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Ivan MenezesChief Executive
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Making a strong business stronger
3
Performance ambition
Sustained top line growth
Expand operating margin
Enhanced financial strength
Double digit eps growth
Improve returns to shareholders
F13 delivery
5%organic net sales growth
0.8 ppt organic operating margin
improvement
1.5 billion free cash flow
eps pre-exceptional items up 11%
Recommended 9%increase in
final dividend
Year ended 30 June 2013.
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My key highlights:
4
0.5 billion additional net sales*
An incremental 1 million cases of Johnnie Walker,
now over 20 million cases
Innovation was up nearly 30%this year contributing
over 50% of our growth
We fully integrated Mey ki, Ypica, Shuijingfang
and Meta Abo
Year ended 30 June 2013. *Organic growth.
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Deirdre MahlanCFO
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Delivering efficient growth
Focus on strategic brands
Leading position in US spirits, driving top line
growth and margin expansion
Scale in emerging markets is now also driving top
line growth and margin expansion
Our geographic breadth mitigates the impact of
individual market challenges
6
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Delivering efficient growth from our strategicbrands
7
Other
Strategic
brands
Volume growthEU k
165
352
Net sales growthm
163
(21)
(58)
102
108
58
Net sales growth fromstrategic brands m
Asia Pacific developed
Western Europe
North America
AEET
LAC
Asia Pacific emerging
2,167
(590)
Year ended 30 June 2013. Organic growth.
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Delivering efficient growth in North America
8
4% volume growth from strategic spirits brands
5 ppts of price/mix from strategic spirits brands
Marketing up 10%
Gross margin up 150 bpts
Operating margin up 120 bpts
Year ended 30 June 2013. Organic growth.
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Scale in the emerging markets drives top linegrowth and margin expansion
9Year ended 30 June 2013. Organic growth.
198
182
70
170
297
326
15
Emergingmarkets
LAC Asia Pacificemerging
AEET
AEET
LAC
Asia Pacific
emerging
Operating margin expansion bptsNet sales growth m
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Diageos strength is in its geographic breadth
10
5
(6)
11
18
6 56
(2)
9
12
0
55
(4)
10
15
3
5
North America Western Europe AEET LAC Asia Pacific Diageo
Net sales % growth
H2H1 FY
Year ended 30 June 2013. Organic growth.
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Price increases and production and overheadefficiencies drove operating margin improvement
11
F12 Reportedoperating margin
FX Acquisitions/Disposals
Organicmovement
F13 Reportedoperating margin
29.7% 0.2 ppts0.2 ppts
0.8 ppts 30.9%
Year ended 30 June.
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Exceptional items reflect decisions made tostrengthen the business
12
2012
m
2013
m
Business restructuring (96) (69)
Other operating exceptionals 56 (30)
Operating exceptional items pre-tax (40) (99)
Sale of businesses 147 (83)
Exceptional tax items (505) 55
Discontinued operations net of tax (11) -
Net exceptional items post tax (409) (127)
Cash impact of business restructuring (158) (61)
Year ended 30 June.
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Another year of strong free cash flow
13Year ended 30 June. m. *Operating profit is adjusted with non-cash items and excludes pension related payments.
2012 Operatingprofit*
Workingcapital
movement
Dividendsincome
Net interestand tax
Net capex Contributionto UK
pensionschemes
Otheroperatingactivities
2013
1,647
416
(24)
37
(71)
(159)
(400)
14 1,460
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Debt remains at 2.4 x EBIT*
14
Net borrowingsat 30 June 2012
Acquisitions Dividends Free cash flow Other Net borrowingsat 30 June 2013
7,570
844
1,125
(1,460)
324 8,403
*Pre-exceptional items. m.
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Interest costs broadly flat despite increasedborrowings
15
2012
m
2013
m
Movement
m
Core interest (386) (403) (17)
IAS 39 4 4 -
Net interest charge (382) (399) (17)
Finance income/(charge) from post
employment obligations 7 (5) (12)
Other finance charges (22) (20) 2
Net other finance charge (15) (25) (10)
Net finance charges (397) (424) (27)
Year ended 30 June.
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Improved performance throughout theincome statement
16
2012
m
2013
m
Movement
mOperating profit* 3,198 3,530 332
Associate income net of tax 213 199 (14)
Trading profit* 3,411 3,729 318
Net finance charges (397) (424) (27)
PBET 3,014 3,305 291
Taxation* (533) (584) (51)
Non-controlling interests (130) (109) 21
Profit after tax* 2,351 2,612 261
eps* 94.2 pence 104.4 pence 10.2 pence
Year ended 30 June. *Excludes exceptional items.
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Delivering efficient growth
17
eps growth
Aim: Double digit growth in core* eps
Organic operatingmargin improvement
Aim: The first 200bps by year ending
2014
Faster organic net sales growth
Aim: 6% CAGR in the medium term
Maximising
cash and
returns
Strongplatform
+
Expansion
in faster
growing
markets
+
Sharper
focus
*Excluding foreign exchange and exceptional items.
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Making a strong business even stronger
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Enhancing our position asthe #1 spirits company
in North America
Increasing our presencein the emerging markets
of the world
Leading
brands acrosscategories andglobal reach
Respectedfor our
actions and performance Capturing efficient growth
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Industry leading brands across categories
19
Scotch whisky Other whisk(e)y Vodka Rum TequilaLiqueur Gin Local spirits Beer
Ultra premium
Super premium
Premium
Standard
Value
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The category breadth to deliver on consumertrends in all markets
20Year ended 30 June 2013.
Net sales
Scotch
Vodka
Beer
Whiskey
Rum
RTDs
Liqueurs
Wine
0
25
50
75
100
Developed markets
Tequila, gin, flavoured and local spirits not included
%
Scotch
Beer
Vodka
0
25
50
75
100
Emerging markets
Liqueurs, rum, wine, gin, whiskey, tequila and flavoured
spirits not included Vodka includes Smirnoff ready to drink
%
Local spirits
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Marketing spend is focused on the biggestgrowth opportunity by market
21
Western Europe North America Asia Pacific Africa, EasternEurope & Turkey
Latin America &Caribbean
m
Johnnie Walker super and ultra deluxeJohnnie Walker Red Label
Year ended 30 June 2013.
F13 Increased spend
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Enhancing our position as the #1 spiritscompany in North America
22
Building our brands through world
class marketing
Leading the industry in innovation
Building stronger routes to
consumersLeading
brands acrosscategories and
global reach
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Increasing our presence in the emergingmarkets of the world
23
Through strong organic growth
Through driving value from the
acquisitions we have made
Building stronger routes to
consumersLeading
brands acrosscategories and
global reach
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Increasing our presence in the new highgrowth markets through acquisitions
24
Mey kiTurkey Meta AboEthiopia Shui Jing FangChina Hanoi VodkaVietnam YpicaBrazil United SpiritsIndia
August 2011 January 2012 June 2012 June 2012 August 2012 July 2013
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Building stronger routes to consumers inemerging markets
25
For example in Africa:
Diageos biggest emerging market
The biggest emerging middle class opportunity
Driving growth in beer and spirits
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Capturing efficient growth
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Managing challenges in
Western Europe
Premiumising especially in scotch
Drive out cost to invest in growth
Leading
brands acrosscategories andglobal reach
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Western Europe is a large and profitablebusiness and we can improve performance
27
F13 Organic performance
Great Britain France Ireland Iberia, Greece& Italy
Germany Western Europe
Operating profit movementNet sales movement
Year ended 30 June 2013.
m
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Driving out cost to invest in growth
28
Deliver restructuring savings
Deliver marketing efficiency
Consistent focus on driving out cost
creates agility
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Building the global leader in super andultra premium
29Year ended 30 June 2013.
North
America
0
50
100
Leading markets
%
JohnnieWalker
Croc
0
50
100
Leading brands
%
Other
Emerging
Asia Pacific
Western Europe
Latin America and Caribbean
Other
The Singleton of Glen OrdBuchanans
Don Julio
Ketel One
Net sales
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Respected for our actions and performance
30
Alcohol in society
Environment Socio-economic development
Leadingbrands acrosscategories and
global reach
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Target by 2015
2013
Performance %
Cumulative
performance
(2007-2013) % Achievement
Progress against operational targets
Reduce carbon emissions by 50% 4.1 26.3
Improve water efficiency by 30% 1.5 19.5
Reduce water wasted at water-stressed sitesby 50% 7.0 21.0
Reduce polluting power of wastewater by 60% (9.1) (17.5)
Eliminate waste to landfill 53.4 77.9
Progress against packaging targets
Reduce average packaging weight by 10% 1.2 5.3
Increase average recycled content across allpackaging to 42% 2.0 37.0
Make all packaging 100% recyclable/reusable 0.2 98.5
Year ended 30 June 2013. 31
Off track
On track
On track
On track
On track
On track
On track
On track
Setting targets for our environmental impactwhich will make a difference
f f
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Respected for our actions and performance
Leadingbrands acrosscategories and
global reach
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Diageo, the worlds leadingpremium drinks company
Outlook statements
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The information on this slide is inherently forward-looking. Please see slide Cautionary statement concerning forward-looking statements.
*Excluding foreign exchange and exceptional items.
For the year ending 30 June 2014
Exceptional operating items:Exceptional operating items are expected to be approximately 85 million for the year ending 30 June 2014 in respect of supplyrestructuring projects. Cash payments related to restructuring programs are expected to be approximately 110 million for the yearending 30 June 2014.
Net finance chargesThe effective interest rate for the year ending 30 June 2014 is likely to be at 4.0%.
Exchange rate movementsExchange rate movements for the year ending 30 June 2014 are expected to have a 55 million adverse impact on operating profit andincrease net finance charges by 5 million. This guidance excludes the impact of IAS 21 and 39.
Capex
Capex spend is expected to be approximately 750 million for the year ending 30 June 2014.
TaxationThe effective tax rate was 18% in the year ended 2013 and is currently expected to be the same for the year ending 30 June 2014.
Restatement for IAS 19RIn the year ending 30 June 2014, Diageo will restate for the new accounting standard on pension accounting and expects to issue thisrestatement in October with the quarter one IMS. The application of the revision to IAS 19 will increase net finance charges for the yearended 30 June 2013 by about 30 million. It is estimated that the IAS 19 charge for the year ending June 2014 will be approximately 10million. In addition, operating profit will reduce by about 10 million in respect of pension service charges which used to be charged to
finance charges.
Medium term guidance (issued August 2011)Organic operating profit growthDiageos medium term outlook is for cumulative average organic top line growth of 6%, cumulative operating margin improvementof200 basis points to be achieved in the 3 years ending 30 June 2014 and double-digit growth in core* eps.
34
Outlook statements
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Cautionary statement concerning forward-looking statements
This presentation contains forward-looking statements. These forward-looking statements can be identified by the fact that they do not relate only to historical or current facts. Inparticular, forward-looking statements include all statements that express forecasts, expectations, plans, outlook and projections with respect to future matters, including trends in resultsof operations, margins, growth rates, overall market trends, the impact of interest or exchange rates, the availability or co st of financing to Diageo, anticipated cost savings or synergies,the completion of Diageo's strategic transactions and restructuring programmes, anticipated tax rates, expected cash payments, outcomes of litigation, anticipated deficit reductions inrelation to pension schemes, general economic conditions and all statements on the slide outlook statements. By their nature, forward-looking statements involve risk and uncertaintybecause 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 differmaterially from those expressed or implied by these forward-looking statements, including factors that are outside Diageo's control.
These factors include, but are not limited to: changes in political or economic conditions in countries and markets in which Diageo operates, including changes in levels of consumer spending, failure of customer, supplier and
financial counterparties or imposition of import, investment or currency restrictions; changes in consumer preferences and tastes, demographic trends or perceptions about health related issues, or contamination, counterfeiting or other circumstances which could
harm the integrity or sales of Diageos brands; developments in any litigation or other similar proceedings (including with tax, customs and other regulatory authorities) directed at the drinks and spirits industry generally or at
Diageo in particular, or the impact of a product recall or product liability claim on Diageos profitability or reputation; the effects of climate change and regulations and other measures to address climate change including any resulting impact on the cost and supply of water; changes in the cost or supply of raw materials, labour and/or energy; legal and regulatory developments, including changes in regulations regarding production, product liability, distribution, importation, labelling, packaging, consumption or advertising;
changes in tax law, rates or requirements (including with respect to the impact of excise tax increases) or accounting standards; and changes in environmental laws, health regulationsand the laws governing labour and pensions;
the costs associated with monitoring and maintaining compliance with anti-corruption and other laws and regulations, and the costs associated with investigating alleged breaches ofinternal policies, laws or regulations, whether initiated internally or by external regulators, and any penalties or fines imposed as a result of any breaches;
ability to maintain Diageos brand image and corporate reputation, and exposure to adverse publicity, whether or not justified, and any resulting impacts on Diageos reputation andthe likelihood that consumers choose products offered by Diageos competitors;
increased competitive product and pricing pressures and unanticipated actions by competitors that could impact Diageos market share, increase expenses and hinder growth
potential; the effects of Diageos strategic focus on premium drinks, the effects of business combinations, partnerships, acquisitions or disposals, existing or future, and the ability to realiseexpected synergies and/or costs savings;
Diageos ability to complete existing or future business combinations, restructuring programmes, acquisitions and disposals; contamination, counterfeiting or other events that could adversely affect the perception of Diageos brands; increased costs or shortages of talent; disruption to production facilities or business service centres, and systems change programmes, existing or future, and the a bility to derive expected benefits f rom such programmes; changes in financial and equity markets, including significant interest rate and foreign currency exchange rate fluctuations and changes in the cost of capital, which may reduce or
eliminate Diageos access to or increase the cost of financing or which may affect Diageos financial results and movements to the value of Diageos pension funds; renewal of supply, distribution, manufacturing or licence agreements (or related rights) and licenses on favourable terms when they expire; and technological developments that may affect the distribution of products or impede Diageos ability to protect its intellectual property rights.
All oral and written forward-looking statements made on or after the date of this presentation and attributable to Diageo are expressly qualified in their entirety by the above factors andthe Risk factors contained in Diageos results announcement dated 31 July 2013. 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 circumstanceson 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 US
Securities and Exchange Commission. 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 rightsreserved. Diageo plc 2013.
The information in this presentation 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 investmentactivities.
This presentation includes information about Diageos target debt rating. A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision orwithdrawal 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.The contents of the companys website (www.diageo.com) should not be considered to form a part of or be incorporated into this presentation