AGM Statement

Diageo PLC
20 October 2004

                                      EMBARGOED until  14:30 BST 20 October 2004



DIAGEO AGM STATEMENT



At Diageo's annual general meeting this afternoon, Paul Walsh, chief executive
Diageo plc, will make the following comments:



'Trading in the first three months of the new financial year has been in line
with our expectations.   We therefore confirm the guidance we gave in July in
our trading update and at the time of our results announcement in early
September 2004.



Four years ago  Diageo embarked  on an exit strategy from food to build the
world's leading premium drinks company. To this end, on 4 October 2004 Diageo
sold 49.9 million shares of common stock of General Mills, and today our exit
from food is now almost complete. This focus on premium drinks created a
business that is capable of delivering top and bottom line growth with high and
improving operating margins, high and improving return on invested capital and
strong cash flow.



It has been our policy that the appropriate capital structure for Diageo is one
which achieves capital efficiency, maximises flexibility and gives Diageo the
appropriate level of access to debt markets at attractive cost levels. We
believe that this can be achieved by targeting a range of ratios which are
currently broadly consistent with a single A credit rating.



Today that policy is unchanged. Accordingly, £600 million of the net proceeds
received from the sale of common stock in General Mills will be used by Diageo
to repay debt.  The balance of £600 million of the net proceeds received will be
returned to shareholders as part of a larger on-market share buyback programme
in our current financial year - the year ending 30 June 2005.



Diageo expects to continue to return to shareholders the surplus capital which
arises from free cash flow and other opportunities which may improve financial
ratios on an on-going basis.  We intend to do so at a rate, which is consistent
with our view of capital structure, and of course subject to market conditions.
We believe that the most appropriate mechanism by which to return surplus
capital is through a combination of an on-market share buyback programme and
dividend payments.

From the beginning of Diageo's 2006 financial year, in July 2005, Diageo intends
to rebalance the return to shareholders of surplus capital arising from free
cash flow between buybacks and dividends and to gradually build dividend cover
over time from the current level.



While final decisions on annual dividends will continue to be taken in the light
of earnings performance, inflation and other external factors, the Diageo Board
would expect, from February 2006, to hold the company's dividend increase to
shareholders to around 5% annually until dividend cover moves towards 2.0
times.'



                                     -ends-



Investor enquiries:
Catherine James                 [phone]
[e-mail]


Media enquiries:
Isabelle Thomas                 [phone]            [e-mail]



Notes to Editor:

Diageo is the world's leading premium drinks business. With its global vision,
and local marketing focus, Diageo brings to consumers an outstanding collection
of beverage alcohol brands across the spirits, wine and beer categories
including Smirnoff, Guinness, Johnnie Walker, Baileys, J&B, Jose Cuervo, Captain
Morgan, Tanqueray and Crown Royal, and Beaulieu Vineyard and Sterling Vineyards
wines. Diageo trades in some 180 markets around the world and is listed on both
the New York Stock Exchange (DEO) and the London Stock Exchange (DGE). For more
information about Diageo, its people, brands and performance, visit us at
www.diageo.com






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