(ii)
Organic equals reported volume movement.
(iii)
Africa, Africa Regional Markets, South Africa and ready to drink
reported volume movement impacted by acquisitions and
disposals.
(iv)
Flavoured malt beverages have been reclassified from ready to drink
to beer from 1 July 2020. This reflects the nature of these
products and how management reviews performance. Movements reported
in the table above are on a like for like basis.
●
|
East Africa net sales declined 5%. Kenya declined 10%,
driven by severe on-trade restrictions primarily impacting Senator
Keg and Tusker sales. Tanzania grew 11% as it was minimally
impacted by limited Covid-19 related lockdowns, and benefited from
the ongoing successes of Serengeti Lager and Serengeti
Lite.
|
●
|
In Africa
Regional Markets, net sales grew 7%. Double digit growth in
Malta Guinness and Guinness in Ghana, and Guinness in Cameroon,
partly offset by double digit beer declines in Ethiopia due to
civil unrest.
|
●
|
In Nigeria,
net sales grew 10% due to the strong double digit growth of
mainstream spirits, primarily driven by Orijin which benefitted
from a refreshed marketing campaign and the development of a small
formats strategy.
|
|
Beer
grew 3% driven by Malta Guinness and Guinness despite the
disruption in October due to the civil protests.
|
●
|
South Africa net sales declined 10%. Economic and
social challenges were further exacerbated by the banning of
alcohol sales across all channels for six weeks through July and
August and starting again 28 December 2020. Scotch net sales
declined 6% driven by Johnnie Walker partially offset by modest
growth of Bell's and VAT69.
|
●
|
Marketing investment declined 6% due to on-trade
savings. Overall spend was shifted to support new route to consumer
programmes, off-trade and e-commerce.
DIAGEO CONDENSED CONSOLIDATED INCOME STATEM
|
Latin America and Caribbean
|
|
Latin America and Caribbean net sales declined 1%. Declines in CCA,
Travel Retail Latin America and Caribbean and Mexico were partially
offset by growth in PUB, PEBAC and Colombia. In CCA, significantly
reduced tourism resulted in a 21% net sales decline. Travel Retail
Latin America and Caribbean net sales declined 100% due to
continued international travel restrictions. Mexico net sales
decreased 1% as growth in tequila and vodka was offset by declines
in scotch. PUB net sales increased 21% primarily driven by
double-digit growth in scotch and gin, aided by replenishment of
stock levels by distributors and retailers. PEBAC net sales grew
16% supported by strong growth in scotch and liqueurs. Colombia net
sales increased 7% driven by liqueurs, vodka and ready to drink.
Scotch net sales across the region declined 5% as strong growth in
White Horse and Black & White was more than offset by declines
in Johnnie Walker, Buchanan's and Old Parr. Gin net sales grew 24%
mainly due to strong momentum in Brazil. Tequila net sales grew 6%
driven by growth of Don Julio in Mexico. Operating margin declined
133 bps as adverse product mix within scotch and market mix in the
region more than offset reduced marketing investment and some
pricing benefit.
Key financials £ million:
|
||||||||
|
F20 H1
|
FX
|
Reclassification(i)
|
Acquisitions and disposals
|
Organic movement
|
Other(ii)
|
F21 H1
|
Reported movement %
|
Net
sales
|
680
|
(86)
|
(6)
|
-
|
(9)
|
-
|
579
|
(15)
|
Marketing
|
113
|
(14)
|
(6)
|
-
|
(15)
|
-
|
78
|
(31)
|
Operating profit
|
257
|
(47)
|
-
|
-
|
(12)
|
(1)
|
197
|
(23)
|
Markets:
|
|
|
|
|
|
Global giants and local stars(iii):
|
||||
|
Organic
volume movement
|
Reported
volume movement
|
Organic
net sales movement
|
Reported
net sales movement
|
|
|
Organic
volume movement(iv)
|
Organic
net sales movement
|
Reported
net sales movement
|
|
|
%
|
%
|
%
|
%
|
|
|
%
|
%
|
%
|
|
Latin America and Caribbean
|
|
|
|
|
|
Johnnie
Walker
|
(6)
|
(11)
|
(21)
|
|
4
|
|
|
|
|
Buchanan's
|
(16)
|
|
|
|
|
|
|
|
|
|
|
Old Parr
|
(18)
|
(21)
|
(31)
|
|
PUB(vi)
|
12
|
12
|
21
|
(8)
|
|
Smirnoff
|
(13)
|
(1)
|
(18)
|
|
Mexico(vi)
|
(4)
|
(5)
|
(1)
|
(15)
|
|
Black & White
|
31
|
41
|
14
|
|
CCA
|
(10)
|
(10)
|
(21)
|
(23)
|
|
Tanqueray
|
5
|
18
|
(8)
|
|
Andean(vi)
|
14
|
15
|
7
|
(4)
|
|
Baileys
|
11
|
12
|
3
|
|
PEBAC(vi)
|
13
|
12
|
16
|
7
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spirits
|
4
|
4
|
(2)
|
(16)
|
|
|
|
|
|
|
Beer(v)
|
(7)
|
(7)
|
11
|
13
|
|
|
|
|
|
|
Ready
to drink(v)
|
6
|
6
|
8
|
(10)
|
|
|
|
|
|
(i) In the six months ended 31 December 2020, £6
million has been reclassified from marketing to
sales.
(ii)
The adjustment to cost of sales reflects the fair value
remeasurement of biological assets in respect of growing agave
plants.
(iii)
Spirits brands excluding ready to drink and flavoured malt
beverages.
(iv)
Organic equals reported volume movement.
(v)
Flavoured malt beverages have been reclassified from ready to drink
to beer from 1 July 2020. This reflects the nature of these
products and how management reviews performance. Movements reported
in the table above are on a like for like basis.
(vi) Variances between organic net sales movement and reported net
sales movement are primarily a result of foreign
exchange.
●
|
PUB (Paraguay, Uruguay and Brazil) net sales increased
21%. Scotch net sales increased 25% driven by triple-digit growth
in White Horse and growth in Johnnie Walker driven by Johnnie
Walker Red Label, Johnnie Walker Black Label and Johnnie Walker
super deluxe variants. Brazil delivered 33% growth. Strong
consumption recovery in Brazil's domestic market, replenishment of
stock levels by distributors and retailers, as well as some pricing
benefit, more than offset net sales decline in border stores and
the duty free channel. Momentum in gin continued with strong
double-digit growth in Tanqueray and triple-digit growth in
Gordon's.
|
●
|
Mexico net sales declined 1% impacted by continued
economic slowdown as well as on-trade closures. Scotch declined 8%
as double-digit growth of Black & White was offset by declines
in Johnnie Walker and Buchanan's. Tequila grew 10% driven by Don
Julio, supported by the local "Antes Que Don" campaign, limited
editions and a strong activation plan, resulting in share gains in
the off-trade. Vodka increased 9% primarily due to Smirnoff's X1
Spicy Tamarind innovation, which continued to perform
strongly.
|
●
|
CCA (Caribbean and Central America) net sales declined
21% primarily as a result of reduced levels of international
tourism and on-trade restrictions, which drove declines across all
spirits categories. Scotch net sales decreased 24% as declines in
Buchanan's, Johnnie Walker and Old Parr more than offset
double-digit growth in Black & White.
|
●
|
Andean (Colombia and Venezuela) net sales increased 7%
driven by Colombia. Growth in Colombia was primarily driven by
strong double-digit growth of Baileys building on the brand's
globally proven indulgent treat communication and occasions
strategy. Vodka net sales grew strong double-digit due to the
Smirnoff X1 Lulo innovation endorsed by a local trend-setting
celebrity. Scotch net sales increased 1% driven by triple-digit
growth in Black & White and double-digit growth in Johnnie
Walker, partially offset by double-digit declines in Old Parr due
to its high reliance on the on-trade.
|
●
|
PEBAC (Peru, Ecuador, Bolivia, Argentina and Chile) net
sales increased 16% driven by lapping social and political
instability across key markets, as well as strong execution through
new distribution partnerships. Scotch delivered double-digit net
sales growth driven by Johnnie Walker, White Horse and
Buchanan's.
|
●
|
Travel Retail Latin America and Caribbean net sales
decreased 100% due to continued international travel
restrictions.
|
●
|
Marketing investment was down 15%. On-trade marketing
spend was reduced, and partially redeployed to the off-trade and
e-commerce given at-home consumption trends.
|
Asia Pacific
|
Asia Pacific net sales decreased 3%. Strong growth in Greater China
and Australia in the first half was offset by declines in Travel
Retail Asia and Middle East, South East Asia and North Asia. The
region was in growth excluding Travel Retail Asia and Middle East.
Greater China net sales increased 15%, driven by Chinese white
spirits and scotch. Australia net sales increased 23%, with growth
across key categories. India net sales grew 1%. Spirits sales
declined due to the continued economic slowdown and on-trade
closures. This was more than offset by revenue from the United
Spirits Limited owned cricket team due to the postponement of the
Indian Premier League from March 2020 to October 2020. South East
Asia net sales decreased 17% with declines across all key
categories primarily driven by local market restrictions and the
reduced levels of international travel. Travel Retail Asia and
Middle East declined 81% due to the continued impact of Covid-19 on
international travel. Operating margin decreased 237 bps driven by
adverse market and category mix partially offset by overhead
efficiencies.
Key financials £ million:
|
||||||
|
F20 H1
|
FX
|
Acquisitions and disposals
|
Organic movement
|
F21 H1
|
Reported movement %
|
Net
sales
|
1,477
|
(33)
|
(1)
|
(48)
|
1,395
|
(6)
|
Marketing
|
232
|
(2)
|
-
|
(3)
|
227
|
(2)
|
Operating profit before exceptional items
|
432
|
2
|
-
|
(48)
|
386
|
(11)
|
Exceptional
operating items(i)
|
(59)
|
|
|
|
-
|
|
Operating profit
|
373
|
|
|
|
386
|
3
|
Markets:
|
|
|
|
|
|
Global giants and local stars(ii):
|
|||
|
Organic
volume movement
|
Reported
volume movement
|
Organic
net sales movement
|
Reported
net sales movement
|
|
|
Organic
volume movement(iii)
|
Organic
net sales movement
|
Reported
net sales movement
|
|
%
|
%
|
%
|
%
|
|
|
%
|
%
|
%
|
Asia
Pacific
|
(3)
|
(3)
|
(3)
|
(6)
|
|
Johnnie
Walker
|
(14)
|
(21)
|
(21)
|
|
|
|
|
|
|
McDowell's
|
(3)
|
(3)
|
(11)
|
India(vi)
|
(2)
|
(2)
|
1
|
(7)
|
|
Shui
Jing Fang(iv)
|
17
|
18
|
18
|
Greater
China
|
6
|
6
|
15
|
15
|
|
Guinness
|
(9)
|
(11)
|
(13)
|
Australia
|
25
|
26
|
23
|
26
|
|
The
Singleton
|
(3)
|
(3)
|
(2)
|
South
East Asia
|
(15)
|
(15)
|
(17)
|
(21)
|
|
Royal
Challenge
|
(11)
|
(11)
|
(17)
|
North
Asia
|
5
|
2
|
(6)
|
(8)
|
|
Windsor
|
(35)
|
(27)
|
(28)
|
Travel
Retail Asia and Middle East
|
(76)
|
(76)
|
(81)
|
(81)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Spirits
|
(3)
|
(3)
|
(6)
|
(8)
|
|
|
|
|
|
Beer(v)
|
(7)
|
(7)
|
(10)
|
(13)
|
|
|
|
|
|
Ready
to drink(v)
|
9
|
9
|
14
|
17
|
|
|
|
|
|
(i)
For further details on exceptional operating items see Summary
Income Statement, (c) Exceptional items and Notes, Exceptional
items.
(ii) Spirits brands excluding ready to drink
and flavoured malt beverages.
(iii)
Organic equals reported volume movement.
(iv)
Growth figures represent total Chinese white spirits of which Shui
Jing Fang is the principal brand.
(v)
Flavoured malt beverages have been reclassified from ready to drink
to beer from 1 July 2020. This reflects the nature of these
products and how management reviews performance. Movements reported
in the table above are on a like for like basis.
(vi)
Variances between organic net sales movement and reported net sales
movement are primarily a result of foreign exchange.
●
|
In India, net
sales grew 1%. Spirits declined due to the continued economic
slowdown and on-trade closures. This was more than offset by
revenue from the United Spirits Limited owned cricket team, Royal
Challengers Bangalore, as the start of the Indian Premier League
was rescheduled from March 2020 to October 2020. Net sales in the
popular brands segment declined 10%. Prestige and Above segment net
sales decreased 2% primarily driven by declines in vodka and IMFL
whisky. Scotch net sales grew 1% driven by Johnnie Walker Red
Label.
|
●
|
In Greater
China, net sales increased 15% driven primarily by Chinese
white spirits and scotch. Chinese white spirits grew 20% partly
driven by route to consumer expansion. Scotch net sales increased
9% with double-digit growth in scotch malts and Johnnie Walker
super deluxe.
|
●
|
In Australia, net
sales increased 23% due to growth across all key categories driven
by strong off-trade momentum. Ready to drink net sales grew 30%
driven primarily by Bundaberg as well as strong growth in Smirnoff
and Gordon's due to the Smirnoff Spiked Seltzers and Gordon's Pink
Gin Premix innovations. Scotch net sales increased 17% driven by
Johnnie Walker super deluxe. Gin net sales grew 48% due to
continued momentum in Gordon's, Gordon's Premium Pink Distilled Gin
and Gordon's Sicilian Lemon as well as Tanqueray. Baileys net sales
increased 29% driven by strong growth in Baileys Original and
Baileys Red Velvet innovation. Rum net sales delivered 20% growth
driven by Bundaberg and Captain Morgan. Vodka net sales grew 23%
due to Smirnoff.
|
●
|
In South
East Asia, net sales decreased 17% with declines across
all key categories primarily driven by local market restrictions
and the reduced levels of international travel. Scotch net sales
were down 8% as strong double-digit growth in scotch malts was more
than offset by declines in Johnnie Walker.
|
●
|
In North
Asia, net sales decreased 6%, with Japan and Korea each
declining 6%. Performance in Japan was primarily driven by the
decline of ready to drink. In Korea the main driver of decline was
Windsor, partially offset by double-digit growth in Johnnie
Walker.
|
●
|
Travel Retail Asia and Middle East net sales decreased
81% across the portfolio due to continued international travel
restrictions.
|
●
|
Marketing investment declined 1% as a proportion of
on-trade investment was redeployed into off-trade and e-commerce to
focus on the at-home consumption occasion.
|
CATEGORY AND BRAND REVIEW
Six months ended 31 December 2020
Key categories:
|
|||
|
Organic
volume
movement(iii)
%
|
Organic
net
sales
movement
%
|
Reported
net
sales
movement
%
|
Spirits(i)
|
1
|
3
|
(2)
|
Scotch
|
(3)
|
(8)
|
(13)
|
Vodka(ii)(iv)
|
(2)
|
-
|
(6)
|
Canadian
whisky
|
1
|
3
|
(1)
|
Rum(ii)
|
(6)
|
1
|
(3)
|
Liqueurs
|
3
|
8
|
5
|
Indian-Made Foreign
Liquor (IMFL) whisky
|
1
|
(1)
|
(8)
|
Tequila
|
42
|
61
|
56
|
Gin(ii)
|
6
|
6
|
2
|
US
whiskey
|
8
|
8
|
5
|
Beer(v)
|
(9)
|
(11)
|
(16)
|
Ready to drink(v)
|
10
|
13
|
4
|
(i) Spirits brands excluding ready to drink and
flavoured malt beverages.
(ii) Vodka, rum, gin including IMFL brands.
(iii)
Organic equals reported volume movement except for spirits 0%,
vodka (3)%, rum (7)%, liqueurs 2%, gin 7%, beer (10)% and ready to
drink (1)%, which were impacted by acquisitions and
disposals.
(iv)
Vodka includes Ketel One Botanical.
(v)
Flavoured malt beverages have been reclassified from ready to drink
to beer from 1 July 2020. This reflects the nature of these
products and how management reviews performance. Movements reported
in the table above are on a like for like basis.
●
|
Scotch represents 24% of Diageo's net sales and
declined 8%. Growth in North America of 2% was offset by declines
in all other regions. Scotch performance was severely affected by
the impact of Covid-19 on international travel, particularly in
Asia Pacific. Excluding Travel Retail, scotch was broadly flat with
growth in North America and Asia Pacific offset by declines in all
other regions. Johnnie Walker net sales were down 12%, and scotch
malts down 7%, driven by the impact of Covid-19 on Travel Retail
sales and lapping Game of Thrones innovations. Primary scotch
brands grew 16% driven by the growth of White Horse and Black &
White in Latin America and Caribbean and Bell's in Europe and
Turkey. Old Parr declined 19% driven by international tourism
restrictions in Caribbean and Central America and restrictions on
the on-trade channel in Colombia. Buchanan's net sales were down 2%
with decline in Latin America and Caribbean partially offset by
strong growth in North America driven by its strong presence in the
off-trade channel. JƐB
continued to decline with net sales down 12% driven by the impact
of on-trade restrictions in Southern Europe.
|
●
|
Vodka represents 10% of Diageo's net sales and was
broadly flat with growth in North America and Africa offset with
decline in all other regions. Cîroc grew 11% driven mainly by
US Spirits on the back of refreshed activations to engage with
Cîroc's consumer base. Smirnoff net sales were down 3%
driven by declines in Europe and Turkey and Asia Pacific partially
offset by growth in North America. Ketel One net sales
decreased 4% with North America performance flat and a decline in
Europe and Turkey.
|
●
|
Canadian whisky represents 8% of Diageo's net sales and
grew 3%. Growth of Crown Royal in North America was largely driven
by continued momentum on flavours with Crown Royal Regal Apple,
Crown Royal Vanilla and Crown Royal Peach all growing
strongly.
|
●
|
Rum represents 6% of Diageo's net sales and grew 1%
primarily driven by Captain Morgan in North America and Great
Britain partially offset by a decline in McDowell's No.1 in
India.
|
●
|
Liqueurs represent 7% of Diageo's net sales and grew 8%
driven by Baileys. Baileys growth was broad based across regions,
apart from Asia Pacific which declined 2%. Performance was
driven by Baileys Original, the successful launch of limited time
offer Baileys Apple Pie, and continued focus on Baileys'
positioning as a year-round indulgent
treat.
|
●
|
IMFL whisky represents 5%
of Diageo's net sales and declined 1% driven by the economic
slowdown, and the impact of Covid-19 shutdowns, in
India.
|
●
|
Tequila represents 7% of Diageo's net sales and grew
61% driven by strong performance of Don Julio and Casamigos in
North America.
|
●
|
Gin represents 5% of Diageo's net sales and grew 6%
with growth across all regions except Europe and Turkey. Gin growth
was driven by strong double-digit growth in Africa and Latin
America and Caribbean. Growth in Africa was mainly driven by
Gilbey's in Kenya and broad-based growth of Gordon's across the
region. Growth in Latin America and Caribbean was mainly driven by
growth of Tanqueray and Gordon's in Brazil. The decline in Europe
and Turkey was mainly due to the impact of on-trade closures and
reduced tourism in Southern Europe and the impact of Covid-19 on
Travel Retail Europe. Gin net sales grew 12% in both Northern
Europe and Great Britain driven by Tanqueray and Gordon's,
respectively. In Great Britain Gordon's performance was primarily
driven by the successful launch of Gordon's Sicilian
Lemon.
|
●
|
US whiskey represents 2% of Diageo's net sales and
grew 8%. Performance continued to be driven by strong growth in
Bulleit.
|
●
|
Beer represents 15% of Diageo's net sales and declined
11% with declines in all regions except North America and Latin
America and Caribbean. Guinness declined 18% due to the impact of
Covid-19 on the on-trade, particularly in Ireland and Great
Britain. Smirnoff flavoured malt beverages in Diageo Beer Company
USA grew 26% driven by innovation launches as well as increased
consumption in the off-trade channel.
|
●
|
Ready to drink represents 4% of Diageo's net sales and
grew 13% with broad-based growth across all regions, particularly
North America and Australia. Australia performance was driven by
Bundaberg, Smirnoff and Gordon's.
|
.
Global giants, local stars and reserve(i):
|
|||
|
Organic
volume
movement(ii)
%
|
Organic
net
sales
movement
%
|
Reported
net
sales
movement
%
|
Global giants
|
|
|
|
Johnnie
Walker
|
(10)
|
(12)
|
(16)
|
Smirnoff
|
(4)
|
(3)
|
(8)
|
Baileys
|
5
|
10
|
7
|
Captain
Morgan
|
7
|
7
|
3
|
Tanqueray
|
(1)
|
1
|
(5)
|
Guinness
|
(11)
|
(18)
|
(20)
|
Local stars
|
|
|
|
Crown
Royal
|
2
|
3
|
(1)
|
Yenì
Raki
|
(1)
|
(4)
|
(26)
|
Buchanan's
|
(5)
|
(2)
|
(9)
|
JƐB
|
(12)
|
(12)
|
(14)
|
Windsor
|
(35)
|
(27)
|
(28)
|
Old
Parr
|
(17)
|
(19)
|
(27)
|
Bundaberg
|
13
|
9
|
11
|
Black
& White
|
19
|
20
|
3
|
Ypióca
|
18
|
12
|
(19)
|
McDowell's
|
(3)
|
(3)
|
(10)
|
Shui
Jing Fang(iii)
|
17
|
18
|
18
|
Reserve
|
|
|
|
Scotch
malts
|
(6)
|
(7)
|
(7)
|
Cîroc
vodka
|
8
|
11
|
7
|
Ketel
One(iv)
|
5
|
(4)
|
(9)
|
Don
Julio
|
19
|
39
|
35
|
Bulleit
|
11
|
15
|
10
|
Casamigos
|
111
|
135
|
126
|
(i) Spirits brands excluding ready to drink and
flavoured malt beverages.
(ii)
Organic equals reported volume movement.
(iii)
Growth figures represent total Chinese white spirits of which Shui
Jing Fang is the principal brand.
(iv)
Ketel One includes Ketel One vodka and Ketel One
Botanical.
●
|
Global giants represent
39% of Diageo's net sales and declined by 7%. Johnnie Walker
decline was due to the impact of Covid-19 on Travel Retail, and
Guinness declined due to restrictions on the on-trade channel,
particularly in Great Britain and Ireland. These declines were
partially offset by growth in Baileys in North America and Europe
and Turkey and Captain Morgan in North America.
|
●
|
Local stars represent 20%
of Diageo's net sales and grew 1%, largely driven by growth in
Chinese white spirits in Asia Pacific, Crown Royal in North America
and Black & White in Colombia and Mexico. These gains were
partially offset by declines in Old Parr in the Caribbean and
Central America and Colombia, Windsor in South Korea,
JƐB in Southern Europe and McDowell's No.1 in
India.
|
●
|
Reserve brands represent 24% of Diageo's net sales and
grew 15% largely driven by the strong growth of Casamigos and Don
Julio in US Spirits and Chinese white spirits partially offset by
declines in scotch malts mainly in US Spirits and Johnnie Walker
Reserve variants mainly in Travel Retail Asia and Middle
East.
|
ADDITIONAL FINANCIAL INFORMATION
Six months ended 31 December 2020
SUMMARY INCOME STATEMENT
|
|
31 December 2019
|
Exchange(a)
|
Acquisitions and disposals(b)
|
Organic movement(i)
|
Fair value remeasure-ment(d)
|
Reclassification(ii)
|
31 December 2020
|
|
£
million
|
£
million
|
£
million
|
£
million
|
£
million
|
£ million
|
£ million
|
Sales
|
10,831
|
(601)
|
(88)
|
300
|
-
|
(6)
|
10,436
|
Excise
duties
|
(3,631)
|
273
|
28
|
(232)
|
-
|
-
|
(3,562)
|
Net
sales
|
7,200
|
(328)
|
(60)
|
68
|
-
|
(6)
|
6,874
|
Cost
of sales
|
(2,702)
|
141
|
50
|
(149)
|
(1)
|
-
|
(2,661)
|
Gross
profit
|
4,498
|
(187)
|
(10)
|
(81)
|
(1)
|
(6)
|
4,213
|
Marketing
|
(1,116)
|
35
|
(2)
|
(8)
|
-
|
6
|
(1,085)
|
Other
operating items
|
(881)
|
18
|
(6)
|
4
|
(7)
|
-
|
(872)
|
Operating
profit before exceptional items
|
2,501
|
(134)
|
(18)
|
(85)
|
(8)
|
-
|
2,256
|
Exceptional
operating items (c)
|
(59)
|
|
|
|
|
|
(17)
|
Operating
profit
|
2,442
|
|
|
|
|
|
2,239
|
Non-operating
items (c)
|
-
|
|
|
|
|
|
5
|
Net
finance charges
|
(154)
|
|
|
|
|
|
(200)
|
Share
of after tax results of associates and joint ventures
|
176
|
|
|
|
|
|
154
|
Profit
before taxation
|
2,464
|
|
|
|
|
|
2,198
|
Taxation
(e)
|
(530)
|
|
|
|
|
|
(537)
|
Profit
for the period
|
1,934
|
|
|
|
|
|
1,661
|
(i) For the definition of organic movement see
Explanatory notes, Organic movements.
(ii) In the six months ended 31 December 2020, £6
million has been reclassified from marketing to sales.
(a) Exchange
The impact of movements in exchange rates on reported figures for
net sales and operating profit are principally in respect of the
translation exchange impact of the strengthening of sterling
against the US dollar, the Brazilian real and the Turkish lira,
partially offset by weakening of sterling against the
euro.
The effect of movements in exchange rates and other movements on
profit before exceptional items and taxation for the six months
ended 31 December 2020 is set out in the table below.
|
Gains/(losses)
|
|
£ million
|
Translation
impact
|
(94)
|
Transaction
impact
|
(40)
|
Operating profit before exceptional items
|
(134)
|
Net
finance charges - translation impact
|
4
|
Net
finance charges - transaction impact
|
1
|
Net
finance charges
|
5
|
Associates
- translation impact
|
3
|
Profit before exceptional items and taxation
|
(126)
|
|
Six months ended 31 December 2020
|
Six months ended 31 December 2019
|
Exchange
rates
|
|
|
Translation
£1 =
|
$1.31
|
$1.26
|
Transaction £1
=
|
$1.34
|
$1.36
|
Translation
£1 =
|
€1.11
|
€1.14
|
Transaction £1
=
|
€1.11
|
€1.13
|
(b) Acquisitions and disposals
The acquisitions and disposals movement includes the impact of the
acquisition of Aviation Gin LLC ('Aviation Gin') and Davos Brands
LLC ('Davos Brands') in the six months ended 31 December 2020, as
well as the impact of disposals.
See Notes, Acquisition of businesses and purchase of
non-controlling interests and Explanatory Notes for further
details.
(c) Exceptional items
Exceptional operating items in the six months ended 31 December 2020
were £17 million before tax (2019 -
£59 million).
In
the six months ended 31 December 2020, based on recent
developments, an additional provision of TRY 152 million (£15
million) was recorded as an exceptional item in respect of ongoing
litigation in Turkey, bringing the provision's balance at 31
December 2020 to TRY 283 million (£28 million).
On 20 November 2020, the High Court of Justice of England and Wales
issued a ruling that requires schemes to equalise pension benefits
for men and women for the calculation of their guaranteed minimum
pension liability (GMP) on historic transfers out, which has
resulted in an additional liability of £5 million. The
corresponding expense has been recognised as an exceptional
operating item, consistent with the charge in relation to the
initial GMP ruling in the year ended 30 June 2019.
In the six months ended 31 December 2020, an inventory provision of
£3 million (2019 - £nil) has been released in respect of
inventories that had earlier been expected to be returned and
destroyed as a consequence of the Covid-19 pandemic, resulting in
an exceptional gain.
In
the six months ended 31 December 2019, an impairment charge of
£59 million in respect of the Old Tavern brand in India
was recognised in exceptional operating items.
Non-operating items in the
six months ended 31 December 2020 were £5 million (2019 -
£nil).
In the six months ended 31 December 2020, ZAR 100 million (£5
million) of deferred consideration was paid to Diageo in respect of
the sale of United National Breweries, resulting in a non-operating
gain.
Non-operating
items in the six months ended 31 December 2019
comprised:
● £8 million
step up gain as a result of the acquisition of Seedlip Limited,
Anna Seed 83 Limited and certain smaller
businesses;
● £7 million
incremental loss on the disposal of United National
Breweries;
● £1 million
loss on the disposal of an associate, Equal Parts,
LLC.
Exceptional tax charges in the six months
ended 31 December 2020 were £42 million (2019 - £nil),
driven by a change in the applicable corporate tax rate in the
Netherlands.
See Explanatory Notes, (c) Exceptional items for the definition of
exceptional items.
(d) Fair value remeasurement
The adjustment to cost of sales reflects the elimination of fair
value changes for biological assets in respect of growing agave
plants of a £3 million gain for the six months ended 31
December 2020 and a £4 million gain for the six months ended
31 December 2019. The adjustment to other operating expenses is the
elimination of fair value changes to contingent consideration
liabilities in respect of prior year acquisitions of £11
million loss for the six months ended 31 December 2020 and £4
million loss for the six months ended 31 December
2019.
(e) Taxation
The reported tax rate for the six months ended 31 December
2020 was
24.4% compared with 21.5%
for the six months ended 31 December 2019.
For
the six months ended 31 December 2020, income tax expense is
recognised based on management's best estimate of the weighted
average annual income tax rate expected for the full financial year
applied to the pre-tax income of the interim period in line with
the relevant accounting standard.
On
15 December 2020, legislation was substantively enacted in the
Netherlands to maintain the headline corporate tax rate at 25%,
reversing a previously enacted reduction in the corporate tax rate
to 21.7% in 2021. As a result of the change, an exceptional tax
charge of £42 million was recognised for the six months ended
31 December 2020 in relation to the remeasurement of deferred tax
liabilities.
The
reported tax charge for the six months ended 31 December 2019
included a tax credit of £14 million in respect of the Old
Tavern brand impairment charge.
The tax rate before exceptional items for the six
months ended 31 December 2020 was
22.4% compared with 21.6%
for the six months ended 31 December 2019.
We expect the tax rate before exceptional items
for the year ending 30 June 2021 to be in the upper end of
the 21%-22%
range.
(f) Dividend
The group aims to increase the dividend each year and the decision
in respect of the dividend is made with reference to 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 2020
dividend cover was 1.6 times.
An interim dividend of 27.96 pence per share will
be paid to holders of ordinary shares and ADRs on the register as
of 26 February 2021. The ex-dividend date is 25 February
2021. This represents an increase of 2% on last year's interim
dividend. The interim dividend will be paid to ordinary
shareholders on 8 April 2021.
Payment to US ADR holders will be made on 13 April 2021. A
dividend reinvestment plan is available to holders of ordinary
shares in respect of the interim dividend and the plan notice date
is 12 March 2021.
(g) Share buyback
On 25 July 2019, the Board approved a return of capital programme
to return up to £4.5 billion to shareholders over the
three-year period from 1 July 2019 to 30 June 2022, utilising the
most appropriate mechanic of either share buybacks or special
dividends depending on market conditions.
During the six months
ended 31 December 2019, the group purchased 34.6 million ordinary
shares at a cost of £1,129 million (including £6
million of transaction costs). In the second half of the year the
group purchased 4.1
million ordinary shares at a cost of £127 million (including
£1 million of transaction costs), taking the total number of
ordinary shares purchased under the programme to 38.7 million at a
cost of £1,256 million (including £7 million of
transaction costs). All shares purchased under the share buyback
programmes were cancelled. On 9 April 2020, the group announced
that it had not initiated the next phase of the three-year
programme. Given our elevated leverage ratio we have paused the
programme until the leverage ratio is back within target
range.
At
31 December 2020 the leverage ratio, calculated as adjusted net
debt to adjusted EBITDA, was 3.4x, in-line with the leverage ratio
at 30 June 2020. The group anticipates leverage to be above the
target range of 2.5-3.0x through the year ending 30 June
2021.
See
Explanatory Notes for explanation of the calculation and use of
non-GAAP measures.
MOVEMENT IN NET BORROWINGS AND EQUITY
|
Movement in net borrowings
|
2020
|
2019
|
|
£
million
|
£
million
|
Net borrowings at 30 June
|
(13,246)
|
(11,277)
|
Free
cash flow (a)
|
1,753
|
966
|
Acquisitions
(b)
|
(364)
|
(106)
|
Sale
of businesses and brands
|
5
|
-
|
Share
buyback programme
|
-
|
(1,155)
|
Proceeds from issue
of share capital
|
-
|
1
|
Net
sale of own shares for share schemes (c)
|
9
|
33
|
Dividends paid to
non-controlling interests
|
(53)
|
(76)
|
Net
movements in bonds (d)
|
(216)
|
1,289
|
Purchase of shares
of non-controlling interests (e)
|
(34)
|
(25)
|
Net
movements in other borrowings (f)
|
(345)
|
209
|
Equity
dividends paid
|
(992)
|
(1,006)
|
Net
(decrease)/increase in cash and cash equivalents
|
(237)
|
130
|
Net
decrease/(increase) in bonds and other borrowings
|
561
|
(1,503)
|
Exchange
differences (g)
|
420
|
209
|
Other
non-cash items (h)
|
(159)
|
(188)
|
Adoption
of IFRS 16
|
-
|
(251)
|
Net borrowings at 31 December
|
(12,661)
|
(12,880)
|
(a) See Explanatory Notes, Free cash flow for the analysis of free
cash flow.
(b) In the six months ended 31 December 2020, Diageo completed the
acquisition of Aviation Gin and Davos Brands for a total
consideration of $337 million (£263 million) in cash and
contingent consideration of up to $275 million (£214 million)
over a ten-year period linked to performance targets.
In
the six months ended 31 December 2019, Diageo acquired the
remaining share capital of Seedlip Limited and Anna Seed 83 Limited
(the brand owner of Aecorn) which it did not already own, as well
as a number of smaller transactions.
Acquisitions
also include additional investments as part of the Distill Ventures
programme, as well as deferred and contingent consideration paid in
respect of previous acquisitions.
(c) Net sale of own shares comprised purchase of treasury shares
for the future settlement of obligations under the employee share
option schemes of £1 million (2019 - £1 million) less
receipts from employees on the exercise of share options of
£10 million (2019 - £34 million).
(d) In the six months ended 31 December 2020, the group issued
bonds of €700 million (£636 million - net of discount
and fee) and £395 million (including £5 million discount
and fee) and repaid bonds of $696 million (£551 million) and
€775 million (£696 million). In the six months ended 31
December 2019, the group issued bonds of $1,600 million
(£1,289 million).
(e) In the six months ended 31 December 2020, East African
Breweries Limited (EABL), a subsidiary of Diageo, completed the
purchase of 30% of the share capital of Serengeti Breweries Limited
for $55 million (£42 million) out of which $12 million
(£8 million) was still payable at 31 December
2020.
In
the six months ended 31 December 2019, Diageo acquired an
additional 3,310,515 shares (representing 0.46% of total shares) of
United Spirits Limited for INR 1,960 million (£23 million) and
completed the purchase of 4% of the share capital of Serengeti
Breweries Limited for $3 million (£2 million).
(f) In the six months ended 31 December 2020, the net movement in
other borrowings principally arose from cash movement of foreign
exchange swaps and forwards. In the six months ended 31 December
2019, movements were driven by the issue of commercial paper,
partially offset by cash movements on foreign exchange swaps and
forwards.
(g) The exchange arising on net borrowings of £420 million is
primarily driven by favourable exchange movements on US dollar and
euro denominated borrowings, moderately offset by an unfavourable
movement on cash and cash equivalents, foreign exchange swaps and
forwards.
In
the six months ended 31 December 2019, exchange differences were
principally driven by beneficial exchange movements on US dollar
and euro denominated borrowings partially offset by an adverse
movement on foreign exchange swaps and forwards.
(h) In the six months ended 31 December 2020, other non-cash items
are principally in respect of fair value changes of cross currency
interest rate swaps. In the six months ended 31 December 2019,
other non-cash items are principally in respect of additional
leases entered into during the six months ended 31 December
2019.
Movement in equity
|
2020
|
2019
|
|
£
million
|
£
million
|
Equity at 30 June
|
8,440
|
10,156
|
Profit
for the period
|
1,661
|
1,934
|
Exchange
adjustments (a)
|
(590)
|
(623)
|
Remeasurement of
post employment plans net of taxation
|
(115)
|
(82)
|
Purchase of shares
of non-controlling interests (b)
|
(42)
|
(25)
|
Dividends declared
to non-controlling interests
|
(24)
|
(52)
|
Equity
dividends paid
|
(992)
|
(1,006)
|
Share
buyback programme
|
-
|
(1,200)
|
Other
reserve movements
|
40
|
128
|
Equity at 31 December
|
8,378
|
9,230
|
(a) Exchange movement in the six months ended 31 December 2020
primarily arose from exchange losses driven by the US dollar,
Indian rupee and the Turkish lira.
(b) In the six months ended 31 December 2020, East African
Breweries Limited completed the purchase of 30% of the share
capital of Serengeti Breweries Limited for $55 million (£42
million).
In the six months ended 31 December 2019, Diageo
acquired an additional 3,310,515 shares of United Spirits Limited
for INR 1,960 million (£23 million) and completed the purchase
of 4% of the share capital of Serengeti Breweries Limited for $3
million (£2 million).
Post employment plans
The net surplus of the group's post employment benefit plans have
decreased by £94 million from £362 million at 30 June
2020 to £268 million at 31 December 2020. The decrease in net
surplus is primarily attributable to the change in discount rates
in Ireland and in the United Kingdom due to the decrease in returns
from AA-rated corporate bonds used to calculate the discount rates
on the liabilities of the post employment plans (Ireland from 1.2%
to 0.7%; UK from 1.5% to 1.4%), partially offset by an increase in
the market value of assets held by the post employment
schemes.
The operating profit charge before
exceptional items increased by £18 million from £36
million for the six months ended 31 December 2019 to £54
million for the six months ended 31 December 2020. Operating profit
for the six months ended 31 December 2019 includes a past service
gain of £19 million following a communication to the deferred
members of the Guinness Ireland Group Pension Scheme in respect of
changing their expectation of a full pension prior to reaching the
age of 65.
Total cash contributions by the group to
all post employment plans in the year ending 30 June 2021 are
estimated to be approximately £120 million.
DIAGEO CONDENSED CONSOLIDATED INCOME STATEMENT
|
|
Six months ended
31 December 2020
|
|
Six months ended
31 December 2019
|
|
Notes
|
£
million
|
|
£
million
|
|
|
|
|
|
Sales
|
2
|
10,436
|
|
10,831
|
Excise
duties
|
|
(3,562)
|
|
(3,631)
|
Net
sales
|
2
|
6,874
|
|
7,200
|
Cost of
sales
|
|
(2,661)
|
|
(2,702)
|
Gross
profit
|
|
4,213
|
|
4,498
|
Marketing
|
|
(1,085)
|
|
(1,116)
|
Other
operating items
|
|
(889)
|
|
(940)
|
Operating
profit
|
2
|
2,239
|
|
2,442
|
Non-operating
items
|
3
|
5
|
|
-
|
Finance
income
|
4
|
127
|
|
163
|
Finance
charges
|
4
|
(327)
|
|
(317)
|
Share
of after tax results of associates and joint ventures
|
|
154
|
|
176
|
Profit
before taxation
|
|
2,198
|
|
2,464
|
Taxation
|
5
|
(537)
|
|
(530)
|
Profit for the period
|
|
1,661
|
|
1,934
|
|
|
|
|
|
Attributable
to:
|
|
|
|
|
Equity
shareholders of the parent company
|
|
1,580
|
|
1,865
|
Non-controlling
interests
|
|
81
|
|
69
|
|
|
1,661
|
|
1,934
|
|
|
|
|
|
|
|
million
|
|
million
|
Weighted
average number of shares
|
|
|
|
|
Shares
in issue excluding own shares
|
|
2,336
|
|
2,356
|
Dilutive potential
ordinary shares
|
|
7
|
|
10
|
|
|
2,343
|
|
2,366
|
|
|
|
|
|
|
|
pence
|
|
pence
|
Basic
earnings per share
|
|
67.6
|
|
79.2
|
|
|
|
|
|
Diluted
earnings per share
|
|
67.4
|
|
78.8
|
|
|
|
|
|
DIAGEO CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE
INCOME
|
Six months ended
31 December 2020
|
|
Six months ended
31 December 2019
|
|
£ million
|
|
£
million
|
Other comprehensive income
|
|
|
|
Items that will not be recycled subsequently to the income
statement
|
|
|
|
Net
remeasurement of post employment plans
|
|
|
|
-
group
|
(128)
|
|
(101)
|
-
associates and joint ventures
|
(1)
|
|
(1)
|
Tax on
post employment plans
|
14
|
|
20
|
|
(115)
|
|
(82)
|
Items that may be recycled subsequently to the income
statement
|
|
|
|
Exchange
differences on translation of foreign operations
|
|
|
|
-
group
|
(887)
|
|
(585)
|
-
associates and joint ventures
|
(78)
|
|
(161)
|
-
non-controlling interests
|
(138)
|
|
(100)
|
Net
investment hedges
|
513
|
|
223
|
Tax
on exchange differences
|
(3)
|
|
(7)
|
Effective portion
of changes in fair value of cash flow hedges
|
|
|
|
-
hedge of foreign currency debt of the group
|
(280)
|
|
(60)
|
-
transaction exposure hedging of the group
|
138
|
|
63
|
-
commodity price risk hedging of the group
|
14
|
|
5
|
-
hedges by associates and joint ventures
|
13
|
|
3
|
-
recycled to income statement - hedge of foreign currency debt of
the group
|
150
|
|
50
|
-
recycled to income statement - transaction exposure hedging of the
group
|
(18)
|
|
12
|
-
recycled to income statement - commodity price risk hedging of the
group
|
5
|
|
-
|
Tax on
effective portion of changes in fair value of cash flow
hedges
|
(4)
|
|
5
|
Hyperinflation
adjustment
|
(16)
|
|
(15)
|
Tax on
hyperinflation adjustment
|
5
|
|
4
|
|
(586)
|
|
(563)
|
Other comprehensive loss, net of tax, for the period
|
(701)
|
|
(645)
|
Profit
for the period
|
1,661
|
|
1,934
|
Total comprehensive income for the period
|
960
|
|
1,289
|
|
|
|
|
Attributable to:
|
|
|
|
Equity
shareholders of the parent company
|
1,017
|
|
1,320
|
Non-controlling
interests
|
(57)
|
|
(31)
|
Total comprehensive income for the period
|
960
|
|
1,289
|
DIAGEO CONDENSED CONSOLIDATED BALANCE SHEET
|
|
31 December 2020
|
|
30 June 2020
|
|
31 December 2019
|
|||||||
|
Notes
|
£ million
|
|
£ million
|
|
£
million
|
|
£
million
|
|
£
million
|
|
£
million
|
|
Non-current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Intangible
assets
|
|
10,877
|
|
|
|
11,300
|
|
|
|
12,035
|
|
|
|
Property,
plant and equipment
|
|
4,757
|
|
|
|
4,926
|
|
|
|
4,834
|
|
|
|
Biological
assets
|
|
63
|
|
|
|
51
|
|
|
|
42
|
|
|
|
Investments
in associates and joint ventures
|
|
3,578
|
|
|
|
3,557
|
|
|
|
3,202
|
|
|
|
Other
investments
|
|
36
|
|
|
|
41
|
|
|
|
51
|
|
|
|
Other
receivables
|
|
41
|
|
|
|
46
|
|
|
|
48
|
|
|
|
Other
financial assets
|
|
410
|
|
|
|
686
|
|
|
|
338
|
|
|
|
Deferred
tax assets
|
|
114
|
|
|
|
119
|
|
|
|
71
|
|
|
|
Post
employment benefit assets
|
|
1,083
|
|
|
|
1,111
|
|
|
|
955
|
|
|
|
|
|
|
|
20,959
|
|
|
|
21,837
|
|
|
|
21,576
|
|
Current assets
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Inventories
|
6
|
5,750
|
|
|
|
5,772
|
|
|
|
5,459
|
|
|
|
Trade
and other receivables
|
|
3,075
|
|
|
|
2,111
|
|
|
|
3,587
|
|
|
|
Assets
held for sale
|
|
-
|
|
|
|
-
|
|
|
|
51
|
|
|
|
Corporate tax receivables
|
5
|
173
|
|
|
|
190
|
|
|
|
68
|
|
|
|
Other
financial assets
|
|
84
|
|
|
|
75
|
|
|
|
42
|
|
|
|
Cash
and cash equivalents
|
7
|
2,763
|
|
|
|
3,323
|
|
|
|
950
|
|
|
|
|
|
|
|
11,845
|
|
|
|
11,471
|
|
|
|
10,157
|
|
Total assets
|
|
|
|
32,804
|
|
|
|
33,308
|
|
|
|
31,733
|
|
Current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings
and bank overdrafts
|
7
|
(1,214)
|
|
|
|
(1,995)
|
|
|
|
(3,381)
|
|
|
|
Other
financial liabilities
|
|
(332)
|
|
|
|
(389)
|
|
|
|
(474)
|
|
|
|
Share buyback liability
|
|
-
|
|
|
|
-
|
|
|
|
(71)
|
|
|
|
Trade
and other payables
|
|
(4,624)
|
|
|
|
(3,683)
|
|
|
|
(4,474)
|
|
|
|
Liabilities
held for sale
|
|
-
|
|
|
|
-
|
|
|
|
(27)
|
|
|
|
Corporate tax payables
|
5
|
(364)
|
|
|
|
(246)
|
|
|
|
(336)
|
|
|
|
Provisions
|
|
(176)
|
|
|
|
(183)
|
|
|
|
(90)
|
|
|
|
|
|
|
|
(6,710)
|
|
|
|
(6,496)
|
|
|
|
(8,853)
|
|
Non-current liabilities
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Borrowings
|
7
|
(14,063)
|
|
|
|
(14,790)
|
|
|
|
(10,091)
|
|
|
|
Other
financial liabilities
|
|
(376)
|
|
|
|
(393)
|
|
|
|
(405)
|
|
|
|
Other
payables
|
|
(267)
|
|
|
|
(175)
|
|
|
|
(185)
|
|
|
|
Provisions
|
|
(295)
|
|
|
|
(293)
|
|
|
|
(320)
|
|
|
|
Deferred
tax liabilities
|
|
(1,900)
|
|
|
|
(1,972)
|
|
|
|
(1,896)
|
|
|
|
Post
employment benefit liabilities
|
|
(815)
|
|
|
|
(749)
|
|
|
|
(753)
|
|
|
|
|
|
|
|
(17,716)
|
|
|
|
(18,372)
|
|
|
|
(13,650)
|
|
Total liabilities
|
|
|
|
(24,426)
|
|
|
|
(24,868)
|
|
|
|
(22,503)
|
|
Net assets
|
|
|
|
8,378
|
|
|
|
8,440
|
|
|
|
9,230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Share
capital
|
|
742
|
|
|
|
742
|
|
|
|
743
|
|
|
|
Share
premium
|
|
1,351
|
|
|
|
1,351
|
|
|
|
1,351
|
|
|
|
Other
reserves
|
|
1,835
|
|
|
|
2,272
|
|
|
|
1,930
|
|
|
|
Retained
earnings
|
|
2,890
|
|
|
|
2,407
|
|
|
|
3,499
|
|
|
|
Equity attributable to equity shareholders of the parent
company
|
|
|
|
6,818
|
|
|
|
6,772
|
|
|
|
7,523
|
|
Non-controlling interests
|
|
|
|
1,560
|
|
|
|
1,668
|
|
|
|
1,707
|
|
Total equity
|
|
|
|
8,378
|
|
|
|
8,440
|
|
|
|
9,230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
DIAGEO CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN
EQUITY
|
|
|
|
|
|
|
Retained earnings/(deficit)
|
|
|
|
|
|
|
|||||
|
Sharecapital
|
|
Sharepremium
|
|
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 2019
|
753
|
|
1,350
|
|
2,372
|
|
(2,026)
|
|
5,912
|
|
3,886
|
|
8,361
|
|
1,795
|
|
10,156
|
|
Profit
for the period
|
-
|
|
-
|
|
-
|
|
-
|
|
1,865
|
|
1,865
|
|
1,865
|
|
69
|
|
1,934
|
|
Other comprehensive loss
|
-
|
|
-
|
|
(452)
|
|
-
|
|
(93)
|
|
(93)
|
|
(545)
|
|
(100)
|
|
(645)
|
|
Total comprehensive (loss)/income
|
-
|
|
-
|
|
(452)
|
|
-
|
|
1,772
|
|
1,772
|
|
1,320
|
|
(31)
|
|
1,289
|
|
Employee
share schemes
|
-
|
|
-
|
|
-
|
|
74
|
|
(35)
|
|
39
|
|
39
|
|
-
|
|
39
|
|
Share-based
incentive plans
|
-
|
|
-
|
|
-
|
|
-
|
|
23
|
|
23
|
|
23
|
|
-
|
|
23
|
|
Share-based
incentive plans in respect of associates
|
-
|
|
-
|
|
-
|
|
-
|
|
1
|
|
1
|
|
1
|
|
-
|
|
1
|
|
Shares
issued
|
-
|
|
1
|
|
-
|
|
-
|
|
-
|
|
-
|
|
1
|
|
-
|
|
1
|
|
Purchase
of non-controlling interests
|
-
|
|
-
|
|
-
|
|
-
|
|
(15)
|
|
(15)
|
|
(15)
|
|
(10)
|
|
(25)
|
|
Non-controlling interest in respect of new subsidiary
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
5
|
|
5
|
|
Change
in fair value of put option
|
-
|
|
-
|
|
-
|
|
-
|
|
(1)
|
|
(1)
|
|
(1)
|
|
-
|
|
(1)
|
|
Share
buyback programme
|
(10)
|
|
-
|
|
10
|
|
-
|
|
(1,200)
|
|
(1,200)
|
|
(1,200)
|
|
-
|
|
(1,200)
|
|
Dividends
paid
|
-
|
|
-
|
|
-
|
|
-
|
|
(1,006)
|
|
(1,006)
|
|
(1,006)
|
|
(52)
|
|
(1,058)
|
|
At 31 December 2019
|
743
|
|
1,351
|
|
1,930
|
|
(1,952)
|
|
5,451
|
|
3,499
|
|
7,523
|
|
1,707
|
|
9,230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At 30 June 2020
|
742
|
|
1,351
|
|
2,272
|
|
(1,936)
|
|
4,343
|
|
2,407
|
|
6,772
|
|
1,668
|
|
8,440
|
|
Profit
for the period
|
-
|
|
-
|
|
-
|
|
-
|
|
1,580
|
|
1,580
|
|
1,580
|
|
81
|
|
1,661
|
|
Other
comprehensive loss
|
-
|
|
-
|
|
(437)
|
|
-
|
|
(126)
|
|
(126)
|
|
(563)
|
|
(138)
|
|
(701)
|
|
Total comprehensive (loss)/income
|
-
|
|
-
|
|
(437)
|
|
-
|
|
1,454
|
|
1,454
|
|
1,017
|
|
(57)
|
|
960
|
|
Employee
share schemes
|
-
|
|
-
|
|
-
|
|
41
|
|
(20)
|
|
21
|
|
21
|
|
-
|
|
21
|
|
Share-based
incentive plans
|
-
|
|
-
|
|
-
|
|
-
|
|
17
|
|
17
|
|
17
|
|
-
|
|
17
|
|
Share-based
incentive plans in respect of associates
|
-
|
|
-
|
|
-
|
|
-
|
|
(1)
|
|
(1)
|
|
(1)
|
|
-
|
|
(1)
|
|
Purchase
of non-controlling interests
|
-
|
|
-
|
|
-
|
|
-
|
|
(15)
|
|
(15)
|
|
(15)
|
|
(27)
|
|
(42)
|
|
Change
in fair value of put option
|
-
|
|
-
|
|
-
|
|
-
|
|
(1)
|
|
(1)
|
|
(1)
|
|
-
|
|
(1)
|
|
Dividends
declared
|
-
|
|
-
|
|
-
|
|
-
|
|
(992)
|
|
(992)
|
|
(992)
|
|
(24)
|
|
(1,016)
|
|
At 31 December 2020
|
742
|
|
1,351
|
|
1,835
|
|
(1,895)
|
|
4,785
|
|
2,890
|
|
6,818
|
|
1,560
|
|
8,378
|
|
DIAGEO CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
|
Six months ended
31 December 2020
|
|
Six
months ended
31
December 2019
|
||||
|
£
million
|
|
£
million
|
|
£
million
|
|
£
million
|
Cash
flows from operating activities
|
|
|
|
|
|
|
|
Profit
for the period
|
1,661
|
|
|
|
1,934
|
|
|
Taxation
|
537
|
|
|
|
530
|
|
|
Share
of after tax results of associates and joint ventures
|
(154)
|
|
|
|
(176)
|
|
|
Net
finance charges
|
200
|
|
|
|
154
|
|
|
Non-operating
items
|
(5)
|
|
|
|
-
|
|
|
Operating
profit
|
|
|
2,239
|
|
|
|
2,442
|
Increase in
inventories
|
(112)
|
|
|
|
(85)
|
|
|
Increase
in trade and other receivables
|
(1,078)
|
|
|
|
(1,016)
|
|
|
Increase
in trade and other payables and provisions
|
1,161
|
|
|
|
423
|
|
|
Net
increase in working capital
|
|
|
(29)
|
|
|
|
(678)
|
Depreciation,
amortisation and impairment
|
219
|
|
|
|
286
|
|
|
Dividends
received
|
82
|
|
|
|
3
|
|
|
Post
employment payments less amounts included in operating
profit
|
(14)
|
|
|
|
(60)
|
|
|
Other
items
|
(1)
|
|
|
|
(5)
|
|
|
|
|
|
286
|
|
|
|
224
|
Cash
generated from operations
|
|
|
2,496
|
|
|
|
1,988
|
Interest
received
|
84
|
|
|
|
86
|
|
|
Interest
paid
|
(266)
|
|
|
|
(239)
|
|
|
Taxation
paid
|
(316)
|
|
|
|
(547)
|
|
|
|
|
|
(498)
|
|
|
|
(700)
|
Net
cash inflow from operating activities
|
|
|
1,998
|
|
|
|
1,288
|
Cash
flows from investing activities
|
|
|
|
|
|
|
|
Disposal of
property, plant and equipment and computer software
|
8
|
|
|
|
8
|
|
|
Purchase of
property, plant and equipment and computer software
|
(250)
|
|
|
|
(330)
|
|
|
Movements in loans
and other investments
|
(3)
|
|
|
|
-
|
|
|
Sale of
businesses and brands
|
5
|
|
|
|
-
|
|
|
Acquisition of
businesses
|
(364)
|
|
|
|
(106)
|
|
|
Net
cash outflow from investing activities
|
|
|
(604)
|
|
|
|
(428)
|
Cash
flows from financing activities
|
|
|
|
|
|
|
|
Share
buyback programme
|
-
|
|
|
|
(1,155)
|
|
|
Proceeds from issue
of share capital
|
-
|
|
|
|
1
|
|
|
Net
sale of own shares for share schemes
|
9
|
|
|
|
33
|
|
|
Dividends paid to
non-controlling interests
|
(53)
|
|
|
|
(76)
|
|
|
Proceeds from
bonds
|
1,031
|
|
|
|
1,289
|
|
|
Repayment of
bonds
|
(1,247)
|
|
|
|
-
|
|
|
Purchase
of shares of non-controlling interests
|
(34)
|
|
|
|
(25)
|
|
|
Net
movements in other borrowings
|
(345)
|
|
|
|
209
|
|
|
Equity
dividends paid
|
(992)
|
|
|
|
(1,006)
|
|
|
Net
cash outflow from financing activities
|
|
|
(1,631)
|
|
|
|
(730)
|
|
|
|
|
|
|
|
|
Net
(decrease)/increase in net cash and cash equivalents
|
|
|
(237)
|
|
|
|
130
|
Exchange
differences
|
|
|
(236)
|
|
|
|
(32)
|
Net
cash and cash equivalents at beginning of the period
|
|
|
3,153
|
|
|
|
721
|
Net
cash and cash equivalents at end of the period
|
|
|
2,680
|
|
|
|
819
|
|
|
|
|
|
|
|
|
Net
cash and cash equivalents consist of:
|
|
|
|
|
|
|
|
Cash
and cash equivalents
|
|
|
2,763
|
|
|
|
950
|
Bank
overdrafts
|
|
|
(83)
|
|
|
|
(131)
|
|
|
|
2,680
|
|
|
|
819
|
NOTES
1. Basis of preparation
These unaudited condensed set of financial statements have been
prepared in accordance with IAS 34 Interim Financial Reporting as
issued by the International Accounting Standards Board (IASB) and
as adopted by the European Union (EU). International Financial
Reporting Standards (IFRS) as adopted by the EU differs in certain
respects from IFRS as issued by the IASB. The differences have no
impact on the group's condensed consolidated financial statements
for the periods presented.
The annual financial statements of the group are
prepared in accordance with IFRSs as issued by the IASB and as
adopted by the EU. As required by the Disclosure and Transparency
Rules of the Financial Conduct Authority, the condensed set of
financial statements have been prepared applying the accounting
policies and presentation that were applied in the preparation of
the company's published consolidated financial statements for the
year ended 30 June
2020 except for changes on
the adoption of new accounting standards and amendments explained
below. IFRS is subject to ongoing review and endorsement by the EU
or possible amendment by interpretative guidance and the issuance
of new standards by the IASB. In preparing these condensed interim
financial statements, the significant judgements made by management
when applying the group's accounting policies and the significant
areas where estimates were required were the same as those that
applied to the consolidated financial statements for the year
ended 30 June 2020, with the
exception of changes in estimates disclosed in
note 12 - Contingent
liabilities and legal
proceedings.
The
potential financial impact of the Covid-19 pandemic has been
modelled in our cash flow projections and stress tested by
including several severe but plausible downside scenarios which are
linked to our principal risks. In our downside Covid-19 scenario,
we have considered the key impacts of the pandemic for each region
including the potential restrictions on the sale of our products in
both on-trade and off-trade channels. We have then considered the
expected duration of those restrictions, as well as a forecast for
the length of time to recovery (a return to 2019 volumes), based on
industry projections. As a result of these factors, in our severe
but plausible scenarios, we do not anticipate that the on-trade
business recovers to volumes experienced in the year ending 30 June
2019 within the next 18-month period. Even with these negative
sensitivities for each region taken into account, the group's cash
position is still considered to remain strong, as we have protected
our liquidity by launching and pricing €700 million of
fixed rate Euro and £400 million of fixed rate Sterling
denominated bonds under Diageo's European Debt Issuance Programme.
Mitigating actions, should they be required, are all within
management's control and could include reduced advertising and
promotion spend, dividend cash payments, non-essential overheads
and non-committed capital expenditure in the next 12 months. Having
considered the outcome of these assessments, it is deemed
appropriate to prepare the condensed consolidated financial
statements on a going concern basis.
Weighted average exchange rates used in the translation of income
statements were US dollar - £1 = $1.31 (2019 - £1 =
$1.26) and euro - £1 = €1.11 (2019 - £1 =
€1.14). Exchange rates used to translate assets and
liabilities at the balance sheet date were US dollar - £1 =
$1.36 (31 December 2019 - £1 = $1.32; 30 June 2020 - £1 =
$1.23) and euro - £1 = €1.11 (31 December 2019 - £1
= €1.18; 30 June 2020 - £1 = €1.09). 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 or International Financial Reporting Interpretations Committee
(IFRIC) and endorsed by the EU, have been adopted by the group from
1 July 2020 with no impact on the group's consolidated
results, financial position or disclosures:
● Amendments
to References to the Conceptual Framework in
IFRS
● Amendments
to IFRS 3 - Definition of a Business
● Amendments
to IAS 1 and IAS 8 - Definition of Material
● Amendments
to IFRS 16 - Covid-19 - Related Rent
Concessions
The following amendment issued by the IASB and endorsed by the EU,
has been adopted by the group:
Amendments to IFRS 9, IAS 39 and IFRS 7 - Interest rate benchmark
reform (phase 1). The amendment provides temporary relief from
applying specific hedge accounting requirements to hedging
relationships directly affected by interbank offered rate (IBOR)
reform. The reliefs have the effect that IBOR reform should not
generally cause hedge accounting to terminate.
The following standard and amendment, issued by the IASB has not
been endorsed by the EU and has not been adopted by the
group:
IFRS 17 - Insurance contracts (effective in the year ending 30 June
2023) 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 IFRS 9, IAS 39 and IFRS 7 - Interest rate benchmark
reform (phase 2). The amendment to IFRS 9 provides relief from applying specific hedge
accounting and financial instrument derecognition requirements
directly affected by interbank offered rate (IBOR) reform. By
applying the practical expedient, Diageo will not be required to
discontinue its hedging relationships as a result of changes in
reference rates due to the IBOR reform. The amendment to IFRS 7
will require additional disclosure explaining the nature and extent
of risk related to the reform and the progress of the
transition.
There are a number of other amendments and clarifications to IFRS,
effective in future years, which are not expected to significantly
impact the group's consolidated results or financial
position.
The comparative figures for the financial year ended 30 June 2020
are not the company's statutory accounts for that financial year.
Those 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.
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 the production sites in the
United Kingdom, Ireland, Italy, Guatemala and Mexico, as well as
comprises the global procurement management
functions.
Continuing
operations also include the Corporate function. Corporate revenues
and 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.
They also include rents receivable and payable in respect of
properties not used by the group in the manufacture, sale or
distribution of premium drinks.
Diageo
uses shared services operations to deliver transaction processing
activities for markets and operational entities. These centers are
located in Hungary, Colombia, the Philippines and India. The
captive business service centers in Budapest and Bangalore 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.
As
part of the annual planning process a budget exchange rate is set
each year equal to the prior year's weighted average rate. This
rate is used for management reporting purposes and, in order to
ensure a consistent basis on which performance is measured through
the year, the prior period results are restated to the budget rate
as well. Segmental information for net sales and operating profit
before exceptionals are reported on a consistent basis with our
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
separately the result of acquisitions and disposals completed in
the current and prior year 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
Six months ended
|
North America
|
Europe
and
Turkey
|
Africa
|
Latin America
and
Caribbean
|
Asia Pacific
|
SC&P
|
Eliminate
inter-segment sales
|
Total operating segments
|
Corporate
and
other
|
Total
|
|
31 December 2020
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
|
Sales
|
3,022
|
2,727
|
1,064
|
775
|
2,837
|
|
785
|
(785)
|
10,425
|
11
|
10,436
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
|
At
budgeted exchange rates(i)
|
2,790
|
1,442
|
790
|
641
|
1,418
|
|
824
|
(786)
|
7,119
|
11
|
7,130
|
Acquisitions
and disposals
|
7
|
-
|
5
|
-
|
-
|
|
-
|
-
|
12
|
-
|
12
|
SC&P allocation
|
5
|
21
|
2
|
6
|
4
|
|
(38)
|
-
|
-
|
-
|
-
|
Retranslation
to actual exchange rates
|
(101)
|
(20)
|
(52)
|
(68)
|
(27)
|
|
(1)
|
1
|
(268)
|
-
|
(268)
|
Net sales
|
2,701
|
1,443
|
745
|
579
|
1,395
|
|
785
|
(785)
|
6,863
|
11
|
6,874
|
Operating profit/(loss)
|
|
|
|
|
|
|
|
|
|
|
|
At
budgeted exchange rates(i)
|
1,325
|
461
|
124
|
246
|
391
|
|
(23)
|
-
|
2,524
|
(98)
|
2,426
|
Acquisitions
and disposals
|
(9)
|
-
|
-
|
-
|
-
|
|
-
|
-
|
(9)
|
-
|
(9)
|
SC&P allocation
|
(13)
|
-
|
-
|
(10)
|
-
|
|
23
|
-
|
-
|
-
|
-
|
Fair
value remeasurement of contingent consideration
|
(4)
|
(7)
|
-
|
-
|
-
|
|
-
|
-
|
(11)
|
-
|
(11)
|
Fair
value remeasurement of biological assets
|
-
|
-
|
-
|
3
|
-
|
|
-
|
-
|
3
|
-
|
3
|
Retranslation
to actual exchange rates
|
(73)
|
(8)
|
(29)
|
(42)
|
(5)
|
|
-
|
-
|
(157)
|
4
|
(153)
|
Operating profit/(loss) before exceptional items
|
1,226
|
446
|
95
|
197
|
386
|
|
-
|
-
|
2,350
|
(94)
|
2,256
|
Exceptional
items
|
-
|
(17)
|
-
|
-
|
-
|
|
-
|
-
|
(17)
|
-
|
(17)
|
Operating profit/(loss)
|
1,226
|
429
|
95
|
197
|
386
|
|
-
|
-
|
2,333
|
(94)
|
2,239
|
Non-operating
items
|
|
|
|
|
|
|
|
|
|
5
|
|
Net
finance charges
|
|
|
|
|
|
|
|
|
|
(200)
|
|
Share
of after tax results of associates and joint ventures
|
|
|
|
|
|
|
|
|
|
154
|
|
Profit before taxation
|
|
|
|
|
|
|
|
|
|
2,198
|
Six months ended
|
North America
|
Europe
and
Turkey
|
Africa
|
Latin America
and
Caribbean
|
Asia Pacific
|
SC&P
|
Eliminate
inter-segment
sales
|
Total
operating
segments
|
Corporate
and
other
|
Total
|
31 December 2019
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
£ million
|
Sales
|
2,830
|
2,971
|
1,212
|
893
|
2,898
|
811
|
(811)
|
10,804
|
27
|
10,831
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
At
budgeted exchange rates(i)
|
2,395
|
1,617
|
825
|
679
|
1,455
|
874
|
(811)
|
7,034
|
27
|
7,061
|
Acquisitions
and disposals
|
25
|
5
|
17
|
-
|
1
|
-
|
-
|
48
|
-
|
48
|
SC&P allocation
|
8
|
37
|
3
|
8
|
7
|
(63)
|
-
|
-
|
-
|
-
|
Retranslation
to actual exchange rates
|
74
|
7
|
3
|
(7)
|
14
|
-
|
-
|
91
|
-
|
91
|
Net sales
|
2,502
|
1,666
|
848
|
680
|
1,477
|
811
|
(811)
|
7,173
|
27
|
7,200
|
Operating profit/(loss)
|
|
|
|
|
|
|
|
|
|
|
At
budgeted exchange rates(i)
|
1,098
|
573
|
164
|
250
|
424
|
73
|
-
|
2,582
|
(84)
|
2,498
|
Acquisitions
and disposals
|
1
|
(2)
|
-
|
-
|
-
|
-
|
-
|
(1)
|
-
|
(1)
|
SC&P allocation
|
11
|
37
|
3
|
12
|
10
|
(73)
|
-
|
-
|
-
|
-
|
Fair value remeasurement of contingent consideration
|
(4)
|
-
|
-
|
-
|
-
|
-
|
-
|
(4)
|
-
|
(4)
|
Fair value remeasurement of biological assets
|
-
|
-
|
-
|
4
|
-
|
-
|
-
|
4
|
-
|
4
|
Retranslation
to actual exchange rates
|
14
|
7
|
(8)
|
(9)
|
(2)
|
-
|
-
|
2
|
2
|
4
|
Operating profit/(loss) before exceptional items
|
1,120
|
615
|
159
|
257
|
432
|
-
|
-
|
2,583
|
(82)
|
2,501
|
Exceptional
items
|
-
|
-
|
-
|
-
|
(59)
|
-
|
-
|
(59)
|
-
|
(59)
|
Operating profit/(loss)
|
1,120
|
615
|
159
|
257
|
373
|
-
|
-
|
2,524
|
(82)
|
2,442
|
Non-operating
items
|
|
|
|
|
|
|
|
|
|
-
|
Net
finance charges
|
|
|
|
|
|
|
|
|
|
(154)
|
Share
of after tax results of associates and joint ventures
|
|
|
|
|
|
|
|
|
|
176
|
Profit before taxation
|
|
|
|
|
|
|
|
|
|
2,464
|
(1)
The net sales figures for SC&P reported to the Executive
Committee primarily comprise inter-segmental sales and these are
eliminated in a separate column in the above segmental analysis.
Apart from sales by the SC&P segment to the other operating
segments, inter-segmental sales are not material.
(2) The group's net finance charges are
managed centrally and are not attributable to individual operating
segments.
(3)
Approximately 43% of calendar year net sales occurred in the last
four months of 2020.
(b) Category and geographical analysis
|
Category
analysis
|
Geographic
analysis
|
||||||||
Six months ended
|
Spirits
£ million
|
Beer
£ million
|
Ready to drink
£ million
|
Other
£ million
|
Total
£ million
|
Great Britain
£ million
|
United States
£ million
|
India
£ million
|
Rest of World
£ million
|
Total
£ million
|
31 December 2020
|
|
|
|
|
|
|
|
|
|
|
Sales(i)
|
8,648
|
1,310
|
363
|
115
|
10,436
|
1,044
|
2,817
|
1,650
|
4,925
|
10,436
|
Six months ended
|
|
|
|
|
|
|
|
|
|
|
31 December 2019
|
|
|
|
|
|
|
|
|
|
|
Sales(i)
|
8,739
|
1,585
|
356
|
151
|
10,831
|
989
|
2,644
|
1,698
|
5,500
|
10,831
|
|
|
|
|
|
|
|
|
|
|
|
(i)
The geographical analysis of sales is based on the location of
third party customers.
3. Exceptional items
Exceptional items are those that in management's judgement need to
be disclosed separately. See Explanatory Notes, (c) Exceptional
items for the definition of exceptional items and the criteria used
to determine whether an exceptional item is accounted for as
operating or non-operating.
|
Six months ended
31 December 2020
|
|
Six months ended
31 December 2019
|
|
£ million
|
|
£ million
|
|
|
|
|
Exceptional operating items
|
|
|
|
Ongoing litigation in Turkey
|
(15)
|
|
-
|
Guaranteed minimum pension equalisation
|
(5)
|
|
-
|
Reversal of provision for obsolete inventories
|
3
|
|
-
|
Impairment of Old Tavern brand
|
-
|
|
(59)
|
|
(17)
|
|
(59)
|
Non-operating items
|
|
|
|
Step acquisitions
|
-
|
|
8
|
Sale of businesses and brands
|
|
|
|
United
National Breweries
|
5
|
|
(7)
|
Loss
on disposal of associate
|
-
|
|
(1)
|
|
5
|
|
-
|
|
|
|
|
Exceptional items before taxation
|
(12)
|
|
(59)
|
|
|
|
|
Items included in taxation
|
|
|
|
Tax on
exceptional operating items
|
-
|
|
14
|
Exceptional
taxation
|
(42)
|
|
-
|
|
(42)
|
|
14
|
|
|
|
|
Total exceptional items
|
(54)
|
|
(45)
|
|
|
|
|
Attributable to:
|
|
|
|
Equity
shareholders of the parent company
|
(54)
|
|
(25)
|
Non-controlling
interests
|
-
|
|
(20)
|
Total exceptional items
|
(54)
|
|
(45)
|
Operating exceptional items are charged to other operating
expenses.
See Summary Income Statement, (c) Exceptional Items for detailed
explanation on exceptional items.
4. Finance income and charges
|
Six months ended
31 December 2020
|
|
Six months ended
31 December 2019
|
|
£
million
|
|
£
million
|
|
|
|
|
Interest
income
|
58
|
|
122
|
Fair
value gain on financial instruments
|
56
|
|
24
|
Total
interest income
|
114
|
|
146
|
Interest charge on
bank loans, bonds and overdrafts
|
(203)
|
|
(182)
|
Interest
charge on leases
|
(7)
|
|
(7)
|
Fair
value loss on financial instruments
|
(55)
|
|
(23)
|
Interest
charge on all other borrowings
|
(35)
|
|
(82)
|
Total
interest charges
|
(300)
|
|
(294)
|
Net
interest charges
|
(186)
|
|
(148)
|
|
|
|
|
Net
finance income in respect of post employment plans in
surplus
|
9
|
|
13
|
Hyperinflation
adjustment in respect of Venezuela (a)
|
2
|
|
3
|
Change
in financial liability (Level 3)
|
2
|
|
-
|
Other
finance income
|
-
|
|
1
|
Total
other finance income
|
13
|
|
17
|
Hyperinflation
adjustment and foreign exchange revaluation of monetary items in
respect of Lebanon (a)
|
(8)
|
|
-
|
Net
finance charge in respect of post employment plans in
deficit
|
(7)
|
|
(9)
|
Unwinding of
discounts
|
(8)
|
|
(7)
|
Interest
charge in respect of direct and indirect tax
|
(2)
|
|
(5)
|
Change
in financial liability (Level 3)
|
-
|
|
(1)
|
Other
finance charges
|
(2)
|
|
(1)
|
Total
other finance charges
|
(27)
|
|
(23)
|
Net
other finance charges
|
(14)
|
|
(6)
|
|
|
|
|
(a) Hyperinflation adjustment
Venezuela is a hyperinflationary economy where the government
maintains a regime of strict currency controls with multiple
foreign currency rate systems. Access to US dollars on these
exchange systems is very limited. The foreign currency denominated
transactions and balances of the group's Venezuelan operations are
translated into the local functional currency (Venezuelan bolivar)
at the rate they are expected to be settled, applying the most
appropriate official exchange rate (DICOM). For consolidation
purposes, the group converts its Venezuelan operations using
management's estimate of the exchange rate considering forecast
inflation and the most appropriate official exchange rate. The
exchange rate used to translate the results of the group's
Venezuelan operations was VES/£ 64,166,658 for the six months
ended 31 December 2020 (2019 - VES/£ 2,525,956). Movement in
the price index for the six months ended 31 December 2020 was 479%
(2019 - 502%). The inflation rate used by the group is provided by
an independent valuer, because no reliable, official published rate
is available that is representative of the situation in
Venezuela.
The
following table presents the contribution of the group's Venezuelan
operations to the consolidated income statement, cash flow
statement and net assets for the six months ended 31 December 2020
and 31 December 2019 and with the amounts that would have resulted
if the official DICOM exchange rate had been
applied:
|
Six months ended 31 December 2020
|
|
Six months ended 31 December 2019
|
||
|
At
estimated
exchange
rate
|
At
DICOM
exchange
rate
|
|
At
estimated
exchange
rate
|
At
DICOM
exchange
rate
|
|
64,166,658
VES/£
|
1,504,240
VES/£
|
|
2,525,956
VES/£
|
61,213
VES/£
|
|
£
million
|
£
million
|
|
£ million
|
£ million
|
Net
sales
|
-
|
4
|
|
-
|
4
|
Operating
profit
|
-
|
11
|
|
-
|
11
|
Other
finance income - hyperinflation adjustment
|
2
|
100
|
|
3
|
132
|
Net
cash inflow from operating activities
|
-
|
9
|
|
-
|
7
|
Net
assets
|
39
|
1,656
|
|
48
|
2,000
|
|
|
|
|
|
|
Lebanon became a hyperinflationary economy during the six months
ended 31 December 2020. Hyperinflationary accounting has been
applied for the group's Lebanese operations from 1 July 2020, with
hyperinflation gain and foreign exchange losses associated with
monetary items being reported in finance charges. The impact of
applying hyperinflationary accounting was immaterial.
5. Taxation
For the six months ended 31 December 2020,
the £537 million
taxation charge (2019
- £530
million) comprises a UK
tax charge of £89
million (2019 - £133
million) and a foreign tax charge of £448 million
(2019 - £397
million).
For the six months ended 31 December 2020, income tax expense is
recognised based on management's best estimate of the weighted
average annual income tax rate expected for the full financial year
applied to the pre-tax income of the interim period in line with
the relevant accounting standard.
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 audit. For
the six months ended 31 December 2020 the ongoing audits that
are provided for individually are not expected to result in a
material tax liability. The current tax asset of £173 million
(30 June 2020 - £190 million) and tax liability of £364
million (30 June 2020 - £246 million) includes £154
million (30 June 2020 - £189 million) of provisions for tax
uncertainties.
The tax rate before exceptional items for the six
months ended 31 December 2020 was
22.4% compared with 21.6%
for the six months ended 31 December 2019.
6. Inventories
|
31 December 2020
|
|
30 June 2020
|
|
31 December 2019
|
|
£
million
|
|
£ million
|
|
£
million
|
|
|
|
|
|
|
Raw
materials and consumables
|
332
|
|
363
|
|
322
|
Work in
progress
|
53
|
|
48
|
|
59
|
Maturing
inventories
|
4,562
|
|
4,562
|
|
4,358
|
Finished goods and
goods for resale
|
803
|
|
799
|
|
720
|
|
5,750
|
|
5,772
|
|
5,459
|
7. Net borrowings
|
31 December 2020
|
|
30 June 2020
|
|
31 December 2019
|
|
£ million
|
|
£
million
|
|
£
million
|
|
|
|
|
|
|
Borrowings
due within one year and bank overdrafts
|
(1,214)
|
|
(1,995)
|
|
(3,381)
|
Borrowings
due after one year
|
(14,063)
|
|
(14,790)
|
|
(10,091)
|
Fair
value of foreign currency forwards and swaps
|
117
|
|
497
|
|
39
|
Fair
value of interest rate hedging instruments
|
146
|
|
189
|
|
89
|
Lease liabilities
|
(410)
|
|
(470)
|
|
(486)
|
|
(15,424)
|
|
(16,569)
|
|
(13,830)
|
Cash
and cash equivalents
|
2,763
|
|
3,323
|
|
950
|
|
(12,661)
|
|
(13,246)
|
|
(12,880)
|
8. Reconciliation of movement in net borrowings
|
Six months ended
31 December 2020
|
|
Six months ended
31 December 2019
|
|
£ million
|
|
£
million
|
|
|
|
|
Net
(decrease)/increase in cash and cash equivalents before
exchange
|
(237)
|
|
130
|
Net
decrease/(increase) in bonds and other borrowings(i)
|
561
|
|
(1,503)
|
Net decrease/(increase) in net borrowings from cash
flows
|
324
|
|
(1,373)
|
Exchange
differences on net borrowings
|
420
|
|
209
|
Other
non-cash items(ii)
|
(159)
|
|
(188)
|
Adoption of IFRS 16
|
-
|
|
(251)
|
Net
borrowings at beginning of the period
|
(13,246)
|
|
(11,277)
|
Net borrowings at end of the period
|
(12,661)
|
|
(12,880)
|
(i)
In the six months ended 31 December 2020, net decrease in bonds and
other borrowings excludes £nil cash outflow in respect of
derivatives designated in forward point hedges (2019 - £5
million).
(ii)
In the six months ended 31 December 2020, other non-cash items are
principally in respect of fair value changes of cross currency
interest rate swaps. In the six months ended 31 December 2019,
other non-cash items are principally in respect of leases of
£169 million entered into in the period.
In the six months ended 31 December 2020, the group issued bonds of
€700 million (£636 million) and £395 million
(including £5 million discount and fee) and repaid bonds
of $696 million (£551 million) and
€775 million (£696 million). In the six months
ended 31 December 2019, the group issued bonds of $1,600 million
(£1,289 million).
All
bonds and commercial papers issued by Diageo plc's 100% 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 Creations & Products
Inc, the owner of the Zacapa rum brand, to Diageo. The liability is
fair valued and as at 31 December 2020 an amount of £148
million (30 June 2020 - £167 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 31 December 2020 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 current
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 2022, the fair value of
the liability would decrease by approximately
£12 million.
Included
in other financial liabilities, the contingent consideration on
acquisition of businesses represents the present value of payments
up to £380 million linked to certain performance targets which
are expected to be paid over the next 10 years.
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 six months ended 31
December 2020.
The
group's financial assets and liabilities measured at fair value are
categorised as follows:
|
31 December 2020
|
|
30 June 2020
|
|
31 December 2019
|
|
£
million
|
|
£
million
|
|
£
million
|
Derivative
assets
|
489
|
|
758
|
|
379
|
Derivative
liabilities
|
(150)
|
|
(145)
|
|
(228)
|
Valuation
techniques based on observable market input (Level 2)
|
339
|
|
613
|
|
151
|
Financial
assets - other
|
122
|
|
116
|
|
96
|
Financial
liabilities - other
|
(481)
|
|
(416)
|
|
(386)
|
Valuation
techniques based on unobservable market input (Level
3)
|
(359)
|
|
(300)
|
|
(290)
|
In the six months ended 31 December 2020, the increase in financial
assets - other of £6 million is principally due to additions.
In the six months ended 31 December 2019, the increase in financial
assets - other of £10 million was mainly due to
additions.
The movements in level 3 instruments, measured on a recurring
basis, are as follows:
|
Zacapa financial liability
|
|
Contingent consideration
recognised on acquisition of
businesses(i)
|
|
Zacapa
financial liability
|
|
Contingent
consideration recognised on acquisition of businesses
|
|
Six
months ended
31
December 2020
|
|
Six
months ended
31
December 2020
|
|
Six
months ended
31
December 2019
|
|
Six
months ended
31
December 2019
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
At the
beginning of the period
|
(167)
|
|
(249)
|
|
(174)
|
|
(227)
|
Net
gains/(losses) included in the income statement
|
2
|
|
(17)
|
|
(1)
|
|
(9)
|
Net
gains included in exchange in other comprehensive
income
|
15
|
|
27
|
|
6
|
|
8
|
Net
gains/(losses) included in retained earnings
|
1
|
|
-
|
|
(1)
|
|
-
|
Additions
|
-
|
|
(181)
|
|
-
|
|
(42)
|
Settlement
of liabilities
|
1
|
|
87
|
|
5
|
|
49
|
At the end of the period
|
(148)
|
|
(333)
|
|
(165)
|
|
(221)
|
|
|
|
|
|
|
|
|
There were no transfers between levels during the first half of the
year ending 30 June 2021 and the year ended 30 June
2020.
The
carrying amount of the group's financial assets and liabilities are
generally the same as their fair value apart from borrowings. At 31
December 2020 the fair value of gross borrowings (excluding lease
liabilities and the fair value of derivative instruments) was
£16,751 million and the carrying value was £15,277
million (30 June 2020 - £18,175 million and £16,785
million, respectively).
10. Dividends and other reserves
|
Six
months ended
31
December 2020
|
|
Six
months ended
31
December 2019
|
|
£ million
|
|
£
million
|
Amounts recognised as distributions to equity
shareholders
|
|
|
|
Final
dividend for the year ended 30 June 2020 of
42.47 pence per share (2019 - 42.47 pence)
|
992
|
|
1,006
|
|
|
|
|
An interim dividend of 27.96 pence per share (2019 - 27.41 pence)
was approved by the Board of Directors on 27 January 2021. As
the approval was after the balance sheet date, it has not been
included as a liability.
Other
reserves of £1,835 million at 31 December 2020 (2019 -
£1,930 million) include a capital redemption reserve of
£3,201 million (2019 - £3,200 million), a hedging reserve
of £111 million surplus (2019 - £41 million surplus) and
an exchange reserve of £1,477 million deficit (2019 -
£1,311 million deficit). £30 million surplus (2019 -
£2 million surplus) out of the hedging reserve represents the
cost of hedging arising as a result of imperfections of foreign
exchange markets in the form of foreign currency basis
spreads.
11. Acquisition of businesses and purchase of non-controlling
interests
(i) Acquisition of businesses
On 30 September 2020, Diageo completed the acquisition of Aviation
Gin and Davos Brands to support Diageo's participation in the super
premium gin segment in the United States, for a total consideration
of $337 million (£263 million) upfront in cash and
contingent consideration of up to $275 million
(£214 million) payable over a ten-year period linked to
performance targets.
Provisional
fair value of assets and liabilities acquired and cash
consideration paid in respect of acquisition of businesses in the
six months ended 31 December 2020 were as follows:
|
£ million
|
|
|
Brands
|
206
|
Property, plant and equipment
|
11
|
Inventories
|
7
|
Borrowings
|
(6)
|
Cash
|
2
|
Fair value of assets and liabilities
|
220
|
Goodwill arising on acquisition
|
224
|
Consideration payable
|
444
|
Satisfied by:
|
|
Cash
consideration paid
|
(263)
|
Contingent
consideration payable
|
(181)
|
|
(444)
|
|
|
Cash consideration paid for subsidiaries
|
(263)
|
Cash consideration paid for Casamigos
|
(87)
|
Cash consideration paid in respect of other prior year
acquisitions
|
(1)
|
Cash consideration paid for investments in associates
|
(2)
|
Capital injection in associates
|
(13)
|
Cash acquired
|
2
|
Net cash outflow on acquisition of business
|
(364)
|
Purchase of shares of non-controlling interests
|
(34)
|
Total net cash outflow
|
(398)
|
It is expected that the goodwill and brand will be deductible for
tax purposes. The goodwill arising on the acquisition of Aviation
Gin and Davos Brands represents expected revenue and cost synergies
and acquired workforce. Aviation Gin and Davos Brands contributed
$9 million (£7 million) to net sales and $12 million
(£9 million) loss to the period, out of which $9 million
(£7 million) is related to acquisition transaction cost in the
six months ended 31 December 2020.
(ii) Purchase of shares of non-controlling interests
On 21 October 2020 and on
6 November 2020, EABL completed
the acquisition of 13.3% and 16.7%, respectively of shares in
Serengeti Breweries Limited for a
total consideration of $55 million (£42 million) in cash and
£16 million in the form of shareholder loans outstanding
to EABL and Diageo Holdings Netherlands B.V. at the date of
completion, increasing Diageo's effective economic interest from
40.2% to 47.0%. At 31 December 2020, $12 million (£8 million)
of the consideration was payable. Both transactions are recognised within
retained earnings.
12. Contingent liabilities and legal proceedings
(a) Guarantees and related matters
As of 31 December 2020, the group has no material unprovided
guarantees or indemnities in respect of liabilities of third
parties.
(b) Acquisition of USL shares from UBHL,
winding-up petitions against UBHL and other 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 21,767,749 shares (14.98%)
in United Spirits Limited (USL) for a total consideration of INR
31.3 billion (£314 million), including 10,141,437 shares
(6.98%) from UBHL. The SPA was signed on 9 November 2012 and was
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 31 December 2020, Diageo has a 55.94%
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 sections 536
and 537 of 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 five winding-up
petitions that were pending against UBHL on 9 November 2012, being
the date of the SPA. Additional winding-up petitions have been
brought against UBHL since 9 November 2012, and the Leave Order did
not extend to them. 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 on 4 July 2013,
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 10,141,437 USL shares from UBHL at that
time.
Following
closing of the UBHL Share Sale, appeals were filed by various
petitioners in respect of the Leave Order. On 20 December 2013, the
division bench of the High Court set aside the Leave Order (the
December 2013 Order). Following the December 2013 Order, Diageo
filed special leave petitions (SLPs) in the Supreme Court of India
against the December 2013 Order.
On
10 February 2014, the Supreme Court of India issued an order giving
notice in respect of the SLPs and ordering that the status quo be
maintained with regard to the UBHL Share Sale pending a hearing on
the matter in the Supreme Court. Following a number of
adjournments, the next date for a substantive hearing of the SLPs
(in respect of which leave has since been granted and which have
been converted to civil appeals) is yet to be
fixed.
In
separate proceedings, the High Court passed a winding-up order
against UBHL on 7 February 2017. On 4 March 2017, UBHL appealed
against this order before a division bench of the High Court. On 6
March 2020, the division bench of the High Court confirmed the
winding up order dated 7 February 2017, and dismissed the appeal
filed by UBHL. On 30 June 2020, UBHL filed a special leave petition
in the Supreme Court of India against the order of the division
bench of the High Court. On 26 October 2020, the Supreme Court of
India dismissed the petition filed by
UBHL.
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 acquired from UBHL (now represented by 50,707,185 USL shares
following a share split). 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 be
able to consolidate USL as a subsidiary 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 timeframe within which
they would be concluded.
Diageo
also has the benefit of certain contractual undertakings and
commitments from the relevant sellers in relation to potential
challenges to its unencumbered title to the USL shares acquired on
4 July 2013, including relating to the winding-up petitions
described above and/or certain losses and costs that may be
incurred in the event of third party actions relating to the
acquisition of the USL shares.
(c) Continuing matters relating to the resignation of Dr Vijay
Mallya from USL and USL internal inquiries
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. As specified by
Diageo in its announcement at that time, these arrangements ended
its prior agreement with Dr Mallya regarding his position at USL,
therefore bringing to an end the uncertainty relating to the
governance of USL, and put in place a five-year global non-compete
(excluding the United Kingdom), non-interference, non-solicitation
and standstill arrangement with Dr Mallya. As part of those
arrangements, USL, Diageo and Dr Mallya agreed a mutual release in
relation to matters arising out of an inquiry into certain matters
referred to in USL's financial statements and the qualified
auditor's report for the year ended 31 March 2014 (the Initial
Inquiry) which had revealed, among other things, certain diversions
of USL funds. Dr Mallya also agreed not to pursue any claims
against Diageo, USL and their affiliates (including under the prior
agreement with Diageo). In evaluating entering into such
arrangements, Diageo considered the impact of the arrangements on
USL and all of USL's shareholders, and came to the view that the
arrangements were in the best interests of USL and its
shareholders.
Diageo's
agreement with Dr Mallya (the February 2016 Agreement) provided for
a payment of $75 million (£55 million) to Dr Mallya over a
five-year period in consideration for the five-year global
non-compete, non-interference, non-solicitation and standstill
commitments referred to above, his resignation from USL and the
termination of his USL-related appointment and governance rights,
the relinquishing of rights and benefits attached to his position
at USL, and his agreement not to pursue claims against Diageo and
USL. The February 2016 Agreement also provided for the release of
Dr Mallya's personal obligations to indemnify (i) Diageo Holdings
Netherlands B.V. (DHN) in respect of its earlier liability ($141
million (£104 million)) under a backstop guarantee of certain
borrowings of Watson Limited (Watson) (a company affiliated with Dr
Mallya), and (ii) Diageo Finance plc in respect of its earlier
liability (£30 million) under a guarantee of certain
borrowings of United Breweries Overseas Limited, a subsidiary of
UBHL. $40 million (£29 million) of the $75 million (£55
million) amount was paid on signing of the February 2016 Agreement
with the balance being payable in equal instalments of $7 million
(£5 million) a year over five years, subject to and
conditional on Dr Mallya's compliance with certain terms of the
agreement.
While
the first four instalments of $7 million (£5 million) each
would have become due on 25 February 2017, 25 February 2018, 25
February 2019 and 25 February 2020, respectively, owing to various
reasons (including breaches committed by Dr Mallya and certain
persons connected with him of several provisions of the February
2016 Agreement and agreements of the same date between Dr Mallya
and USL), Diageo believes that it was not liable to pay such
amounts and did not do so. Diageo further believes that it is very
unlikely to become liable to pay the fifth instalment to Dr Mallya.
By notice to Dr Mallya and certain persons connected with him on 24
February 2017, 3 November 2017, 23 February 2018, 22 August 2018,
22 February 2019 and 24 February 2020, Diageo and other group
companies have demanded from Dr Mallya the repayment of $40 million
(£29 million) which was paid by Diageo on 25 February 2016,
and also sought compensation from him for various losses incurred
by the relevant members of the Diageo group on account of the
breaches committed by him and certain persons connected with him.
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 certain of the matters specified in those notices. At
the same time DHN also commenced claims in the English High Court
against Dr Mallya, his son Sidhartha Mallya, Watson (a company
affiliated with Dr Mallya) 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 (£104 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. These additional claims are described in
paragraph (d) below.
Dr Mallya, Sidhartha Mallya and
the relevant affiliated companies filed a defence to such claims
and the additional claims on 12 March 2018, and Dr Mallya also
filed a counterclaim for payment of the two $7 million (£5
million) instalment payments that had then been withheld by Diageo as described
above. Diageo and the other relevant members of its group filed a
reply to that defence and a defence to the counterclaim on 5
September 2018.
Diageo
continues to prosecute its claims and to defend the counterclaim.
As part of this, on 18 December 2018, 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.
That application was made by DHN on the basis that the defence
filed by Dr Mallya and his co-defendants in relation to those
matters had no real prospect of success.
As
described in paragraph (d) below, this application was successful
in relation to the predominant part of Watson and CASL's liability
to repay DHN and, since that application, Watson and CASL's defence
in relation to the remaining part of this liability has also been
struck out. Accordingly, Diageo and DHN have 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.
The
remaining elements of the claims originally commenced on 16
November 2017 by Diageo and the relevant members of its group are
now proceeding to trial and following a case management conference
on 6 December 2019, that trial is scheduled to take place from 11
October 2021 through 21 October 2021.
As
previously announced by USL, the Initial Inquiry identified certain
additional parties and matters indicating the possible existence of
other improper transactions. These transactions could not be fully
analysed during the Initial Inquiry and, accordingly, USL, as
previously announced, mandated that its Managing Director and Chief
Executive Officer conduct a further inquiry into the transactions
involving the additional parties and the additional matters to
determine whether they also suffered from improprieties (the
Additional Inquiry). USL announced the results of the Additional
Inquiry in a notice to the Indian Stock Exchange dated 9 July 2016.
The mutual release in relation to the Initial Inquiry agreed by
Diageo and USL with Dr Mallya announced on 25 February 2016 does
not extend to matters arising out of the Additional
Inquiry.
As
stated in USL's previous announcement, the Additional Inquiry
revealed further instances of actual or potential fund diversions
from USL and its Indian and overseas subsidiaries to, in most
cases, Indian and overseas entities in which Dr Mallya appears to
have a material direct or indirect interest, as well as other
potentially improper transactions involving USL and its Indian and
overseas subsidiaries.
In
connection with the matters identified by the Additional Inquiry,
USL has, pursuant to a detailed review of each case of such fund
diversion and after obtaining expert legal advice, where
appropriate, filed civil suits for recovery of funds from certain
parties, including Dr Mallya, before the relevant courts in
India.
The
amounts identified in the Additional Inquiry have been previously
provided for or expensed in the financial statements of USL or its
subsidiaries for prior periods. 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 continuing matters relating to Dr Mallya and
affiliates
DHN issued a conditional backstop guarantee on 2 August 2013 to
Standard Chartered Bank (Standard Chartered) pursuant to a
guarantee commitment agreement (the Guarantee Agreement). The
guarantee was in respect of the liabilities of Watson, a company
affiliated with Dr Mallya, under a $135 million (£99 million)
facility from Standard Chartered (the Facility Agreement). The
Guarantee Agreement was entered into as part of the arrangements
put in place and announced at the closing of the USL transaction on
4 July 2013.
DHN's
provision of the Guarantee Agreement enabled the refinancing of
certain existing borrowings of Watson from a third party bank and
facilitated the release by that bank of rights over certain USL
shares that were to be acquired by Diageo as part of the USL
transaction. The facility matured and entered into default in May
2015. In aggregate DHN paid Standard Chartered $141 million
(£104 million) under this guarantee, i.e. including payments
of default interest and various fees and
expenses.
Watson
remains liable for all amounts paid by DHN under the guarantee.
Under the guarantee documentation with Standard Chartered, DHN is
entitled to the benefit of the underlying security package for the
loan, including: (a) certain shares in United Breweries Limited
(UBL) held solely by Dr Mallya and certain other shares in UBL held
by Dr Mallya jointly with his son Sidhartha Mallya, and (b) the
shareholding in Watson.
Aspects
of the security package are the subject of various proceedings in
India in which third parties are alleging and asserting prior
rights to certain assets comprised in the security package or
otherwise seeking to restrain enforcement against certain assets by
Standard Chartered and/or DHN. These proceedings are ongoing and
DHN will continue to vigorously pursue these matters as part of its
efforts for enforcement of the underlying security and recovery of
outstanding amounts. Diageo believes that the existence of any
prior rights or dispute in relation to the security would be in
breach of representations and warranties given by Dr Mallya and
others to Standard Chartered at the time the security was granted
and further believes that certain actions taken by Dr Mallya in
relation to the proceedings described above also breached his
obligations to Standard Chartered. In addition to these third party
proceedings, Dr Mallya is also subject to proceedings in India
under the Prevention of Money Laundering Act and the Fugitive
Economic Offenders Act in which the relevant Indian authority, the
Directorate of Enforcement, is seeking confiscation of the UBL
shares which were provided as security for Watson's liabilities.
DHN is participating in these proceedings in order to protect its
security interest in respect of the UBL shares.
Under
the terms of the guarantee and as a matter of law, there are
arrangements to pass on to DHN the benefit of the security package
upon payment by DHN under the guarantee of all amounts owed to
Standard Chartered. Payment under the guarantee has now occurred as
described above. To the extent possible in the context of the
proceedings described above, DHN continues to work towards
enforcement of the security package, including, when appropriate,
in conjunction with Standard Chartered. DHN's ability to assume or
enforce security over some elements of the security package is also
subject to regulatory consent. It is not at this stage possible to
determine whether such consent would be forthcoming.
In
addition to the Indian proceedings just described, certain of the
assets comprised in the security package may also be affected by a
worldwide freezing order of the English High Court granted on 24
November 2017 and continued on 8 December 2017 and 8 May 2018 in
respect of the assets of Dr Mallya.
The
agreement with Dr Mallya referenced in paragraph (c) above does not
impact the security package. Watson remains liable for all amounts
paid pursuant to the guarantee and DHN has the benefit of a
counter-indemnity from Watson in respect of payments in connection
with the guarantee, as well as a claim against CASL as a co-surety
with DHN of Watson's obligations. The various security providers,
including Dr Mallya and Watson, acknowledged in the February 2016
Agreement referred to in paragraph (c) above that DHN is entitled
to the benefit of the security package underlying the Standard
Chartered facility and have also undertaken to take all necessary
actions in that regard. Further, Diageo believes that the existence
of any prior rights or disputes in relation to the security package
would be in breach of certain confirmations given to Diageo and DHN
pursuant to that agreement by Dr Mallya, Watson and certain
connected persons.
On
16 November 2017, DHN commenced various claims in the English High
Court for, in aggregate, in excess of $142 million (£104
million) (plus interest) in relation to these matters, including
the following: (i) a claim against Watson for $141 million
(£104 million) (plus interest) under Watson's
counter-indemnity to DHN in respect of payments made by DHN to
Standard Chartered under the guarantee referred to above; (ii) a
claim against Dr Mallya and Sidhartha Mallya under various
agreements creating or relating to the security package referred to
above for (a) the costs incurred to date in the various Indian
proceedings referred to above (plus interest), and (b) damages of
$141 million (£104 million), being DHN's loss as a result of
those Indian proceedings which currently prevent enforcement of the
security over shares in UBL (plus interest); and (iii) a claim
against CASL, as a co-surety with DHN of Watson's obligations under
the Facility Agreement, for 50% of the difference between the
amount claimed under (i) above and the amount (if any) that DHN is
in fact able to recover from Watson, Dr Mallya and/or Sidhartha
Mallya.
As
noted in paragraph (c), Dr Mallya, Sidhartha Mallya and the
relevant affiliated companies filed a defence to these claims on 12
March 2018. Diageo and the other relevant members of its group
filed a reply to that defence on 5 September
2018.
DHN
and Diageo continue to prosecute these claims. As part of that, on
18 December 2018, Diageo and the other relevant members of its
group filed an application for strike out and/or summary judgment
in respect of certain aspects of the defence filed by Dr Mallya,
Sidhartha Mallya and the relevant affiliated companies, including
in respect of Watson and CASL's liability to repay
DHN.
This
summary judgement and strike out application was heard by the
English High Court on 24 May 2019. The court decided in favour of
DHN that (i) Watson is liable to pay, and has no defence against
paying, $135 million (£99 million) plus interest of $11
million (£8 million) to DHN, and (ii) CASL is liable, as
co-surety, to pay, and has no defence against paying, 50% of any
such amount unpaid by Watson, i.e. up to $67.5 million (£50
million) plus interest of $5.5 million (£4 million) to DHN.
Watson and CASL were ordered to pay such sums, as well as certain
amounts in respect of DHN and Diageo's costs, to DHN by 21 June
2019. Such amounts were not paid on that date by either Watson or
CASL.
On
15 October 2020, as a result of applications made by DHN to recover
certain outstanding costs owed by Watson and CASL (being
approximately £260,000 plus interest, which remained unpaid),
Dr Mallya and Sidhartha Mallya were ordered to pay those amounts by
27 November 2020. As Dr Mallya and Sidhartha Mallya, in default of
the Court order, failed to make the required payments to DHN: (i)
Watson and CASL's defence to DHN's remaining claim for payment of
approximately $6 million (£4 million)(plus interest) has been
struck out, with further judgment in DHN's favour being entered
which will be pursued along with the original judgment as set out
above, and (ii) DHN is pursuing enforcement against Dr Mallya and
Sidhartha Mallya for the judgment debt of approximately
£260,000 plus interest.
(e) Other matters in relation to USL
Following USL's earlier updates concerning the Initial Inquiry as
well as in relation to the arrangements with Dr Mallya that were
the subject of the 25 February 2016 announcement, USL and Diageo
have received various notices from Indian regulatory authorities,
including the Ministry of Corporate Affairs, Enforcement
Directorate and Securities and Exchange Board of India
(SEBI).
Diageo
and USL are co-operating fully with the authorities in relation to
these matters. Diageo and USL have also received notices from SEBI
requesting information in relation to, and explanation of the
reasons for, the arrangements with Dr Mallya that were the subject
of the 25 February 2016 announcement as well as, in the case of
USL, in relation to the Initial Inquiry and the Additional Inquiry,
and, in the case of Diageo, whether such arrangements with Dr
Mallya or the Watson backstop guarantee arrangements referred to in
paragraphs (c) and (d) above were part of agreements previously
made with Dr Mallya at the time of the Original USL Transaction
announced on 9 November 2012 and the open offer made as part of the
Original USL Transaction. Diageo and USL have complied with such
information requests and Diageo has confirmed that, consistent with
prior disclosures, the Watson backstop guarantee arrangements and
the matters described in the 25 February 2016 announcement were not
the subject of any earlier agreement with Dr Mallya. In respect of
the Watson backstop guarantee arrangements, SEBI issued a further
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 is clear 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 therefore believes the decision in the SEBI notice
to be misconceived and wrong in law and 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 notice, Diageo believes SEBI's latest order to
be misconceived and wrong in law and has filed an appeal before SAT
against the order. This appeal is currently pending. Diageo is
unable to assess if the notices or enquiries referred to above will
result in enforcement action or, if this were to transpire, to
quantify meaningfully the possible range of loss, if any, to which
any such action might give rise to if determined against Diageo or
USL.
In
relation to the matters described in the 25 February 2016
announcement, Diageo had also responded to a show cause notice
dated 12 May 2017 from SEBI arising out of the previous
correspondence in this regard and made its further submissions in
the matter, including at a personal hearing before a Whole Time
Member of SEBI. On 6 September 2018, SEBI issued an order holding
that Diageo had acquired sole control of USL following its earlier
open offers, and that no fresh open offer was triggered by
Diageo.
(f) 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 (£63
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 (£5 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 has since filed an appeal
against this order before a division bench of the High Court, which
on 30 July 2019 has 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 aforesaid amount of INR 459 million (£5
million) remains recoverable from IDBI.
(g) 2019 Moët Hennessy dividend
As disclosed in Diageo's annual report for the year ended 30 June
2020, no dividend was received in respect of Diageo's 34%
investment in Moët Hennessy SAS and Moët Hennessy
International SAS (together MH) for the financial year of MH ended
31 December 2019. This investment is governed by a Partners'
Agreement with certain members of the LVMH Moët Hennessy -
Louis Vuitton group (LVMH) which holds 66% of MH, which includes
the dividend policy and minimum annual dividend requirements for
MH. Diageo believes that non-payment by MH of the dividend in
respect of its 2019 financial year constitutes a breach by LVMH of
the Partners' Agreement and that the minimum aggregate dividend
that should have been received by Diageo in respect of that period
was €181 million (£163 million). Accordingly, in July
2020 Diageo commenced arbitration proceedings against LVMH under
the Partners' Agreement in respect of this dispute.
Subsequently,
MH convened shareholder meetings on 23 October 2020 to consider
resolutions to approve payment of special dividends equal to
approximately half of the amount that Diageo believes was due in
respect of MH's 2019 financial year. These resolutions were passed
and, on 28 October 2020, Diageo received a payment of €91
million (£82 million) from MH. MH has since convened further
shareholder meetings, held on 25 January 2021, to consider
resolutions to approve payment of further special dividends equal
to approximately the balance of the amount that Diageo believes was
due in respect of MH's 2019 financial year. These resolutions were
passed and Diageo expects to receive a further payment of €90
million (£81 million) from MH on, or shortly after, 29 January
2021. Subject to receipt of this further payment, Diageo has
confirmed to LVMH that it intends to withdraw the ongoing
arbitration proceedings to bring this dispute to an
end.
(h) 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.
In
April 2019, the European Commission issued its decision in a state
aid investigation into the Group Financing Exemption in the UK
controlled foreign company (CFC) rules. The European Commission
found that part of the Group Financing Exemption constitutes state
aid. The Group Financing Exemption was introduced in legislation by
the UK government in 2013. In common with other UK-based
international companies whose arrangements are in line with current
UK CFC legislation, Diageo may be affected by the ultimate outcome
of this investigation. The UK government and other UK-based
international companies, including Diageo, have appealed to the
General Court of the European Union against the
decision.
In
December 2020, the UK government also introduced legislation to
commence collection proceedings. Diageo currently expects to
receive an assessment from HMRC in the coming weeks setting forth
HMRC's calculation of potential liability if the European
Commission decision is upheld. Diageo calculates its maximum
potential liability to be approximately £277 million and
believes that the HMRC assessment will reflect this maximum amount.
Diageo will have 30 days from receipt of the HMRC assessment to
make the required payment. While Diageo expects to appeal against
such an assessment, an appeal will not defer the payment of the tax
assessed. If the decision of the European Commission is upheld,
Diageo's ultimate tax liability will depend on the outcome of the
appeal against the HMRC assessment. Diageo has not recorded any
provision in respect of this issue because it currently believes
that the appeal to the General Court of the European Union against
the decision of the European Commission will be
successful.
The
group operates in a large number of markets with complex tax and
legislative regimes that are open to subjective interpretation. As
assessing an accurate value of contingent liabilities in these
markets requires a high level of judgement, contingent liabilities
are disclosed on the basis of the current known possible exposure
from tax assessment values.
Diageo
has reviewed its disclosures in relation to Brazil and India, where
Diageo has a large number of ongoing tax cases. While these cases
are not individually significant, the current assessment of the
aggregate possible exposures is up to approximately £273
million for Brazil and up to approximately £134 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. 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 2017 in relation to tax assessments where the risk
is considered to be remote or possible. These payments have to be
made in order to challenge the assessments and as such have been
recognised as a receivable on the consolidated balance sheet. The
total amount of protest payments recognised as a receivable as at
31 December 2020 is £115 million (corporate tax payments of
£105 million and indirect tax payments of £10
million).
In
the United States a lawsuit was filed on 15 April 2019 by the
National Association of Manufacturers (NAM) against the United
States Department of the Treasury (U.S. Treasury) and the United
States Customs and Border Protection (CBP) on behalf of its
affected industry members, including Diageo, to invalidate
regulations published in February 2019 and to ensure that
substitution drawback is permitted in accordance with 19
U.S.C.§ 1313(j)(2) as amended by the Trade Facilitation and
Trade Enforcement Act of 2015, which was enacted on 24 February
2016 (TFTEA). Substitution drawback permits the refund, including
of excise taxes, paid on imported merchandise when sufficiently
similar substitute merchandise is exported. The United States
Congress passed the TFTEA to, among other things, clarify and
broaden the standard for what constitutes substitute merchandise.
This change should entitle Diageo to obtain substitution drawback
in respect of certain eligible product categories. Despite this
change in the law, the U.S. Treasury and CBP issued final
regulations in 2019 declaring that substitution drawback is not
available for imports when substituted with an export on which no
tax was paid. The Court of International Trade issued a judgement
in favour of NAM on 18 February 2020, denying the request by the
U.S. Treasury and CBP for a stay of payment on 15 May 2020, and on
26 May 2020, ordered the immediate processing of claims. Eligible
outstanding claims of Diageo Americas Supply, Inc. are estimated at
£62 million ($84 million). Total payments of £27 million
($35 million) have been received as of 31 December 2020 in respect
of this matter, with approximately £26 million
($33 million) of this amount received prior to the close of
the year ended 30 June 2020. However, the U.S. Treasury and CBP has
filed an appeal with the U.S. Federal Court of Appeals, which is
now fully briefed. Although Diageo believes that the NAM is more
likely than not to ultimately prevail, if they were to fail, the
CBP could be permitted to recover these
payments.
(i) Other
The group has extensive international operations and is a defendant
in a number of legal, customs and tax proceedings incidental to
these operations, the outcome of which cannot at present 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.
13. Related party transactions
The group's significant related parties are its associates, joint
ventures, key management personnel and pension plans. There have
been no transactions with these related parties during the six
months ended 31 December 2020 on terms other than those that
prevail in arm's length transactions.
In
April 2020, the Directors became aware that certain purchases by
Diageo of its own shares and certain transactions related to
Diageo's employee share schemes between 10 May 2019 and 9 August
2019, amounting to approximately £320 million ('the
affected transactions'), were undertaken contrary to the applicable
provisions of the Companies Act 2006 as they were undertaken
following utilisation in full of Diageo plc's distributable
reserves as set out in its balance sheet as at 30 June 2018. At the
Annual General Meeting on 28 September 2020, a resolution was
passed to appropriate an equivalent amount of distributable profits
of the company to the payments made in respect of the affected
transactions and implement arrangements to put all potentially
affected parties, so far as possible, in the position in which they
were intended to be had the affected transactions been undertaken
in accordance with the applicable provisions of the Companies Act
2006. This resolution and the arrangements that it has implemented
constituted a related party transaction under IAS 24 and under the
Listing Rules, as the Directors have benefited from the waiver of
any claims that the company had or may have had against them as a
result of the affected transactions.
ADDITIONAL INFORMATION FOR SHAREHOLDERS
EXPLANATORY NOTES
Comparisons are to the six months ended 31 December 2019 (2019)
unless otherwise stated. Unless otherwise stated, percentage
movements given throughout this announcement 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 operating exceptional items and acquisitions and
disposals.
This
announcement contains forward-looking statements that involve risk
and uncertainty. There are 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 beyond Diageo's control. Please refer to Explanatory Notes
for 'Cautionary statement concerning forward-looking statements'
for more details.
This
announcement 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 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 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 in nine-litre
cases, divide by 10; 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 pounds sterling amounts on a
constant currency basis excluding the impact of exceptional items,
certain fair value remeasurement 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 absolute amount in the associated relevant row titled '2019
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
remeasurement 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.
(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. It is believed that separate
disclosure of exceptional items and the classification between
operating and non-operating further helps investors to understand
the performance of the group.
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 impairment of intangible assets and
fixed assets, indirect tax settlements, property disposals and
changes in post employment plans.
Gains
and losses on the sale of businesses, brands or distribution
rights, step up gains and losses that arise when an investment
becomes an associate or an associate becomes a subsidiary and other
material, unusual non-recurring items, that are not in respect of
the production, marketing and distribution of premium drinks, are
disclosed as non-operating exceptional items below operating profit
in the consolidated income statement.
Exceptional
current and deferred tax items, comprising material unusual
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 and fair value changes relating to
contingent consideration liabilities and equity options that arose
on acquisitions recognised in the income statement.
Organic movement calculations for the six months ended 31 December
2020 were as follows:
|
|
North America
million
|
|
Europe
and
Turkey
million
|
|
Africa
million
|
|
Latin America
and
Caribbean
million
|
|
Asia Pacific
million
|
|
Corporate
million
|
|
Total
million
|
Volume (equivalent units)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 reported
|
|
26.1
|
|
25.4
|
|
17.9
|
|
12.3
|
|
48.8
|
|
-
|
|
130.5
|
Disposals(iv)
|
|
(0.5)
|
|
(0.2)
|
|
(1.4)
|
|
-
|
|
-
|
|
-
|
|
(2.1)
|
2019 adjusted
|
|
25.6
|
|
25.2
|
|
16.5
|
|
12.3
|
|
48.8
|
|
-
|
|
128.4
|
Organic movement
|
|
2.0
|
|
(1.2)
|
|
(0.2)
|
|
0.5
|
|
(1.4)
|
|
-
|
|
(0.3)
|
Acquisitions and disposals(iv)
|
|
0.1
|
|
-
|
|
0.1
|
|
-
|
|
-
|
|
-
|
|
0.2
|
2020 reported
|
|
27.7
|
|
24.0
|
|
16.4
|
|
12.8
|
|
47.4
|
|
-
|
|
128.3
|
Organic movement %
|
|
8
|
|
(5)
|
|
(1)
|
|
4
|
|
(3)
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
£ million
|
|
Europe
and
Turkey
£ million
|
|
Africa
£ million
|
|
Latin America
and
Caribbean
£ million
|
|
Asia Pacific
£ million
|
|
Corporate
£ million
|
|
Total
£ million
|
Sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 reported
|
|
2,830
|
|
2,971
|
|
1,212
|
|
893
|
|
2,898
|
|
27
|
|
10,831
|
Exchange
|
|
-
|
|
(45)
|
|
(26)
|
|
(30)
|
|
(34)
|
|
-
|
|
(135)
|
Reclassification(iii)
|
|
-
|
|
-
|
|
-
|
|
(6)
|
|
-
|
|
-
|
|
(6)
|
Disposals(iv)
|
|
(20)
|
|
(34)
|
|
(49)
|
|
-
|
|
(1)
|
|
-
|
|
(104)
|
2019 adjusted
|
|
2,810
|
|
2,892
|
|
1,137
|
|
857
|
|
2,863
|
|
27
|
|
10,586
|
Organic movement
|
|
320
|
|
(63)
|
|
(9)
|
|
5
|
|
63
|
|
(16)
|
|
300
|
Acquisitions and disposals(iv)
|
|
8
|
|
-
|
|
8
|
|
-
|
|
-
|
|
-
|
|
16
|
Exchange
|
|
(116)
|
|
(102)
|
|
(72)
|
|
(87)
|
|
(89)
|
|
-
|
|
(466)
|
2020 reported
|
|
3,022
|
|
2,727
|
|
1,064
|
|
775
|
|
2,837
|
|
11
|
|
10,436
|
Organic movement %
|
|
11
|
|
(2)
|
|
(1)
|
|
1
|
|
2
|
|
(59)
|
|
3
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
North America
£ million
|
|
Europe
and
Turkey
£ million
|
|
Africa
£ million
|
|
Latin America
and
Caribbean
£ million
|
|
Asia Pacific
£ million
|
|
Corporate
£ million
|
|
Total
£ million
|
Net sales
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 reported
|
|
2,502
|
|
1,666
|
|
848
|
|
680
|
|
1,477
|
|
27
|
|
7,200
|
Exchange(i)
|
|
-
|
|
(20)
|
|
(16)
|
|
(18)
|
|
(6)
|
|
-
|
|
(60)
|
Reclassification(iii)
|
|
-
|
|
-
|
|
-
|
|
(6)
|
|
-
|
|
-
|
|
(6)
|
Disposals(iv)
|
|
(14)
|
|
(20)
|
|
(37)
|
|
-
|
|
(1)
|
|
-
|
|
(72)
|
2019 adjusted
|
|
2,488
|
|
1,626
|
|
795
|
|
656
|
|
1,470
|
|
27
|
|
7,062
|
Organic movement
|
|
307
|
|
(163)
|
|
(3)
|
|
(9)
|
|
(48)
|
|
(16)
|
|
68
|
Acquisitions and disposals(iv)
|
|
7
|
|
-
|
|
5
|
|
-
|
|
-
|
|
-
|
|
12
|
Exchange(i)
|
|
(101)
|
|
(20)
|
|
(52)
|
|
(68)
|
|
(27)
|
|
-
|
|
(268)
|
2020 reported
|
|
2,701
|
|
1,443
|
|
745
|
|
579
|
|
1,395
|
|
11
|
|
6,874
|
Organic movement %
|
|
12
|
|
(10)
|
|
-
|
|
(1)
|
|
(3)
|
|
(59)
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Marketing
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 reported
|
|
404
|
|
268
|
|
97
|
|
113
|
|
232
|
|
2
|
|
1,116
|
Exchange
|
|
11
|
|
(5)
|
|
(4)
|
|
(4)
|
|
-
|
|
-
|
|
(2)
|
Reclassification(iii)
|
|
-
|
|
-
|
|
-
|
|
(6)
|
|
-
|
|
-
|
|
(6)
|
Disposals(iv)
|
|
-
|
|
(1)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(1)
|
2019 adjusted
|
|
415
|
|
262
|
|
93
|
|
103
|
|
232
|
|
2
|
|
1,107
|
Organic movement
|
|
42
|
|
(10)
|
|
(6)
|
|
(15)
|
|
(3)
|
|
-
|
|
8
|
Acquisitions and disposals(iv)
|
|
3
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
3
|
Exchange
|
|
(17)
|
|
-
|
|
(3)
|
|
(10)
|
|
(2)
|
|
(1)
|
|
(33)
|
2020 reported
|
|
443
|
|
252
|
|
84
|
|
78
|
|
227
|
|
1
|
|
1,085
|
Organic movement %
|
|
10
|
|
(4)
|
|
(6)
|
|
(15)
|
|
(1)
|
|
-
|
|
1
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Operating profit before exceptional items
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2019 reported
|
|
1,120
|
|
615
|
|
159
|
|
257
|
|
432
|
|
(82)
|
|
2,501
|
Exchange(ii)
|
|
26
|
|
(8)
|
|
-
|
|
(5)
|
|
7
|
|
(1)
|
|
19
|
Fair value remeasurement of contingent considerations and equity
option
|
|
4
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
4
|
Fair value remeasurement of biological assets
|
|
-
|
|
-
|
|
-
|
|
(4)
|
|
-
|
|
-
|
|
(4)
|
Acquisitions
and Disposals(iv)
|
|
(2)
|
|
(7)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(9)
|
2019 adjusted
|
|
1,148
|
|
600
|
|
159
|
|
248
|
|
439
|
|
(83)
|
|
2,511
|
Organic movement
|
|
164
|
|
(139)
|
|
(35)
|
|
(12)
|
|
(48)
|
|
(15)
|
|
(85)
|
Acquisitions and disposals(iv)
|
|
(9)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(9)
|
Fair value remeasurement of contingent considerations and equity
option
|
|
(4)
|
|
(7)
|
|
-
|
|
-
|
|
-
|
|
-
|
|
(11)
|
Fair value remeasurement of biological assets
|
|
-
|
|
-
|
|
-
|
|
3
|
|
-
|
|
-
|
|
3
|
Exchange(ii)
|
|
(73)
|
|
(8)
|
|
(29)
|
|
(42)
|
|
(5)
|
|
4
|
|
(153)
|
2020 reported
|
|
1,226
|
|
446
|
|
95
|
|
197
|
|
386
|
|
(94)
|
|
2,256
|
Organic movement %
|
|
14
|
|
(23)
|
|
(22)
|
|
(5)
|
|
(11)
|
|
(18)
|
|
(3)
|
Organic operating margin %
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
2020
|
|
46.9
|
|
31.5
|
|
15.7
|
|
36.5
|
|
27.5
|
|
n/a
|
|
34.0
|
2019
|
|
46.1
|
|
36.9
|
|
20.0
|
|
37.8
|
|
29.9
|
|
n/a
|
|
35.6
|
Margin movement (bps)
|
|
80
|
|
(539)
|
|
(434)
|
|
(133)
|
|
(237)
|
|
n/a
|
|
(153)
|
(1)
For the reconciliation of sales to net sales see Summary Income
Statement.
(2)
Percentages and margin movement are calculated on rounded
figures.
Notes:
Information in respect of the organic movement
calculations
(i)
The impact of movements in exchange rates on reported figures for
net sales is principally in respect of the translation exchange
impact of the strengthening of sterling against the US dollar, the
Brazilian real and the Turkish lira, partially offset by weakening
of sterling against the euro.
(ii)
The impact of movements in exchange rates on reported figures for
operating profit is principally in respect of the translation
exchange impact of the strengthening of sterling against the US
dollar, the Brazilian real and the Turkish lira, partially offset
by weakening of sterling against the euro.
(iii)
For the six month period ended 31 December 2020, trade investment
of £6 million has been reclassified from marketing to
sales.
(iv)
In the six months ended 31 December 2020, the acquisitions and
disposals that affected volume, sales, net sales, marketing and
operating profit were as follows:
|
Volume
|
|
Sales
|
|
Net sales
|
|
Marketing
|
|
Operating profit
|
|
equ. units million
|
|
£ million
|
|
£ million
|
|
£ million
|
|
£ million
|
Six months ended 31 December 2019
|
|
|
|
|
|
|
|
|
|
Disposals
|
|
|
|
|
|
|
|
|
|
UNB
|
(1.1)
|
|
(21)
|
|
(21)
|
|
-
|
|
-
|
Budweiser
distribution license termination
|
(0.2)
|
|
(32)
|
|
(18)
|
|
(1)
|
|
(7)
|
Supply
contracts in respect of the 19 brands sold to Sazerac
|
(0.6)
|
|
(24)
|
|
(17)
|
|
-
|
|
(2)
|
South
African ready to drink
|
(0.2)
|
|
(27)
|
|
(16)
|
|
-
|
|
-
|
|
(2.1)
|
|
(104)
|
|
(72)
|
|
(1)
|
|
(9)
|
|
|
|
|
|
|
|
|
|
|
Six months ended 31 December 2020
|
|
|
|
|
|
|
|
|
|
Acquisitions
|
|
|
|
|
|
|
|
|
|
Aviation
Gin and Davos Brands
|
0.1
|
|
8
|
|
7
|
|
(3)
|
|
(9)
|
|
0.1
|
|
8
|
|
7
|
|
(3)
|
|
(9)
|
Disposals
|
|
|
|
|
|
|
|
|
|
South
African ready to drink
|
0.1
|
|
8
|
|
5
|
|
-
|
|
-
|
|
0.1
|
|
8
|
|
5
|
|
-
|
|
-
|
|
|
|
|
|
|
|
|
|
|
Acquisitions and disposals
|
0.2
|
|
16
|
|
12
|
|
(3)
|
|
(9)
|
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 six months ended 31
December 2020 and 31 December 2019 are set out in the table
below.
|
2020
|
|
2019
|
|
£ million
|
|
£ million
|
|
|
|
|
Profit
attributable to equity shareholders of the parent
company
|
1,580
|
|
1,865
|
Exceptional operating and non-operating items
|
12
|
|
59
|
Exceptional taxation charges/(benefits)
|
42
|
|
-
|
Tax in respect of exceptional operating and non-operating
items
|
-
|
|
(14)
|
Exceptional items attributable to non-controlling
interests
|
-
|
|
(20)
|
|
1,634
|
|
1,890
|
|
|
|
|
Weighted average number of shares
|
million
|
|
million
|
Shares
in issue excluding own shares
|
2,336
|
|
2,356
|
Dilutive
potential ordinary shares
|
7
|
|
10
|
|
2,343
|
|
2,366
|
|
|
|
|
|
pence
|
|
pence
|
Basic earnings per share before exceptional items
|
69.9
|
|
80.2
|
|
|
|
|
Diluted earnings per share before exceptional items
|
69.7
|
|
79.9
|
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 cost 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 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 six months ended 31 December 2020
and 31 December 2019 are set out in the table
below:
|
2020
|
|
2019
|
|
£ million
|
|
£
million
|
|
|
|
|
Net cash inflow from operating activities
|
1,998
|
|
1,288
|
Disposal
of property, plant and equipment and computer software
|
8
|
|
8
|
Purchase
of property, plant and equipment and computer software
|
(250)
|
|
(330)
|
Movements
in loans and other investments
|
(3)
|
|
-
|
Free cash flow
|
1,753
|
|
966
|
Return on average total invested capital
Return on average total 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 total invested
capital reflects operating profit before exceptional items
attributable to the 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 period.
Average total invested capital is calculated using the average
derived from the consolidated balance sheets at the beginning and
end of the period. Average capital employed comprises average net
assets attributable to equity shareholders of the parent company
for the period, excluding post employment benefit net
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 total invested capital for the six months
ended 31 December 2020 and 31 December 2019 are set out in the
table below.
|
2020
|
|
2019
|
|
£
million
|
|
£ million
|
|
|
|
|
Operating
profit
|
2,239
|
|
2,442
|
Exceptional
operating items
|
17
|
|
59
|
Profit
before exceptional operating items attributable to non-controlling
interests
|
(81)
|
|
(89)
|
Share
of after tax results of associates and joint ventures
|
154
|
|
176
|
Tax
at the tax rate before exceptional items of 22.4% (2019 -
21.6%)
|
(540)
|
|
(559)
|
|
1,789
|
|
2,029
|
|
|
|
|
Average
net assets (excluding net post employment
assets/liabilities)
|
8,162
|
|
9,520
|
Average
non-controlling interests
|
(1,614)
|
|
(1,751)
|
Average
net borrowings
|
12,953
|
|
12,204
|
Average
integration and restructuring costs (net of tax)
|
1,639
|
|
1,639
|
Goodwill
at 1 July 2004
|
1,562
|
|
1,562
|
Average
total invested capital
|
22,702
|
|
23,174
|
|
|
|
|
Return
on average total invested capital
|
15.8
|
|
17.5
|
Adjusted net borrowings to earnings before exceptional operating
items, interest, tax, depreciation, amortisation and impairment
(adjusted EBITDA)
Diageo manages its capital structure with the aim of achieving
capital efficiency, provide flexibility to invest through the
economic cycle and give 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.
Calculations
for the ratio of adjusted net borrowings to adjusted EBITDA at 31
December 2020 and 31 December 2019 are set out in the table
below.
|
2020
|
|
2019
|
|
£
million
|
|
£
million
|
|
|
|
|
Borrowings due within one year
|
1,214
|
|
3,381
|
Borrowings due after one year
|
14,063
|
|
10,091
|
Fair value of foreign currency derivatives and interest rate
hedging instruments
|
(263)
|
|
(128)
|
Lease liabilities
|
410
|
|
486
|
Less: Cash and cash equivalents
|
(2,763)
|
|
(950)
|
Net borrowings
|
12,661
|
|
12,880
|
Post employment benefit liabilities before tax
|
815
|
|
753
|
Adjusted net borrowings
|
13,476
|
|
13,633
|
|
|
|
|
|
|
|
|
Operating profit
|
1,934
|
|
4,054
|
Depreciation, amortisation and impairment (excluding exceptional
items)
|
486
|
|
416
|
Share of after tax results of associates and joint
ventures
|
260
|
|
309
|
Exceptional impairment
|
1,286
|
|
59
|
Non-operating items
|
(18)
|
|
(2)
|
EBITDA
|
3,948
|
|
4,836
|
Exceptional operating items (excluding impairment)
|
29
|
|
53
|
Non-operating items
|
18
|
|
2
|
Adjusted EBITDA
|
3,995
|
|
4,891
|
|
|
|
|
|
|
|
|
Adjusted net borrowings to adjusted EBITDA
|
3.4
|
|
2.8
|
(1) EBITDA and adjusted EBITDA are calculated based on last 12
months.
Tax rate before exceptional items
Tax rate before exceptional items is calculated by dividing the
total tax charge on continuing operations 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
continuing operations before tax on exceptional
items.
The
tax rates from operations before exceptional and after exceptional
items for the six months ended 31 December 2020 and six months
ended 31 December 2019 are set out in the table
below:
|
2020
|
|
2019
|
|
£ million
|
|
£
million
|
|
|
|
|
Tax
before exceptional items (a)
|
495
|
|
544
|
Tax in
respect of exceptional items
|
-
|
|
(14)
|
Exceptional tax charge
|
42
|
|
-
|
Taxation
on profit (b)
|
537
|
|
530
|
|
|
|
|
Profit before taxation and exceptional items (c)
|
2,210
|
|
2,523
|
Non-operating
items
|
5
|
|
-
|
Exceptional operating items
|
(17)
|
|
(59)
|
Profit
before taxation (d)
|
2,198
|
|
2,464
|
|
|
|
|
Tax rate before exceptional items (a/c)
|
22.4
|
|
21.6
|
Tax rate after exceptional items (b/d)
|
24.4
|
|
21.5
|
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.
Price/mix
is the number of percentage points by which the organic movement in
net sales differs to 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 made 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 Russia, Eastern Europe, Turkey, Africa,
Latin America and Caribbean, 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 premium brands; Roe &
Co; The Singleton, Cardhu, Talisker, Lagavulin and other malt
brands; Buchanan's Special Reserve, Buchanan's Red Seal; Bulleit
Bourbon, Bulleit Rye; Tanqueray No. TEN, Tanqueray ready to drink,
Tanqueray Malacca Gin; Cîroc, Ketel One vodka, Ketel One
Botanical; Don Julio, Casamigos, Zacapa, Bundaberg SDlx, Shui Jing
Fang, Jinzu gin, Haig Club whisky, Orphan Barrel whiskey and
DeLeón Tequila; Villa Ascenti, Copper Dog whisky, Belsazar,
Pierde Almas.
References
to global giants include the following brand families: Johnnie
Walker, Smirnoff, Captain Morgan, Baileys, Tanqueray and Guinness.
Local stars spirits 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 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-mix 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.
References
to the disposal of a portfolio of 19 brands comprise the following
brands that were primarily sold in the United States: Seagram's VO,
Seagram's 83, Seagram's Five Star, Popov, Myers's, Parrot Bay,
Yukon Jack, Romana Sambuca, Scoresby, Goldschlager, Relska,
Stirrings, The Club, Booth's, Black Haus, Peligroso, Grind, Piehole
and John Begg.
References
to the group include Diageo plc and its consolidated
subsidiaries.
RISK FACTORS
Diageo's products are sold in over 180 countries worldwide, which
subjects Diageo to risks and uncertainties in multiple
jurisdictions across developed and developing markets. The group's
aim is to manage risk and control its business and financial
activities cost-effectively and in a manner that enables it to:
exploit profitable business opportunities in a disciplined way;
avoid or reduce risks that can cause loss, reputational damage or
business failure; manage and mitigate historic risks and exposures
of the group; support operational effectiveness; and enhance
resilience to external events. To achieve this, an ongoing process
has been established for identifying, evaluating and managing risks
faced by the group. A detailed description of the key risks and
uncertainties facing the group are described in the 'Strategic
report' section of Diageo's Annual Report for the year ended 30
June 2020 and under 'Risk Factors' in Diageo's Annual Report on
Form 20-F for the year ended 30 June 2020.
These key risks and uncertainties include: unfavourable economic,
political, social or other developments and risks in the countries
in which Diageo operates, including in connection with the ongoing
Covid-19 pandemic, the potential impact of any global, regional or
local trade disputes (including but not limited to any such dispute
between the United States and the European Union and/or the United
Kingdom) and the wider economic repercussions of the United
Kingdom's recent departure from the European Union; changes in
consumer preferences and tastes and the adverse impacts of economic
downturns, among other factors, which could adversely affect
consumer demand; changes in the domestic and international tax
environment resulting in unexpected tax exposures; the impact of
climate change, or legal, regulatory or market measures intended to
address climate change, including on the cost and supply of water;
changes in the cost of production; litigation or similar
proceedings specifically directed at the beverage alcohol industry,
as well as other litigation or proceedings more generally;
other legal and regulatory developments impacting the production,
distribution and marketing of Diageo's products and its business
more generally; the consequences of any failure to comply with
anti-corruption, sanctions or similar laws and regulations; any
failure of internal controls, including those affecting compliance
with accounting and/or disclosure requirements; any failure by
Diageo to maintain its brand image and corporate reputation; the
impact of any contamination, counterfeiting or other events on
support for and sales of Diageo's brands; competitive pressures,
which could reduce Diageo's market share and margins; any
disruption to production facilities, business service centres or
information systems (including as a result of cyber-attacks and
pandemics); failures to derive the expected benefits from Diageo's
business strategies, acquisitions and/or any cost-saving and
restructuring programmes; increased costs for, or shortages of,
talent; fluctuations in exchange and/or interest rates; movements
in the value of Diageo's pension funds; any failure to maintain or
renegotiate distribution, supply, manufacturing and licence
agreements on favourable terms; any inability by Diageo to protect
its intellectual property rights; and difficulty in effecting
service of US process and enforcing US legal process against Diageo
and its directors.
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. In particular, forward-looking
statements include all statements that express forecasts,
expectations, plans, outlook, objectives and projections with
respect to future matters, including trends in results of
operations, margins, growth rates, overall market trends, the
impact of changes in interest or exchange rates, the availability
or cost of financing to Diageo, anticipated cost savings or
synergies, expected investments, the completion of any strategic
transactions or restructuring programmes, anticipated tax rates,
changes in the international tax environment, expected cash
payments, outcomes of litigation or regulatory enquiries,
anticipated changes in the value of assets and liabilities related
to pension schemes and general economic conditions. By their
nature, forward-looking statements involve risk and uncertainty
because they relate to events and depend on circumstances that will
occur in the future. There are 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.
Factors that could cause actual results and developments to differ
materially from those expressed or implied by forward-looking
statements include, but are not limited
to:
●
|
economic,
political, social or other developments in countries and markets in
which Diageo operates (including as a result of the ongoing
Covid-19 pandemic and the recent departure of the United Kingdom
from the European Union), which may contribute to a reduction in
demand for Diageo's products, adverse impacts on Diageo's customer,
supplier and/or financial counterparties, or the imposition of
import, investment or currency restrictions (including the
potential impact of any global, regional or local trade disputes,
including but not limited to any such dispute between the United
States and the European Union and/or the United Kingdom) or any
tariffs, duties or other restrictions or barriers imposed on the
import or export of goods between territories;
|
●
|
the
impact of the Covid-19 pandemic, or other epidemics or pandemics,
on Diageo's business, financial condition, cash flows and results
of operation;
|
●
|
changes
in consumer preferences and tastes, including as a result of
changes in demographics, evolving social trends (including any
shifts in consumer tastes towards small-batch craft alcohol, lower
or no alcohol, or other alternative products), changes in travel,
holiday or leisure activity patterns, weather conditions, health
concerns, pandemics and/or a downturn in economic
conditions;
|
●
|
changes
in the domestic and international tax environment, including as a
result of the OECD Base Erosion and Profit Shifting Initiative and
EU anti-tax abuse measures, leading to uncertainty around the
application of existing and new tax laws and unexpected tax
exposures;
|
●
|
the
effects of climate change, or legal, regulatory or market measures
intended to address climate change, on Diageo's business or
operations, including on the cost and supply of water;
|
●
|
changes
in the cost of production, including as a result of increases in
the cost of commodities, labour and/or energy or as a result of
inflation;
|
●
|
any
litigation or other similar proceedings (including with tax,
customs, competition, environmental, anti-corruption or other
regulatory authorities), including litigation directed at the
beverage alcohol industry generally or at Diageo in
particular;
|
●
|
legal
and regulatory developments, including changes in regulations
relating to production, distribution, importation, marketing,
advertising, sales, pricing, labelling, packaging, product
liability, antitrust, labour, compliance and control systems,
environmental issues and/or data
privacy;
|
●
|
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;
|
●
|
the
consequences of any failure of internal controls, including those
affecting compliance with existing or new accounting and/or
disclosure requirements;
|
●
|
Diageo's
ability to maintain its brand image and corporate reputation or to
adapt to a changing media environment;
|
●
|
contamination,
counterfeiting or other circumstances which could harm the level of
customer support for Diageo's brands and adversely impact its
sales;
|
●
|
increased
competitive product and pricing pressures, including as a result of
actions by increasingly consolidated competitors or increased
competition from regional and local companies, that could
negatively impact Diageo's market share, distribution network,
costs and/or pricing;
|
●
|
any
disruption to production facilities, business service centres or
information systems, including as a result of
cyber-attacks;
|
●
|
Diageo's
ability to derive the expected benefits from its business
strategies, including in relation to expansion in emerging markets,
acquisitions and/or disposals, cost savings and productivity
initiatives or inventory
forecasting;
|
●
|
increased
costs for, or shortages of, talent, as well as labour strikes or
disputes;
|
●
|
fluctuations
in exchange rates and/or interest rates, which may impact the value
of transactions and assets denominated in other currencies,
increase Diageo's cost of financing or otherwise adversely affect
Diageo's financial results;
|
●
|
movements
in the value of the assets and liabilities related to Diageo's
pension plans;
|
●
|
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
|
●
|
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 above cautionary factors, by the
'Risk Factors' section immediately preceding those and by the 'Risk
Factors' included in Diageo's Annual Report on Form 20-F for the
year ended 30 June 2020 filed with the US Securities and Exchange
Commission (SEC). Any forward-looking statements made by or on
behalf of Diageo speak only as of the date they are made. Diageo
does not undertake to update forward-looking statements to reflect
any changes in Diageo's expectations with regard thereto or any
changes in events, conditions or circumstances on which any such
statement is based. The reader should, however, consult any
additional disclosures that Diageo may make in any documents which
it publishes and/or files with the SEC. All readers, wherever
located, should take note of these
disclosures.
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 2021.
The information in this document does not constitute an offer to
sell or an invitation to buy shares in Diageo plc or an invitation
or inducement to engage in any other investment
activities.
This document may include information about Diageo's target debt
rating. A security rating is not a recommendation to buy, sell or
hold securities and may be subject to revision or withdrawal at any
time by the assigning rating organisation. Each rating should be
evaluated independently of any other
rating.
Past performance cannot be relied upon as a guide to future
performance.
Statement of directors' responsibilities
Each of the directors of Diageo plc confirms, to the best of his or
her knowledge, that:
●
|
the
condensed set of financial statements has been prepared in
accordance with IAS 34 Interim Financial Reporting as issued by the
IASB and endorsed and adopted by the EU and give a true and fair
view of the assets, liabilities, financial position and profit and
loss of the group;
|
●
|
the
interim management report includes a fair review of the information
required by:
|
(a) DTR
4.2.7R of the Disclosure Guidance and Transparency Rules sourcebook
of the United Kingdom's Financial Conduct Authority, being an
indication of important events that have occurred during the first
six months of the financial year and their impact on the condensed
set of financial statements; and a description of the principal
risks and uncertainties for the remaining six months of the year;
and
(b) DTR
4.2.8R of the Disclosure Guidance and Transparency Rules sourcebook
of the United Kingdom's Financial Conduct Authority, being related
party transactions that have taken place in the first six months of
the current financial year and that have materially affected the
financial position or performance of the group during that period;
and any changes in the related party transactions described in the
last annual report that could do so.
The directors of Diageo plc are as follows: Javier Ferrán
(Chairman), Ivan Menezes (Chief Executive), Kathryn Mikells (Chief
Financial Officer), Susan Kilsby (Senior Independent Director and
Chairman of the Remuneration Committee), Alan Stewart
(Non-Executive Director and Chairman of the Audit Committee) and
Non-Executive Directors: Melissa Bethell, Valérie
Chapoulaud-Floquet, Sir John Manzoni, Nicola Mendelsohn and Ireena
Vittal.
Webcast, presentation slides and transcript
At 07.15 (UK time) on Thursday 28 January 2021, Ivan Menezes, Chief
Executive and Kathryn Mikells, Chief Financial Officer will present
Diageo's interim 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 and replay
Ivan Menezes, Chief Executive and Kathryn Mikells, Chief Financial
Officer will be hosting a Q&A conference call on Thursday 28
January 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:
|
+44 (0)330 336 9105
|
From the UK (free call):
|
0800 358 6377
|
From the USA:
|
+1 323 794 2093
|
From the USA (free call):
|
866 548 4713
|
The conference call is for analysts and investors only. To join the
call please use the password already sent to you or
email [email protected].
To hear a replay of the call, please use the telephone numbers
below:
From the UK:
|
+44 (0)20 7660 0134
|
From the UK (free call):
|
0808 101 1153
|
From the USA:
|
+1 719 457 0820
|
From the USA (free call):
|
888 203 1112
|
Investor enquiries to:
|
Lavanya Chandrashekar
|
+1 973 979 4551
|
|
Lucinda Baker
|
+44 (0) 7974 375 550
|
|
Belinda Brown
|
+44 (0) 7590 810246
|
|
|
|
|
|
|
Media enquiries to:
|
Jessica Rouleau
|
+44 (0) 7925 642 561
|
|
Dominic Redfearn
|
+44 (0) 7971 977 759
|
|
Francesca Olivieri
|
+44 (0) 7523 930 130
|
|
|
|
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.
|
Diageo plc
|
|
(Registrant)
|
|
|
Date:
28 January 2021
|
|
|
|
|
By:___/s/
James Edmunds
|
|
|
|
James Edmunds
|
|
Deputy Company Secretary
|
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