Interim Results
Diageo PLC
17 February 2005
17 February 2005
Press release
Diageo Interim results for the six months ended 31 December 2004
Continued growth across all key measures with organic growth of 3% volume, 5%
net sales (after deducting excise duties) and 8% operating profit before
exceptional items in the first half of fiscal '05.
Results at a glance
This is the first time that results have been presented under Diageo's realigned
geographic organisation.
First half First half Reported Organic*
2005 2004 movement movement
Volume equivalent 69.2 66.9 3% 3%
units m
Turnover £ million 4,984 5,060 (2)% 5%
Net sales £ million 3,705 3,795 (2)% 5%
(after
deducting
excise
duties)
Marketing £ million 575 612 (6)% 2%
investment
Operating £ million 1,192 1,181 1% 8%
profit
before
exceptional
items
Operating % 23.9 23.3 0.6 ppts 0.6 ppts
margin
before
exceptional
items
* Organic movement before exceptional items. See page 29 for an explanation of
organic movement and a reconciliation to GAAP measures.
Other financial highlights
First half First half
2005 2004
Operating profit £ million 1,172 1,162
Basic eps before exceptional items Pence 30.0 30.3
Free cash flow £ million 636 620
Profit for the period £ million 869 891
Basic eps Pence 29.0 29.3
Interim dividend per share Pence 11.35 10.60
Return on invested capital % 17.9 17.6
Chief Executive's comments
'Diageo's aim is to consistently deliver across key performance measures and in
this half we have again delivered top line organic growth and margin improvement
and increased return on capital. This is the tenth consecutive set of results in
which we have delivered these improvements.
Our main engines for growth during the half year have been our global priority
brands, where volume increased by a further 4%, and our North American business,
where organic operating profit is up 12%. Even in Europe, where the consumer
environment is far more challenging, we have delivered 4% organic operating
profit growth. The performance of our International business, where organic
operating profit was also up 4%, reflected improving trading conditions in Latin
America, partially offset by difficult trading conditions in Korea, Taiwan and
Nigeria, and a 13% increase in marketing investment.
We have made a good start to the year and we can maintain our full year guidance
of 6% organic operating profit growth despite absorbing an increase in the cost
of executing additional productivity initiatives in the second half.'
Paul S Walsh, Chief Executive
17 February 2005
DIAGEO INTERIM RESULTS
For the six months ended 31 December 2004
Key features of the half year
• North America
Diageo's volume in North America grew 5%, significantly ahead of the market
which grew about 2%. Diageo has gained share in the United States across all
three categories - spirits, wine and beer. This strong top line growth
together with mix improvement and cost reduction means that Diageo's
business in North America delivered organic operating profit growth of 12%
• Europe
Trading conditions in Europe are tough and the ready to drink market
continues to contract but these results show that focus on leading brands
with strong consumer appeal, Smirnoff, Guinness, Baileys, and a focus on
cost does deliver operating profit growth
• International
The strength of Diageo's International business is in its broad geographic
reach and brand range. This has allowed us to deliver organic operating
profit growth despite facing difficult trading conditions in Nigeria, Taiwan
and Korea. Strong volume growth in Latin America and innovation-led growth
in Australia drove net sales (after deducting excise duties) up 9%.
Investment was increased in the new growth markets such as China and
marketing behind all the global priority brands was up over 20%
• The global priority brands remain our fastest growth brands with volume up
4%
• Marketing investment has been focused on the core spirits brands and spend
excluding ready to drink brands grew 7%
• Diageo's decision to dispose of most of its shares in General Mills
improved return on invested capital and freed up cash for debt reduction and
share buybacks. It did however negatively impact eps. Excluding the impact
of the sale of General Mills shares and adverse currency movements, Diageo
delivered eps growth of 12%
• Financial highlights
Net sales after deducting excise duties 5%*
Operating profit 8%*
Operating margin 0.6ppts*
Free cash flow at £636 million £16 million
Return on invested capital 0.3 ppts
* Organic movement before exceptional items. See page 29 for an explanation of
organic movement and a reconciliation to GAAP measures.
OPERATING AND FINANCIAL REVIEW
For the six months ended 31 December 2004
OPERATING REVIEW
See explanatory notes on page 29 for definitions.
Analysis by brand
Equivalent Volume Net sales*
units million movement movement
% %
Global priority brands
Smirnoff 13.5 5 2
Johnnie Walker 7.1 4 9
Guinness 5.9 - 7
Baileys 4.5 3 2
J&B 3.5 (1) 1
Captain Morgan 3.5 11 11
Jose Cuervo 2.2 11 10
Tanqueray 1.0 (4) -
Total global priority brands 41.2 4 5
Local priority brands 12.9 1 1
Category brands 15.1 4 7
Total 69.2 3 5
* after deducting excise duties
Smirnoff's overall performance was driven by the core brand's strong performance
across all three regions. Smirnoff ready to drink performance was mixed with
growth in North America and International offset by a volume decline in Europe.
Volume and net sales (after deducting excise duties) of Smirnoff excluding ready
to drink increased by 6%.
Johnnie Walker also achieved strong performance with broad based growth across
all three regions. Johnnie Walker Red Label and Johnnie Walker Black Label both
grew volume and net sales (after deducting excise duties), while even faster
growth of the Johnnie Walker super deluxe variants delivered mix improvement.
Guinness volume was flat, impacted by difficult trading conditions in Africa,
particularly Nigeria, offset by improved performance in Europe. Price increases
were successfully implemented in many markets including Great Britain, Ireland
and Africa.
Baileys overall performance was held back by a decline in volume and net sales
(after deducting excise duties) in North America. This decline was the result of
lower sales of Baileys Minis which were launched in the prior period. In other
markets, Baileys achieved good growth with volume up 6%.
J&B's performance continues to reflect the decline of the scotch category
in Spain, which is J&B's single biggest market, and represents nearly 50%
of total J&B volume.
Captain Morgan, Jose Cuervo and Tanqueray are predominantly North American
brands. The performance of Captain Morgan remained strong, boosted by
innovation. Jose Cuervo rebounded, delivering double digit volume and net sales
(after deducting excise duties) growth. Tanqueray continues to underperform the
North America imported gin segment due in part to a price increase implemented
in certain regions of the United States in the six months ended 31 December
2004.
Overall ready to drink volume increased 2% although performance and the general
health of the segment varies globally. Successful innovation initiatives drove
strong growth in North America and International, particularly in Australia and
South Africa. Volume declined in Europe due to the contraction of the segment
and increased regulations and duties.
Analysis by market
North America
Summary:
• Global priority brands account for 60% of total volume, while local
priority brands represent 25% and category brands account for the remaining
15%
• Share gains in the spirits, wine and beer categories
• Volume growth of 5%, supported by innovation initiatives, together with
price increases and mix improvement delivered 8% net sales (after deducting
excise duties) growth
• Operating profit before exceptional items grew 12% and operating margin
was up 1.1 percentage points driven by strong brand performance, lower
marketing and incremental Seagram synergy of £20 million
• Consolidation phase of distribution strategy essentially completed
Key measures: First half First half Reported Organic
2005 2004 movement movement
£ million £ million % %
Volume 5 5
Turnover 1,384 1,457 (5) 8
Net sales (after deducting excise duties) 1,167 1,228 (5) 8
Marketing 187 202 (7) 2
Operating profit before exceptional items 454 453 - 12
Reported performance:
Turnover was £1,384 million in the six months ended 31 December 2004 down by £73
million from £1,457 million in the comparable prior period. Operating profit
before exceptional items increased by £1 million to £454 million in the six
months ended 31 December 2004.
Organic performance:
The weighted average exchange rate used to translate US dollar turnover moved
from £1 = $1.65 in the six months ended 31 December 2003 to £1 = $1.85 in the
six months ended 31 December 2004. The weakening of the US dollar resulted in a
£171 million reduction in turnover that was partly offset by organic growth of
£100 million. Operating profit before exceptional items increased by £1 million,
this increase reflecting organic growth of £47 million offset by £46 million of
adverse exchange rate movement effects.
Organic brand performance: Volume movement Net sales*
movement
% %
Smirnoff 6 10
Johnnie Walker 6 14
Jose Cuervo 10 8
Baileys (5) (6)
Captain Morgan 12 12
Tanqueray (6) (2)
Guinness 2 4
Total global priority brands 6 7
Local priority brands 4 7
Category brands 3 14
Total 5 8
* after deducting excise duties
Smirnoff excluding ready to drink grew volume 5% while maintaining the price
increase of a year ago. That price increase together with the strong growth of
the flavoured vodka variant Smirnoff Twist drove net sales (after deducting
excise duties) up 7%. Smirnoff Twist grew nearly 30% and now constitutes about
20% of Smirnoff volume, excluding ready to drink. The growth in Smirnoff has
been due in part to an improvement in the brand's appeal amongst legal drinking
age to 29-year-old consumers.
Smirnoff ready to drink volume grew 10% driven by the strong performance of
Smirnoff Twisted V, launched in the fourth quarter of calendar 2003. The
performance of Smirnoff ready to drink resulted in favourable mix and net sales
(after deducting excise duties) growth of 10% for total Smirnoff. In the United
States, Smirnoff grew share of both the vodka category and the ready to drink
segment.
Smirnoff marketing investment decreased 3%. Smirnoff Red marketing was lower
period on period as the prior period included one time investments related to
the Icon package launch and image campaign. This was partially offset by an
increase in Smirnoff ready to drink marketing to support increased media and
programmes focused on introducing target consumers to Smirnoff Twisted V.
Johnnie Walker volume grew 6% while net sales (after deducting excise duties)
was up 14%. A price increase in selected regions of the United States coupled
with growth in Black Label and the super deluxe variants drove this mix
improvement. Johnnie Walker Black Label volume increased 6% and grew share in
the United States on higher pricing. Strong consumer demand for super premium
brands benefited the super deluxe variants, including Johnnie Walker Green Label
launched in October 2004. Johnnie Walker Red Label volume growth slowed to 1%
and Red Label lost share as competitive pressures increased in the premium
scotch segment.
Jose Cuervo grew volume and share of the United States tequila category and the
brand's first television advertising campaign was launched. Net sales (after
deducting excise duties) grew 8% with some adverse impact from flat volume in
the higher value Jose Cuervo Margarita Mix variants. Excluding these variants,
Jose Cuervo volume grew 10% while net sales (after deducting excise duties) was
up 13%.
Baileys volume decreased 5% and share declined as the prior period included the
pipeline fill related to the Minis launch but competitive pressures have also
increased. Marketing investment declined 7% as advertising in the comparable
period had been increased to support the Minis launch.
Captain Morgan continued to deliver strong performance with volume and net sales
(after deducting excise duties) both up 12% driven by Original Spiced Rum and
the launch of new Parrot Bay Flavors. Strong volume growth drove share gains of
over 2 percentage points.
Tanqueray volume decreased 6%, although net sales (after deducting excise
duties) fell only 2% due to a price increase taken in the first quarter.
Tanqueray continued to lead the imported gin segment.
Guinness volume increased 2% and grew share driven by growth in Guinness Draught
in Bottles and Guinness Extra Stout. Net sales (after deducting excise duties)
increased by 4%.
Local priority brand performance accelerated with volume up 4% and net sales
(after deducting excise duties) up 7%. Crown Royal, with volume up 7%, grew
share of the North American whiskey category. Net sales (after deducting excise
duties) growth also benefited from higher pricing in certain regions of the
United States. Beaulieu Vineyard and Sterling Vineyards continued to perform
strongly with combined volume up 27%, while net sales (after deducting excise
duties) growth of 14% was negatively impacted by a mix shift to lower value
variants. Growth of Crown Royal, Beaulieu Vineyard and Sterling Vineyards which
constitute about 30% of Diageo's local priority brand net sales (after deducting
excise duties), offset mixed performance across the remaining North America
local priority brands and delivered mix improvement.
Volume of the category brands grew 3% with Popov up 8% and Gordon's vodka up 3%,
along with growth in beer led by Red Stripe and Smithwick's.
Performance in Canada, which constitutes 10% of North America volume, was
negatively impacted by ongoing external labour issues. This included a strike in
the province of Quebec resulting in the closure of most beverage alcohol
retailers from November 2004 and the dispute in the National Hockey League which
has negatively impacted the on-trade channel.
In the prior period marketing was increased to support the Smirnoff Icon package
launch and image campaign as well as the launch of Baileys Minis. In the current
period marketing expenditure increased 2% as investment was focused to maximise
the impact of other large scale fully integrated marketing programmes and
innovation initiatives in the half. Johnnie Walker marketing increased to
support increased advertising, successful consumer relationship marketing
programmes and holiday gift packaging. Marketing investment was also increased
to support the launch of Johnnie Walker Green Label and Captain Morgan Parrot
Bay Flavors.
In the half year, Diageo essentially completed the consolidation phase of its
distribution strategy with Moet Hennessy in the United States which commenced in
February 2002. Over the last two and a half years, Diageo has created 39
dedicated distributor sales teams and staffed them with over 2,100 sales persons
selling Diageo's brands.
On 1 July 2004, Diageo moved the distribution of its brands formerly managed by
Schieffelin & Somerset into its existing United States Spirits operation,
simplifying the management of the brands and reducing costs.
On 8 February 2005, Diageo completed the acquisition of The Chalone Wine Group
Ltd. for US$275 million (£143 million). The acquisition increases the range of
premium brands in Diageo's North American wine business and is expected to yield
significant synergy for that business.
Europe
Summary:
• Great Britain, Ireland and Spain account for 65% of Europe's volume and
70% of net sales (after deducting excise duties)
• Global priority brands account for 65% of total volume; while local
priority brands represent 16% and category brands account for the remaining
19%
• Increased regulations and duties on ready to drink beverages,
health-related legislation, such as the on-trade smoking ban in Ireland, and
weak economic conditions, form the backdrop of Diageo's performance in
Europe
• Total volume was up 1%, while net sales (after deducting excise duties)
declined 1%. Performance, excluding ready to drink, was stronger, with both
volume and net sales (after deducting excise duties) growing 2% during the
period
• Marketing was down 3%. Investment behind ready to drink declined 49% in
response to the decline in the segment. Excluding ready to drink, marketing
was up 5%
• Operating profit was up 4% due to stronger pricing in Spain, Great Britain
and Greece as well as lower overall marketing
Key measures: First half First half Reported Organic
2005 2004 movement movement
£ million £ million % %
Volume 1 1
Turnover 2,240 2,247 - 1
Net sales (after deducting excise duties) 1,448 1,481 (2) (1)
Marketing 241 268 (10) (3)
Operating profit before exceptional items 459 432 6 4
Reported performance:
Turnover in Europe was down in the six months ended 31 December 2004 at £2,240
million. Operating profit before exceptional items increased by 6% from £432
million to £459 million.
Organic performance:
Turnover decreased by £7 million compared with the six months ended 31 December
2003. This decrease primarily arose from a £29 million reduction due to exchange
rate impacts offset by organic growth of £26 million. The exchange impact
results primarily from a weakening of the euro compared to the comparable period
in 2003. Operating profit before exceptional items increased by £27 million as a
result of £19 million of organic growth and a beneficial exchange rate movement
effect of £8 million.
Organic brand performance Volume Net sales*
movement movement
% %
Smirnoff - (12)
Johnnie Walker 3 5
Guinness 1 6
Baileys 6 6
J&B (1) -
Total global priority brands 2 -
Local priority brands (5) (5)
Category brands 6 -
Total 1 (1)
* after deducting excise duties
Smirnoff volume was flat as 4% growth in the Smirnoff brand, excluding ready to
drink, offset losses in ready to drink volume, down 21%. Net sales (after
deducting excise duties) declined 12%, as a 26% decline in ready to drink net
sales (after deducting excise duties) was only partially compensated by 4%
growth in the Smirnoff brand, excluding ready to drink.
Johnnie Walker volume grew 3% driven by strong performances in the smaller
markets. Both Johnnie Walker Red Label and Johnnie Walker Black Label performed
well in Russia, Poland and Portugal while Johnnie Walker Super Deluxe grew in
Greece, Portugal and Spain. Net sales (after deducting excise duties) grew 5%
due to stronger pricing in Johnnie Walker's two largest markets, Greece and
Spain.
Guinness volume was up 1% as the brand returned to growth in Great Britain and
slowed its decline in Ireland. Both markets had solid performances in the
on-trade with growth in the off-trade due to new packaging.
Baileys continued to grow, with volume up 6% due to strong performances in
several markets. Volume in Great Britain, Baileys biggest European market, grew
6%. Spain grew volume 5% on the back of a new advertising campaign and growth in
the on-trade. The launch of Baileys Minis and a successful coffee house campaign
drove 10% volume growth in Germany.
J&B volume declined 1%. Volume in Spain, J&B's largest market, was
down 4% as a result of a declining whisky category and stronger pricing. This
was partially offset by strong performances in Portugal up 9% and Turkey up 10%.
Net sales (after deducting excise duties) were flat despite declining volume as
a result of stronger pricing throughout Europe.
Local priority brand volume declined 5% with a corresponding decline in net
sales (after deducting excise duties). In Great Britain, Gordon's Gin grew in a
declining category. However, in Ireland, lagers deteriorated as a result of the
competitive environment and a cold summer in 2004 compared to the unusually hot
summer of 2003. In Spain, Cacique continued to grow with volume up 3%.
Category brands grew volume 6%. Blossom Hill continued on a strong trajectory
growing 15% in Great Britain. Pampero performed well in Spain and Italy while
standard scotch was particularly strong in Greece with Haig up 31%.
Great Britain
Volume growth was 2% and net sales (after deducing excise duties) grew 1%.
Excluding ready to drink, performance was stronger with volume up 3% and net
sales (after deducing excise duties) up 6% following price increases on Baileys,
Smirnoff Red and Guinness.
Smirnoff Red volume grew 4%, with net sales (after deducting excise duties)
growing 6% as a result of a price increase in April. Share in the period grew 1
percentage point due to a strong marketing programme, increased distribution and
consistent promotional activities. Smirnoff ready to drink volume declined 18%,
however, the brand grew share by 1 percentage point and is the leader in the
ready to drink segment with a 29% share.
Guinness returned to growth with volume up 2% and net sales (after deducting
excise duties) up 6%, benefiting from a price increase put through in April. New
packaging for Guinness Draught in cans drove off-trade growth while a solid
performance in the on trade enabled Guinness to hold share flat for the period.
Marketing investment increased 6% to support a programme of consistent TV
presence.
Baileys volume was up 6% while net sales (after deducting excise duties) grew
5%. The brand had another good period with share up 10 percentage points
benefiting from major retailers aggressively supporting Baileys as a strategy to
drive footfall through the Christmas period.
Local priority brand volume declined 4%. Bell's retained its leadership of the
blended whisky segment despite lower volume. Gordon's Gin grew volume 7%, and
share 3 percentage points, as a result of an effective advertising and
promotional campaign and the successful re-launch of Gordon's Sloe Gin.
Ireland
The results for Ireland reflect the ongoing difficulties in the on-trade. The
continuing shift from the on-trade to the off-trade was further exacerbated by
the smoking ban introduced in March 2004 and as a result, Diageo's volume
declined 3%.
Guinness turned in a strong performance driven by a range of successful
programmes supporting the brand and benefiting from a cool summer in 2004.
Volume decline slowed to 1% and net sales (after deducting excise duties) grew
5% with some benefit from pricing. The on-trade in the Republic of Ireland
remains Guinness' largest channel, accounting for nearly 80% of volume. In this
channel, share was up by 1 percentage point despite the challenging dynamics
taking place in the on-trade.
Spirits performed well. Baileys volume grew 6% and Smirnoff volume was up 12%.
The Smirnoff relaunch in 2004 was successful and the brand remains the number
one vodka brand in Ireland.
Local priority brand volume was down 10% due to weak performance in lagers and
Smithwick's. Budweiser, Carlsberg and Harp performance was held back by a cool
summer in 2004 and an increasingly competitive environment in the off-trade.
Spain
Volume grew 1% in a spirits market that declined by 2%. While Cacique, Baileys,
and Smirnoff drove growth, performance also benefited from trade buy-in ahead of
increases in both duty and price. A price rise was put through in April 2004 and
a second price increase was made on 1 January 2005 in conjunction with a 2%
increase in duty. As a result of stronger pricing, net sales (after deducting
excise duties) grew 4%.
J&B volume was down 4%. However, stronger pricing meant that net sales
(after deducting excise duties) was down only 1%. Despite a 1 percentage point
decrease in share, J&B remains the leader with a 25% share of the
standard whisky segment.
The remaining global priority brands performed well. Baileys volume was up 5%
and net sales (after deducting excise duties) increased 9%, in the wake of
stronger pricing. Johnnie Walker volume was up 1% thanks to Johnnie Walker Black
Label, growth of 18% - albeit off a small base - which offset a 2% decline in
Johnnie Walker Red Label. Johnnie Walker Black Label also grew share 1
percentage point while Johnnie Walker Red Label's share remained flat.
Local priority brand volume was up 3%. The dark rum segment continued to grow
albeit at a more moderate rate as consumers continue to shift away from whisky
and white rum. Cacique volume grew 3% and net sales (after deducting excise
duties) were up 9%. The brand lost share due to numerous new entries, however,
it is still the leader of the dark rum segment with a 34% share.
Category brand performance was strong. Volume increased 15% as a result of
Gordon's Gin, which grew 14% due to favourable pricing versus the competition
and continued momentum behind Pampero, which was up 16%.
Rest of Europe
The rest of Europe represents 35% of total European volume and 30% of net sales
(after deducting excise duties). Total volume was up 3%, with volume excluding
ready to drink up 4% offsetting a sharp 24% decline in ready to drink. Net sales
(after deducting excise duties) declined 1% as a result of lower ready to drink
sales in Germany, Switzerland and the Nordics. Excluding ready to drink, net
sales (after deducting excise duties) were up 4% reflecting stronger pricing in
Greece and Portugal.
In Greece, volume was up 3% with strong growth in Jose Cuervo and Haig. France's
volume was up 4% as a result of growth in Smirnoff Red, Smirnoff ready to drink
and J&B. Germany's volume fell 4% as growth in Baileys and Smirnoff Red
only partially offset a 65% decline in Smirnoff ready to drink volume due to an
increase in duties and regulations. In Italy, total volume was up 1% as Pampero
growth of 26% was offset by weaker volume for Johnnie Walker and Smirnoff.
Russia delivered a strong performance, albeit from a relatively small base.
Volume grew 28%, while net sales (after deducting excise duties) were up 33%.
Johnnie Walker and Baileys, with volume up 30% and 26% respectively, drove
performance, together with the launch of Smirnoff ready to drink in the summer
of 2004. Johnnie Walker Red Label, Johnnie Walker Black Label and Baileys all
increased share and are the clear leaders in their respective segments.
On 19 November 2004, Diageo announced that it had reached an agreement to
acquire the Ursus vodka and Ursus Roter brands. The total cash investment will
be approximately €145 million (£102 million) for the acquisition of the brands
and the termination of certain existing production and distribution agreements
in respect of the brands. The completion of the transaction is subject to
regulatory clearances.
International
Summary:
• Global priority brands account for 53% of total volume, while local
priority brands represent 15% and category brands account for the remaining
32%
• International volume growth was achieved through strong growth in Latin
America and parts of Asia Pacific. Volume growth together with price
increases in Latin America and Africa and overall favourable mix delivered
9% net sales (after deducting excise duties) growth
• Strong volume growth from the global priority brands together with price
increases on Smirnoff and Guinness offset the continued decline of the
scotch category in Korea and mixed volume performance across Africa and Asia
Pacific
• Significant investments were made in the period to position Diageo for
long term growth including an increase in marketing of 23% on global
priority brands and the launch of a redesigned Guinness bottle in Nigeria
holding back operating profit growth
• Emerging markets of Brazil, India and China continue to grow rapidly
driven by growth in Johnnie Walker and Smirnoff
First half First half Reported Organic
Key measures: 2005 2004 movement movement
£ million £ million % %
Volume 5 4
Turnover 1,332 1,327 - 9
Net sales (after deducting excise duties) 1,062 1,057 - 9
Marketing 147 142 4 13
Operating profit before exceptional items 352 374 (6) 4
Reported performance:
Reported turnover in the six months ended 31 December 2004 was £1,332 million,
up £5 million on the prior period figure of £1,327 million. Operating profit
before exceptional items was down 6% at £352 million for the six months ended 31
December 2004.
Organic performance:
Turnover in International markets was up £5 million compared with the six months
ended 31 December 2003. There were unfavourable exchange losses of £103 million,
offset by a £106 million improvement in organic performance. A small acquisition
effect has also been adjusted in reaching organic turnover growth.
There was a £22 million decrease in reported operating profit before exceptional
items. This decrease was due to organic improvements in brand performance of £13
million offset by unfavourable exchange rate movements of £35 million
(principally driven by weakness in the US dollar).
Organic brand performance: Volume Net sales*
movement movement
% %
Johnnie Walker 5 10
Smirnoff 14 22
Guinness (1) 10
Baileys 5 3
Total global priority brands 6 11
Local priority brands 1 (1)
Category brands 4 13
Total 4 9
* after deducting excise duties
Johnnie Walker and Smirnoff led volume growth in global priority brands. Johnnie
Walker volume grew 5% driven by strong performance across Latin America and
global duty free offset by a volume decline in Taiwan. Smirnoff volume was up
14% with strong growth in both Smirnoff Red, up 11% and Smirnoff ready to drink,
up 31%. Smirnoff performance was particularly strong in Latin America, Asia
Pacific and India with volume growth of 22%, 20% and 41% respectively. Smirnoff
ready to drink volume was up 30% in Latin America driven by strong performance
in Brazil, Paraguay and Uruguay as a result of repositioning of the brand and
the launch of the Black Ice variant. Smirnoff price increases in Latin America
coupled with the growth in the ready to drink segment delivered favourable price
/ mix benefits.
Guinness volume declined 1% driven by mixed results across Africa. Volume in
Nigeria declined 15% while net sales (after deducting excise duties) grew 5% as
economic conditions tightened and price increases in excess of inflation were
implemented. The decline in Nigeria, which represents 46% of Guinness volume in
Africa was due in part to increased competition for disposable income
predominantly from mobile phone companies and a significant decrease in
liquidity because of banking regulation changes. Price increases were
implemented across a number of countries in Africa in the current and previous
fiscal years resulting in 11 percentage points of price/mix benefit.
Baileys volume grew 5% driven by growth of 17% in Latin America offset by
weakness in Australia where volume declined 14%. The growth in Latin America was
led by Chile, where volume doubled to over 60,000 equivalent units as the cream
liqueur segment continues to develop.
Volume of local priority brands grew 1% but performance was mixed. Strong growth
from Bundaberg (Australia), Buchanan's (Venezuela), Pilsner (Kenya) and Bell's
(South Africa) offset declines in Windsor (Korea) and Malta Guinness (Africa).
Bundaberg continued to perform strongly supported by new packaging and increased
media investment. Bundaberg ready to drink grew share of the segment and became
the number 1 selling ready to drink product in Australia benefiting from the
success of recently launched new variants. Trading conditions and pricing above
inflation in Nigeria disproportionately impacted Malta Guinness and overall
volume declined 8%. Local priority brand net sales (after deducting excise
duties) declined 1% driven in part by the negative impact of Windsor's decline
on mix.
Category brands grew 4% with mixed volume performance across the scotch, rum,
gin and beer brands. Net sales (after deducing excise duties) increased 13%
primarily due to the growth of higher value brands such as Buchanan's and Old
Parr coupled with significant declines in lower value brands such as Spey Royal
and Pilsner.
Overall marketing investment grew 13% with spend behind global priority brands
up 23% to support increased media in Latin America on Smirnoff and Johnnie
Walker and an upweighted media campaign on Baileys in Mexico. Additionally,
there was a significant increase in marketing in China focused on Johnnie
Walker. This was offset by a decrease in marketing in Korea due to the decline
in the scotch category and investment in Bundaberg in Australia decreased as the
comparable period included the sponsorship of the Rugby World Cup.
Asia Pacific
Scotch represents 44% of Diageo's volume across the Asia Pacific region and
performance was mixed. The total scotch category declined 12% in Korea due to
the residual effects of the consumer credit crunch and the continued erosion of
consumer confidence. Windsor lost share in Korea with volume declining 21% but
Diageo maintained its leadership of the scotch category.
In Taiwan the scotch category has become increasingly competitive. Johnnie
Walker volume declined 47% and lost share to a local competitor. Volume was
negatively impacted in part by the effect of a prior period price increase.
Volume declined 22% in Thailand driven by Spey Royal with volume down 34% as the
brand increased price and lost share in the highly competitive standard scotch
segment. Johnnie Walker volume declined 17% but net sales (after deducting
excise duties) increased 4% benefiting from growth in the super deluxe variants
and the discontinuance of certain price promotions.
India and China continue to experience rapid economic expansion and increases in
consumer purchasing power and affinity for international spirits. In China,
rapid growth of the scotch category continued with volume of Johnnie Walker up
67%, to 90,000 equivalent units, supported by new marketing initiatives focused
on building brand awareness through advertising and expanding consumer
relationship marketing programmes. In India, Smirnoff grew volume and share
driven by the launch of Smirnoff Flavors while Johnnie Walker volume was up 7%.
Ready to drink volume growth of 20% boosted performance in Australia. Bundaberg,
Smirnoff and Johnnie Walker each posted double digit volume increases on their
respective ready to drink variants. Growth was driven by line extensions and
share gains. Performance in spirits was mixed with Bundaberg, Baileys and
Smirnoff registering share gains while Johnnie Walker Red Label lost share as
aggressive discount programmes were eliminated.
Latin America
The improved economic environment coupled with currency stability provided a
lift to performance across Latin America with the scotch and vodka categories
leading the growth. Total volume in Latin America increased 14% driven by the
global and local priority brands which grew 17% and 23%, respectively. In
Brazil, Paraguay, and Uruguay, Johnnie Walker grew volume 10% and share
benefited from new media spend. Smirnoff, excluding ready to drink, grew volume
26% boosted by higher media spend and a new packaging launch. A price increase
was also implemented on Smirnoff. In Brazil, Johnnie Walker Red Label, Johnnie
Walker Black Label and Smirnoff maintained leadership positions of their
respective segments.
Volume of Johnnie Walker and Buchanan's were each up over 70% in Venezuela and
both grew share as Diageo maintained its leadership in the super deluxe, deluxe
and standard scotch segments. Performance in Mexico was strong with overall
volume up 39% driven by growth and share gains across the scotch category for
Buchanan's, Johnnie Walker Red Label and J&B. Baileys also grew volume
22% and share boosted by a new media campaign.
Africa
Overall volume in Africa grew 3% but results were mixed reflecting trading
difficulties in some markets there. The improving economic environment in Kenya
and growth in South Africa offset the deteriorating trading conditions in
Nigeria and the Ivory Coast. Excluding Nigeria, Guinness volume grew 13% largely
because of volume growth and share gains in Cameroon and Ghana. Guinness Extra
Smooth performed exceptionally well in Cameroon after its launch in June 2004,
capturing 4% of the beer market principally at the expense of competitive lager
brands. The Ivory Coast, which is the fifth largest Guinness market in Africa,
saw volume decline over 40% impacted by the deteriorating political and security
situation.
Beer performance in Kenya was strong with volume up nearly 20% as performance of
Tusker and Pilsner rebounded and a new value lager was launched. Increasing
consumer confidence and strengthening currency boosted performance in South
Africa as Johnnie Walker, J&B and Bell's each posted double-digit volume
growth. Volume of Smirnoff in South Africa, which represents 91% of Smirnoff in
Africa, grew 6% due in part to the introduction of Smirnoff Triple Spin, a new
ready to drink variant.
In December 2004, Diageo completed the purchase of Ghana Breweries Limited, a
subsidiary of Heineken, and retains a majority ownership in the newly formed
entity - Guinness Ghana Breweries Limited.
Global duty free
Volume decreased 1% and net sales (after deducting excise duties) declined 2%
reflecting volume growth in Johnnie Walker offset by a volume decline in
Baileys. Performance was impacted by the weakening of the US dollar.
Corporate revenue and costs
Reported turnover in the six months ended 31 December 2004 was £28 million, down
£1 million versus the prior period. Net corporate operating costs and trading
losses decreased 6% to £73 million. Corporate revenues and costs are in respect
of central costs including finance, human resources and legal as well as certain
information system, service centre, facilities and employee costs that are not
directly allocated to the geographical operating units. Additionally, they also
include the revenues and costs related to rents receivable in respect of
properties not used by Diageo in the manufacture, sale or distribution of
premium drinks and the results of Gleneagles Hotel.
FINANCIAL REVIEW
Summary consolidated profit and loss account
Six months ended 31 December 2004 Six months ended 31 December 2003
Before Exceptional Before Exceptional
exceptional items exceptional items
items Total items Total
£ million £ million £ million £ million £ million £ million
Turnover 4,984 - 4,984 5,060 - 5,060
Operating costs (3,792) (20) (3,812) (3,879) (19) (3,898)
Operating profit 1,192 (20) 1,172 1,181 (19) 1,162
Associates' profits 109 - 109 273 (11) 262
Investment income 8 - 8 - - -
Disposal of fixed assets (25) (25) (8) (8)
Finance charges (74) - (74) (157) - (157)
Profit before taxation 1,235 (45) 1,190 1,297 (38) 1,259
Taxation (296) 14 (282) (324) 6 (318)
Profit after taxation 939 (31) 908 973 (32) 941
Minority interests (39) - (39) (50) - (50)
Profit for the period 900 (31) 869 923 (32) 891
Turnover
On a reported basis, turnover decreased by £76 million from £5,060 million in
the period ended 31 December 2003 to £4,984 million in the period ended 31
December 2004. Turnover was adversely impacted by exchange rate movements of
£303 million, principally arising from weakening of the US dollar.
Operating costs
On a reported basis, operating costs decreased by £86 million (2%) from £3,898
million in the period ended 31 December 2003 to £3,812 million in the period
ended 31 December 2004. Operating costs included exceptional operating costs of
£20 million (2003 - £19 million). On a reported basis before exceptional items,
excise duties increased by £14 million from £1,265 million in the comparable
prior period to £1,279 million, whilst cost of goods sold decreased by £52
million and marketing investment was down 6% from £612 million to £575 million.
Marketing investment on global priority brands (excluding ready to drink) was
£324 million while marketing spend on ready to drink brands was £70 million.
Overall, the impact of exchange rate movements reduced total operating costs
before exceptional items by £230 million.
Exceptional operating costs
Operating profit for the period is after £20 million of exceptional operating
costs. Exceptional operating costs include £14 million of accelerated
depreciation in respect of the Park Royal brewery which, as announced in April
2004, will close in the summer of 2005. Also included in exceptional operating
costs are £6 million of costs related to the integration of the Seagram spirits
and wine businesses, acquired in December 2001 (2003 -£19 million).
Operating profit
Reported operating profit before exceptional items increased by £11 million from
£1,181 million for the period ended 31 December 2003 to £1,192 million for the
period ended 31 December 2004. Exchange rate movements reduced operating profit
before exceptional items for the six months ended 31 December 2004 by £73
million (mainly arising from a £57 million impact of a weakening US dollar).
Post employment plans
Post employment costs for the period ended 31 December 2004 of £42 million (2003
- £62 million) included amounts charged to operating profit of £49 million (2003
- £54 million) partly offset by finance income of £7 million (2003 - charges of
£8 million). In October 2004 4.0 million shares in General Mills with a market
value of £100 million were transferred to the group's UK pension fund.
Associates
The group's share of profits of associates before exceptional items was £109
million for the period compared to £273 million in the comparable period last
year. Diageo ceased to equity account for its share of the results of General
Mills from 23 June 2004. In the six months ended 31 December 2003 General Mills
contributed £153 million to share of profits of associates. Diageo's 34% equity
interest in Moet Hennessy contributed £100 million to share of profits of
associates before exceptional items (2003 - £110 million).
Investment income
Income from fixed asset investments was £8 million, arising on dividends
receivable from General Mills.
Finance charges
Finance charges decreased from £157 million in the period ended 31 December 2003
to £74 million in the six months ended 31 December 2004.
The net interest charge decreased by £68 million (47%) from £146 million in the
comparable prior period to £78 million in the six months ended 31 December 2004;
£33 million of this decrease results from the cessation of equity accounting for
General Mills. The balance of the reduction in the net interest charge mainly
results from the interest impact of increased trading cash inflow (£26 million)
and from the disposal of General Mills shares (£9 million) partly offset by an
increased charge arising from the funding of the share repurchases of £5
million.
Other finance income of £4 million included income of £7 million (2003 - charge
of £8 million) in respect of the group's post employment plans. This beneficial
movement principally reflects the increase in the value of the assets held by
the post employment plans between 1 July 2003 and 30 June 2004.
Non operating exceptional items
Non operating exceptional items before taxation were a charge of £25 million in
the six months ended 31 December 2004 compared with a charge of £8 million in
the six months ended 31 December 2003. This charge comprised a loss on disposal
of part of the group's investment in General Mills of £28 million and a net gain
on disposal of other fixed assets of £3 million. In October 2004, 49.9 million
shares in General Mills were sold for £1.2 billion and a further 4.0 million
shares were transferred to the group's UK pension fund. These disposals
generated a loss before tax of £28 million after writing back goodwill
previously written off to reserves of £247 million and other costs, including
the costs of terminating related hedge instruments, of £25 million.
Profit before taxation
After exceptional items, the profit before taxation and minority interests
decreased by £69 million from £1,259 million to £1,190 million in the six months
ended 31 December 2004.
Exchange rates
Based on current exchange rates, it is estimated that in the year ending 30 June
2005 there will be an adverse impact from exchange rate movements on profit
before exceptional items and taxation of £80 million (translation exchange only
on reported share of profits of associates). Similarly, based on current
exchange rates, the impact of exchange rate movements on profit before
exceptional items and taxation for the year ending 30 June 2006 is estimated to
be adverse £80 million.
Taxation
The effective rate of taxation on profit before and after exceptional items for
the period was 24%, compared with 25% for the six months ended 31 December 2003
primarily as a consequence of the sale of the General Mills shares.
Dividend
An interim dividend of 11.35 pence per share will be paid on 6 April 2005, an
increase of 7% on last year's interim dividend. The interim dividend will be
paid to shareholders on the register on 4 March 2005. Payment to US ADR holders
will be made on 12 April 2005. The record date for this dividend will also be 4
March 2005. A dividend reinvestment plan is available in respect of the interim
dividend and the plan notice date is 14 March 2005.
In the AGM statement in October 2004 Diageo announced that 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 to gradually rebuild dividend cover.
Cash flow
Summary cash flow statement First half First half
2005 2004
£ million £ million
Operating cash inflow 1,001 971
Interest and dividends paid to minority interests (118) (162)
Dividends from associates and fixed asset investments 20 90
Taxation (152) (179)
Net purchase of investments (2) (5)
Net capital expenditure (113) (95)
Free cash flow 636 620
Free cash flow increased 3% to £636 million from £620 million in the prior
period, principally as a result of increased operating cash flows (up £30
million to £1,001 million), reduced net interest payments (down £47 million to
£93 million) offset by reduced dividends received from associates and fixed
asset investments (down £70 million to £20 million).
In the six months ended 31 December 2004, Diageo repurchased 48.2 million shares
for cancellation or to be held as treasury shares (2003 - 36.4 million shares)
at a cost of £353 million (2003 - £256 million). A net £54 million (2003 - £16
million) was spent on the purchase of shares for the employee share trusts. In
October 2004, at the time of the AGM, Diageo reiterated the company's capital
policy. Diageo continues to believe that the company is in a good position to
maintain a single A credit rating and to continue the share repurchase programme
at the current level even with the acquisition of the Chalone Wine Group and the
proposed acquisition of the Ursus vodka brand.
Balance sheet
At 31 December 2004, total shareholders' funds were £4,103 million compared with
£3,692 million at 30 June 2004. The increase was mainly due to the £533 million
retained income for the period and goodwill previously written off and recycled
through the profit and loss account on the disposal of General Mills of £247
million, offset by £353 million for the repurchase of own shares.
Net borrowings were £3,474 million at 31 December 2004, a decrease of £670
million from 30 June 2004 net borrowings of £4,144 million. The principal
components of this decrease were the free cash inflow of £636 million and the
proceeds from the sale of General Mills shares of £1,210 million, offset by
payments of £407 million to repurchase shares (including net payments for share
trust shares), the payment of £302 million to redeem guaranteed preferred
securities, and a £512 million equity dividend payment.
Economic profit
Economic profit decreased by £27 million from £522 million to £495 million in
the six months ended 31 December 2004. The decline was due to the change in
accounting in respect of General Mills. See page 33 for calculation and
definition of economic profit.
Conversion to International Financial Reporting Standards ('IFRS')
Diageo will be required to present IFRS compliant financial statements for the
financial year starting 1 July 2005. In September 2005, Diageo will present
results for the year ending 30 June 2005 under UK GAAP. The income statement,
balance sheet and cash flow will also be available restated under IFRS (see IAS
39 exception below), together with quantitative reconciliations of equity and
net profit, and explanations of differences to the corresponding UK GAAP
reporting.
The adoption of IFRS will result in changes to the presentation of the financial
statements and to the amount and timing of recognition of assets, liabilities,
profits and losses. IFRS standards continue to be revised and be subject to new
interpretations. However, based on current expectations of the standards that
Diageo will need to comply with and on the work carried out to date, the most
significant implications of the conversion to IFRS for the group are described
below:
IAS 10 - Events after the balance sheet date, requires that dividends declared
to holders of equity instruments after the balance sheet date are not recognised
as a liability. Amounts of proposed dividends are noted but not provided for.
IAS 12 - Income taxes, uses a balance sheet based approach whereby deferred tax
assets and liabilities should be recognised for all taxable temporary
differences (except in certain more limited specified instances). One
consequence for Diageo will be the recognition under IFRS of significant
deferred tax assets representing tax benefits of group reorganisations made in
the prior years. Amortisation and other movements in respect of these assets are
likely to result in considerable volatility in the tax charge, and thus in the
effective tax rate. The cash benefit is not affected by this change in
accounting.
IAS 21 - The effects of changes in foreign exchange rates, requires that all
exchange rate differences on monetary items are recognised in the income
statement unless the monetary item forms part of a net investment in a foreign
entity or is designated as a hedging instrument in a net investment hedge. IAS
21 is more prescriptive in determining which loans, including intra group loans,
may be designated as part of the group's net investment or as a net investment
hedge. Volatility will arise in the income statement to the extent that such
loans do not meet the criteria in IAS 21, although this will have no effect on
net assets.
IAS 39 - Financial instruments: recognition and measurement, the provisions of
which Diageo will adopt with effect from 1 July 2005, impacts Diageo in three
key areas:
1. FX cash flow hedging: The degree of confidence in future cash flows required
to achieve hedge accounting for derivatives will increase. Diageo will
reduce its volume of transaction hedges given the difficulty of forecasting
exact cash flows. The results will therefore be somewhat more sensitive to
changes in exchange rates.
2. FX balance sheet hedging: To obtain hedge accounting for its net investments,
Diageo is introducing additional processes to determine, monitor and
document the effectiveness of the hedges in place, although it is possible
that hedge accounting will not be achieved in respect of all of its overseas
investments.
3. Interest rate risk management: Derivatives must be allocated to specific debt
instruments, as opposed to Diageo's total debt portfolio, to obtain hedge
accounting. Additional processes will be introduced to determine, monitor
and document the effectiveness of the hedges in place. Finance charges and
net borrowings will be more sensitive to changes in interest rates. A
proportion of net debt will be recorded at fair value rather than amortised
cost.
Overall, there is likely to be some increased volatility in Diageo's income
statement as a consequence of implementing IAS 39, the extent of which will be
dependent on prevailing interest and currency rates in the relevant accounting
period. There remain aspects of IAS 39 that are subject to ongoing consideration
by the International Accounting Standards Board, which may have implications for
Diageo.
IFRS 2 - Share-based payment requires that equity-settled share based
transactions with employees are required to be measured at the fair value of the
equity instruments at the date of grant and this is the basis of the charge to
the income statement over the vesting period. Currently, the intrinsic value
(the difference between the grant price and the market price at the date of
grant) is charged to profit over the life of the option. The fair values of the
grants will be calculated based on the binomial and Monte Carlo option pricing
models. It is estimated that the change will increase the pre tax cost of
employee options for the year ending 30 June 2005 by approximately £15 million.
In addition to the above differences, associates including Moet Hennessy will
restate their results under IFRS and this will affect Diageo's share of their
results and net assets.
Other differences between UK GAAP and IFRS are not currently expected to have a
significant impact on net income. In particular, under IAS 19 - Employee
benefits Diageo has decided to adopt the option to recognise actuarial gains and
losses in full in the statement of recognised income and expense. This mirrors
the current UK GAAP accounting treatment adopted under full compliance with FRS
17.
DIAGEO CONSOLIDATED PROFIT AND LOSS ACCOUNT
Six months ended 31 December 2004 Six months ended 31 December 2003
Before Exceptional Total Before exceptional Exceptional Total
exceptional items items items
items
£ million £ million £ million £ million £ million £ million
Turnover 4,984 - 4,984 5,060 - 5,060
Operating costs (3,792) (20) (3,812) (3,879) (19) (3,898)
Operating profit 1,192 (20) 1,172 1,181 (19) 1,162
Associates' profits 109 _- 109 273 (11) 262
1,301 (20) 1,281 1,454 (30) 1,424
Investment income 8 - 8 - - -
Disposal of fixed assets (25) (25) (8) (8)
Interest payable (net) (78) - (78) (146) - (146)
Other finance 4 - 4 (11) - (11)
income/(charges)
Profit before taxation 1,235 (45) 1,190 1,297 (38) 1,259
Taxation (296) 14 (282) (324) 6 (318)
Profit after taxation 939 (31) 908 973 (32) 941
Minority interests
Equity (28) - (28) (34) - (34)
Non-equity (11) - (11) (16) - (16)
Profit for the period 900 (31) 869 923 (32) 891
Interim dividend (336) - (336) (320) - (320)
Transferred to 564 (31) 533 603 (32) 571
reserves
Pence per share
Basic earnings 30.0p (1.0)p 29.0p 30.3p (1.0)p 29.3p
Diluted earnings 30.0p (1.0)p 29.0p 30.3p (1.0)p 29.3p
Dividends 11.35p 11.35p 10.6p 10.6p
Average shares 2,999m 3,043m
DIAGEO CONSOLIDATED BALANCE SHEET
31 December 2004 30 June 2004 31 December 2003
£ million £ million £ million £ million £ million £ million
Fixed assets
Intangible assets 3,938 4,012 4,066
Tangible assets 1,970 1,976 1,928
Investments in associates 1,382 1,263 2,882
Other investments 657 1,772 186
7,947 9,023 9,062
Current assets
Stocks 2,232 2,176 2,162
Debtors 2,142 1,724 2,796
Cash at bank and liquid resources 1,590 1,167 1,304
5,964 5,067 6,262
Creditors - due within one year
Borrowings (2,111) (2,001) (2,986)
Other creditors (3,203) (3,022) (3,297)
(5,314) (5,023) (6,283)
Net current assets/(liabilities) 650 44 (21)
Total assets less current 9,067 9,041
liabilities
8,597
Creditors - due after one year
Borrowings (2,911) (3,316) (3,469)
Other creditors (63) (109) (45)
(2,974) (3,425) (3,514)
Provisions for liabilities and (667) (709) (632)
charges
4,956 4,933 4,895
Post employment liabilities (net (672) (750) (1,412)
of tax)
Net assets 4,284 4,183 3,483
Capital and reserves
Called up share capital 883 885 886
Reserves 3,220 2,807 2,106
Shareholders' funds 4,103 3,692 2,992
Minority
interests
Equity 181 179 175
Non-equity - 312 316
181 491 491
4,284 4,183 3,483
DIAGEO CONSOLIDATED CASH FLOW STATEMENT
Six months ended Six months ended
31 December 2004 31 December 2003
£ million £ million £ million £ million
Net cash inflow from operating activities 1,001 971
Dividends received from associates 4 90
Returns on investments and servicing of finance
Interest paid (net) (93) (140)
Dividends received from fixed asset investments 16 -
Dividends paid to equity minority interests (25) (22)
(102) (162)
Taxation (152) (179)
Capital expenditure and financial investment
Purchase of tangible fixed assets (123) (110)
Net purchase of investments (2) (5)
Sale of tangible fixed assets 10 15
(115) (100)
Acquisitions and disposals
Sale of shares in General Mills 1,210 -
Net purchase of subsidiaries and associates (2) (8)
1,208 (8)
Equity dividends paid (512) (480)
Management of liquid resources (441) (218)
Financing
Issue of share capital 3 1
Net purchase of own shares for share trusts (54) (16)
Own shares purchased for cancellation/holding as (353) (256)
treasury shares
Redemption of guaranteed preferred securities (302) -
(Decrease)/increase in loans (154) 269
(860) (2)
Increase/(decrease) in cash in the period 31 (88)
MOVEMENTS IN NET BORROWINGS
Six months ended Six months ended
31 December 2004 31 December 2003
£ million £ million
Increase/(decrease) in cash in the period 31 (88)
Cash flow from change in loans 154 (269)
Change in liquid resources 441 218
Change in net borrowings from cash flows 626 (139)
Exchange adjustments 36 295
Non-cash items 8 9
Decrease in net borrowings 670 165
Net borrowings at beginning of the period (4,144) (4,870)
Net borrowings at end of the period (3,474) (4,705)
DIAGEO CONSOLIDATED STATEMENT OF
TOTAL RECOGNISED GAINS AND LOSSES
Six months ended Six months ended
31 December 2004 31 December 2003
Before tax Tax Net Before tax Tax Net
£ million £ million £ million £ million £ million £ million
Profit for the period - group 1,042 (244) 798 979 (268) 711
- associates 109 (38) 71 230 (50) 180
1,151 (282) 869 1,209 (318) 891
Exchange adjustments - group (25) - (25) 10 (7) 3
- associates 54 - 54 (123) - (123)
Total recognised gains and losses 1,180 (282) 898 1,096 (325) 771
for the period
NOTES
1. Basis of preparation
The interim financial information has been prepared on the basis of accounting
policies consistent with those applied in the accounts for the year ended 30
June 2004. The information is unaudited but has been reviewed by the auditors,
KPMG Audit Plc, and their report is reproduced after these notes. The
information does not comprise the statutory accounts of the group. The statutory
accounts of Diageo plc for the year ended 30 June 2004 have been filed with the
registrar of companies. KPMG Audit Plc have reported on these accounts; their
report was unqualified and did not contain any statement under section 237 of
the Companies Act 1985.
2. Business and geographical analyses
Following a reorganisation of the way the business is managed, the business
analysis is now presented under the categories of Diageo North America, Diageo
Europe and Diageo International. The results for the periods ended 31 December
2004 and 31 December 2003 have been reported to reflect this new organisation.
Business analysis:
Six months ended Six months ended
31 December 2004 31 December 2003
Turnover Operating profit/ Turnover Operating
(loss) profit/(loss)
£ million £ million £ million £ million
North America 1,384 454 1,457 453
Europe 2,240 459 2,247 432
International 1,332 352 1,327 374
4,956 1,265 5,031 1,259
Corporate 28 (73) 29 (78)
4,984 1,192 5,060 1,181
Geographical analysis of turnover and operating profit by destination:
Six months ended Six months ended
31 December 2004 31 December 2003
Turnover Operating profit Turnover Operating
profit
£ million £ million £ million £ million
Europe 2,292 395 2,305 368
North America 1,404 465 1,474 462
Asia Pacific 522 126 558 139
Latin America 311 97 291 101
Rest of World 455 109 432 111
4,984 1,192 5,060 1,181
Turnover and operating profit by geographical destination have been stated
according to the location of the third party customers. Operating profit is
before exceptional operating charges of £20 million (2003 - £19 million).
Certain businesses within Diageo International for internal management purposes
have been reported within the appropriate market in the geographical analysis
above. Corporate turnover and operating loss (principally central costs) are
incurred in Europe.
31 December 2004 31 December 2003
£ million £ million
Net assets relating to:
Premium drinks business 8,029 8,035
Investment in General Mills 473 1,540
Investments in associates 1,382 1,342
Post employment liabilities (net of deferred tax) (672) (1,412)
Net borrowings (3,474) (4,705)
Tax, dividends and other corporate items (1,454) (1,317)
4,284 3,483
Weighted average exchange rates used in the translation of profit and loss
accounts were US dollar - £1 = $1.85 (2003 - £1 = $1.65) and euro - £1 = €1.46
(2003 - £1 = €1.43). Exchange rates used to translate assets and liabilities at
the balance sheet date were US dollar - £1 = $1.92 (2003 - £1 = $1.79) and euro
- £1 = €1.42 (2003 - £1 = €1.42). The group uses foreign exchange transaction
hedges to mitigate the effect of exchange rate movements.
3. Exceptional items
Six months ended Six months ended
31 December 2004 31 December 2003
£ million £ million
Operating costs
Park Royal brewery accelerated (14) -
depreciation
Seagram integration (6) (19)
(20) (19)
Associates - (11)
Disposal of fixed assets (28) -
Shares in General Mills 3 (8)
Other
(45) (38)
4. Taxation
The £282 million total taxation charge for the six months ended 31 December 2004
comprises a UK tax credit of £10 million, a foreign tax charge of £254 million
and a tax charge on associates of £38 million.
5. Note of historical cost profit and losses
There is no material difference between the reported profit shown in the
consolidated profit and loss account and the profit for the relevant periods
restated on an historical cost basis.
6. Movements in consolidated shareholders' funds
Six months ended Six months ended
31 December 2004 31 December 2003
£ million £ million
Profit for the period 869 891
Dividends (336) (320)
533 571
Exchange adjustments 29 (113)
Tax charge on exchange in reserves - (7)
New share capital issued 3 1
Share trust arrangements (48) (14)
Purchase of own shares for cancellation/held as treasury (353) (256)
shares
Goodwill on disposals of businesses 247 9
Net movement in shareholders' funds 411 191
Shareholders' funds at beginning of the period 3,692 2,801
Shareholders' funds at end of the period 4,103 2,992
7. Net borrowings
31 December 31 December
2004 2003
£ million £ million
Debt due within one year and overdrafts (2,111) (2,986)
Debt due after one year (2,911) (3,469)
(5,022) (6,455)
Less: Cash at bank and liquid resources 1,590 1,304
Interest rate and foreign currency swaps (42) 446
Net borrowings (3,474) (4,705)
8. Stocks
31 December 31 December
2004 2003
£ million £ million
Raw materials and consumables 231 208
Work in progress 15 17
Maturing stocks 1,484 1,447
Finished goods and goods for resale 502 490
2,232 2,162
9. Net cash inflow from operating activities
Six months ended Six months ended
31 December 2004 31 December 2003
£ million £ million
Operating profit 1,172 1,162
Exceptional operating costs 20 19
Restructuring and integration payments (16) (52)
Depreciation and amortisation charge 106 110
Increase in working capital (323) (321)
Other items 42 53
Net cash inflow from operating activities 1,001 971
10. Contingent liabilities
(i) Guarantees In connection with the disposal of the quick service restaurant
business, Diageo has guaranteed up to $850 million (£443 million) of external
borrowings of Burger King until December 2007. These loans had an original term
of five years, although Diageo and Burger King agreed to structure their
arrangements to encourage refinancing by Burger King on a non-guaranteed basis
prior to the end of five years. In connection with the disposal of Pillsbury,
Diageo has guaranteed the debt of a third party to the amount of $200 million
(£104 million) until November 2009.
Including these guarantees, but net of the amount provided in the consolidated
financial statements, the group has given performance guarantees and indemnities
to the third parties of £598 million. There has been no material change since 30
June 2004 in the group's performance guarantees and indemnities.
(ii) Colombian litigation An action was filed on 8 October 2004 in the United
States District Court for the Eastern District of New York by the Republic of
Colombia and a number of its local government entities against Diageo and other
spirits companies. The complaint alleges several causes of action. Included
among the causes of action is a claim that the defendants allegedly violated the
Federal RICO Act by facilitating money laundering in Colombia through their
supposed involvement in the contraband trade to the detriment of government
owned spirits production and distribution businesses. The complaint was amended
on 29 December 2004 to add eight additional local Colombian government entities
as plaintiffs. Diageo intends to vigorously defend itself against this lawsuit.
(iii) Alcohol advertising litigation Four putative class actions have been filed
against Diageo, Diageo North America, Inc., Paddington, Ltd (which is not a
legal entity but a name under which Diageo North America, Inc. does business)
and a large group of other beverage alcohol manufacturers and importers. Two of
the actions are now pending in federal district courts - one in Ohio (where two
complaints were originally filed but have since been consolidated under a single
amended complaint) and one in North Carolina. A third action is pending in the
Superior Court of the District of Columbia and the fourth is pending in Colorado
state court. In each action, plaintiffs seek to pursue their claims on behalf of
two classes of plaintiffs - (i) parents or guardians of underage drinkers who
bought alcohol beverages during the period from 1982 to the present and (ii) all
parents and guardians of children currently under the age of 21.
Plaintiffs allege several causes of action, principally for negligence, unjust
enrichment and violation of state consumer fraud statutes. They seek fines,
punitive damages and disgorgement of profits and injunctions against the alleged
targeting of minors in advertising.
Diageo North America and other domestic defendants have moved to dismiss the
complaints in Ohio, North Carolina and Colorado. These motions to dismiss are
fully briefed. The courts have not indicated when they might rule. Diageo North
America, along with other domestic defendants, expects to move to dismiss the
complaint in the District of Columbia on or before 9 April 2005 when their time
to move or answer with respect to the Complaint expires.
Diageo and other foreign defendants must answer or move to dismiss the
complaints for lack of personal jurisdiction by 9 April 2005 in the District of
Columbia and by 17 March 2005 in Ohio, North Carolina and Colorado.
(iv) Other The group has extensive international operations and is defendant in
a number of legal proceedings incidental to these operations. There are a number
of legal claims against the group, the outcome of which cannot at present be
foreseen.
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.
INDEPENDENT Review report to Diageo plc
Introduction
We have been instructed by the company to review the financial information for
the six months ended 31 December 2004 set out on pages 19 to 27. We have read
the other information contained in the interim report and considered whether it
contains any apparent misstatements or material inconsistencies with the
financial information.
This report is made solely to the company in accordance with the terms of our
engagement to assist the company in meeting the requirements of the Listing
Rules of the Financial Services Authority. Our review has been undertaken so
that we might state to the company those matters we are required to state to it
in this report and for no other purpose. To the fullest extent permitted by law,
we do not accept or assume responsibility to anyone other than the company for
our review work, for this report, or for the conclusions we have reached.
Directors' responsibilities
The interim report, including the financial information contained therein, is
the responsibility of, and has been approved by, the directors. The directors
are responsible for preparing the interim report in accordance with the Listing
Rules of the Financial Services Authority which require that the accounting
policies and presentation applied to the interim figures should be consistent
with those applied in preparing annual accounts except where they are to be
changed in the next annual accounts in which case any changes, and the reasons
for them, are to be disclosed.
Review work performed
We conducted our review in accordance with guidance contained in Bulletin 1999/
4: Review of Interim Financial Information issued by the Auditing Practices
Board for use in the United Kingdom. A review consists principally of making
enquiries of group management and applying analytical procedures to the
financial information and underlying financial data and, based thereon,
assessing whether the accounting policies and presentation have been
consistently applied unless otherwise disclosed. A review is substantially less
in scope than an audit performed in accordance with Auditing Standards and
therefore provides a lower level of assurance than an audit. Accordingly, we do
not express an audit opinion on the financial information.
Review conclusion
On the basis of our review we are not aware of any material modifications that
should be made to the financial information as presented for the six months
ended 31 December 2004.
KPMG Audit Plc
Chartered Accountants
London, 16 February 2005
ADDITIONAL INFORMATION FOR SHAREHOLDERS
EXPLANATORY NOTES
Definitions
Unless otherwise stated, percentage movements given throughout this announcement
for volume, turnover, net sales (after deducting excise duties), marketing
investment and operating profit are organic movements (at level exchange rates
and after adjusting for acquisitions and disposals) for continuing operations.
They are before exceptional items. Comparisons are with the equivalent period in
the last financial year. For an explanation of organic movements and free cash
flow please refer to Diageo's annual report for the year ended 30 June 2004 and
'Reconciliation to GAAP measures' in this announcement.
Volume has been 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 5 and ready to
drink in nine litre cases divide by 10.
Net sales are turnover less excise duties.
References to ready to drink include flavoured malt beverages in the United
States. References to Smirnoff ready to drink include Smirnoff Ice, Smirnoff
Black Ice, Smirnoff Twisted V, Smirnoff Mule, Smirnoff Spin, Smirnoff Caesar and
Smirnoff Signatures. References to Smirnoff Black Ice include Smirnoff Ice
Triple Black in the United States.
The share data contained in this announcement is taken from independent industry
sources in the markets in which Diageo operates. Unless otherwise stated, share
is volume share.
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 page 34 - '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 its use.
Reconciliation to GAAP measures
i. Organic movement
Organic movement in volume, turnover, net sales (after deducting excise duties)
and operating profit before exceptional items are measures not specifically used
in the consolidated financial statements themselves (non-GAAP measures). The
performance of our premium drinks business is discussed using these measures.
Since overall performance is the result of a number of factors, breaking these
down into broad categories and discussing each of these categories assists
management and the reader in understanding the overall picture. Once factors
such as the effect of currency movements, excise duties and acquisitions and
disposals have been eliminated, the above measures enable the reader to focus on
the performance of the premium drinks brand portfolio which is common to both
periods. Organic movement measures also most closely reflect the way in which
the business is managed, for the same reasons of achieving comparability between
periods. Diageo's strategic planning and budgeting process is based on organic
movement in volume, net sales (after deducting excise duties) and operating
profit before exceptional items, and these measures closely reflect the way in
which operating targets are defined and performance is monitored by the group's
management.
These measures are chosen for planning, budgeting and reporting purposes since,
as explained further below, they represent those measures which local managers
are most directly able to influence and they enable consideration of the
underlying business performance without the distortion caused by fluctuating
exchange rates, excise duties, acquisitions and disposals. In addition,
management bonus targets are set based on the performance of the business as
measured by organic operating profit growth before exceptional items.
The group's management believe these measures provide valuable additional
information for users of the financial statements in understanding the group's
performance since they provide information on those elements of performance
which local managers are most directly able to influence and focus on that
element of the core brand portfolio which is common to both periods. However,
whilst these measures are important in the management of the business, they
should not be viewed as replacements for, but rather as complementary to, the
comparable GAAP measures such as turnover and reported (rather than organic)
movements in individual profit and loss account captions. These GAAP measures
reflect all of the factors which impact the business and the discussion in
relation to premium drinks should be read in the context of the discussion of
the overall group performance.
In the discussion of the performance of our premium drinks business, net sales
(after deducting excise duties) is presented in addition to turnover, since
turnover reflects significant components of excise duties which are set by
external regulators and over which Diageo has no control. Diageo incurs excise
duties throughout the world. In some countries, excise duties are based on sales
and are separately identified on the face of the invoice to the external
customer. In others, it is effectively a production tax, which is incurred when
the spirit is removed from bonded warehouses. In these countries it is part of
the cost of goods sold and is not separately identified on the sales invoice.
Changes in the level of excise duties can significantly affect the level of
reported turnover and cost of sales, without directly reflecting changes in
volume, mix or profitability that are the variables that impact the element of
turnover retained by the group.
Also in the discussion of the performance of our premium drinks business,
certain information is presented using sterling amounts on a constant currency
basis. This strips out the effect of foreign exchange rate movements and enables
an understanding of the underlying performance of the market that is most
closely influenced by the actions of the group's management. The risk from
foreign exchange is managed centrally and is not a factor over which local
managers have any control.
Adjusting for these items enables group management to monitor performance over
factors which local managers are most directly able to influence in relation to
the core ongoing brand portfolio. The underlying performance on a constant
currency basis and excluding the impact of acquisitions and disposals is
referred to as 'organic' performance, and further information on the calculation
of organic measures as used in the discussion of our premium drinks business is
included on page 32.
Organic movement calculations
The organic movement calculations for volume, turnover, net sales (after
deducting excise duties) and operating profit before exceptional items for the
six months ended 31 December 2004 were as follows:
Disposals 2003 Acquisitions units Organic movement 2004 units Organic movement
units restated units
2003 units
units
million Million million million million million %
Volume 23.4 (0.1) 23.3 - 1.2 24.5 5
North America
Europe 23.5 - 23.5 - 0.3 23.8 1
International 20.0 - 20.0 0.1 0.8 20.9 4
Total 66.9 (0.1) 66.8 0.1 2.3 69.2 3
2003 Reported Exchange Acquisitions Organic movement 2004 Reported Organic
and £ million £ million movement %
£ million £ million disposals
£ million
Turnover
North America 1,457 (171) (2) 100 1,384 8
Europe 2,247 (29) (4) 26 2,240 1
International 1,327 (103) 2 106 1,332 9
Corporate 29 - - (1) 28 (3)
Total 5,060 (303) (4) 231 4,984 5
Net sales (after deducting
excise duties)
North America 1,228 (146) (1) 86 1,167 8
Europe 1,481 (21) (4) (8) 1,448 (1)
International 1,057 (83) 2 86 1,062 9
Corporate 29 - - (1) 28 (3)
Total 3,795 (250) (3) 163 3,705 5
Excise duties 1,265 1,279
Turnover 5,060 4,984
Operating profit before
exceptional items
North America 453 (46) - 47 454 12
Europe 432 8 - 19 459 4
International 374 (35) - 13 352 4
Corporate (78) - - 5 (73) 6
Total 1,181 (73) - 84 1,192 8
Notes
1. The exchange adjustments for turnover, net sales (after deducting excise
duties) and operating profit before exceptional items are principally in
respect of the US dollar.
2. Acquisitions in the period ended 31 December 2004 are only in respect of the
acquisition of Ghana Breweries Limited (International). Disposals in the
period comprise the disposal of Kamchatka (North America) and the disposal
of Finches Soft Drinks (Europe).
3. In the calculation of operating profit before exceptional items the overheads
included in disposals were only those directly attributable to the
businesses disposed, and do not result from subjective judgements of
management.
4. The organic movement percentage is the amount in the column
headed 'organic movement' in the table above expressed as a percentage
of the aggregate of the column headed 2003 Reported, the column headed
Exchange and the impact of disposals from the column headed Acquisitions
and Disposals. The basis of the calculation of the organic movement is
explained below.
Calculation of organic movement
Where a business, brand, brand distribution right or agency agreement was
disposed of, or terminated, in the current period, the group, in organic
movement calculations, adjusts the results for the comparable prior period to
exclude the amount the group earned in that period that it could not have earned
in the current period (i.e. the period between the date in the prior period,
equivalent to the date of the disposal in the current period, and the end of the
prior period). As a result, the organic movement numbers reflect only comparable
trading performance. Similarly, if a business was disposed of part way through
the equivalent prior period then its contribution would be completely excluded
from that prior period's performance in the organic movement calculation, since
the group recognised no contribution from that business in the current period.
A further adjustment in organic movement is made to exclude the effect of
exchange rate movements by recalculating the prior period's results as if they
had been generated at the current period's exchange rates.
Organic movement percentages are calculated as the organic movement amount in £
million, expressed as the percentage of the prior period results at current year
exchange rates and after adjusting for disposals. The basis of calculation means
that the results used to measure organic movement for a given period will be
adjusted when used to measure organic movement in the subsequent period.
i. Free cash flow
Free cash flow is a non-GAAP measure that comprises the net cash flow
arising from operating activities, dividends received from associates,
returns on investments and servicing of finance, taxation, and capital
expenditure and financial investment. Free cash flow as used by the group
covers all the items that are required by FRS 1 to be on the face of the
cash flow statement down to, and including, capital expenditure and
financial investment. It is therefore a natural sub-total but may not be
comparable to similarly titled measures used by other companies. The group's
management believe the measure assists users of the financial statements in
understanding the group's cash generating performance as it comprises items
which arise from the running of the ongoing business.
Where appropriate, separate discussion is given for the impacts of
acquisitions and disposals of businesses, equity dividends and purchase of
own shares - each of which arises from decisions which are independent from
the running of the ongoing underlying business. The group's management
regards capital expenditure as ultimately non-discretionary since ongoing
investment in plant and machinery is required to support the day-to-day
operations, whereas acquisitions and disposals of businesses are
discretionary. However, free cash flow does not necessarily reflect all
amounts which the group either has a constructive or legal obligation to
incur. The free cash flow measure is also used by management for their own
planning, budgeting, reporting and incentive purposes since it provides
information on those elements of performance which local managers are most
directly able to influence.
ii. Return on average total invested capital
Return on average total invested capital is a non-GAAP measure that is used by
management to assess the return obtained from the group's asset base. This
measure is not specifically used in the consolidated financial statements, but
is calculated to aid comparison of the performance of the business.
The profit used in assessing the return on total invested capital reflect the
operating performance of the business after the effective tax rate for the
period, stated before exceptional items and interest. Average total invested
capital is calculated using the average derived from the consolidated balance
sheets at the beginning and the end of the period. Capital employed comprises
net assets for the period, excluding post employment liabilities (net of
deferred tax) and net borrowings. This average total invested capital is
aggregated with restructuring and integration costs net of tax, which have been
charged to exceptional items, and goodwill written off in reserves (up to 1 July
1998). Calculations for the return on average total invested capital for the six
months ended 31 December 2004 and 31 December 2003 were as follows:
2004 2003
£ million £ million
Operating profit before exceptional items 1,192 1,181
Associates after interest 109 241
Dividends receivable from investments 8 -
Effective tax rate 24% (2003 - 25%) (314) (356)
995 1,066
Average net assets 4,945 4,795
Average net borrowings 3,809 4,788
Average integration costs (net of tax) 916 896
Average goodwill 1,443 1,619
Average total invested capital 11,113 12,098
Return on average total invested capital 17.9% 17.6%
iv) Economic profit
Economic profit is a non-GAAP measure that is used by management to assess the
group's return from its asset base compared to a standard cost of capital
charge. The measure is not specifically used in the consolidated financial
statements, but is calculated to aid comparison of the performance of the
business.
The profit used in assessing the return from the group's asset base and the
asset base itself are the same as those used in the calculation for the return
on average total invested capital (see (iii) above). The standard capital charge
applied to the average total invested capital is currently 9%, being
management's assessment of a constant minimum level of return that the group
expects to generate from its asset base. Economic profit is calculated as the
difference between the standard capital charge on the average invested assets
and the actual return achieved by the group on those assets.
Calculations for economic profit for the six months ended 31 December 2004 and
31 December 2003 were as follows:
2004 2003
£ million £ million
Average total invested capital (see (iii) above) 11,113 12,098
Operating profit before exceptional items 1,192 1,181
Associates after interest 109 241
Dividends receivable from investments 8 -
Effective tax rate 24% (2003 - 25%) (314) (356)
995 1,066
Capital charge at 9% of average total invested capital (500) (544)
Economic profit 495 522
Cautionary statement concerning forward-looking statements
This document contains statements with respect to the financial condition,
results of operations and business of Diageo and certain of the plans and
objectives of Diageo with respect to these items. These forward-looking
statements are made pursuant to the 'Safe Harbor' provisions of the United
States Private Securities Litigation Reform Act of 1995. In particular, all
statements that express forecasts, expectations and projections with respect to
future matters, including trends in results of operations, margins, growth
rates, overall market trends, the impact of interest or exchange rates, the
availability of financing to Diageo and parties or consortia who have purchased
Diageo's assets, actions of parties or consortia who have purchased Diageo's
assets, anticipated cost savings or synergy and the completion of Diageo's
strategic transactions, are forward-looking statements. 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.
These factors include, but are not limited to:
• increased competitive product and pricing pressures and unanticipated
actions by competitors that could impact Diageo's market share, increase
expenses and hinder growth potential;
• the effects of future business combinations, partnerships, acquisitions or
disposals, existing or future, and the ability to realise expected synergy
and/or costs savings;
• Diageo's ability to complete existing or future acquisitions and
disposals;
• legal and regulatory developments, including changes in regulations
regarding consumption of, or advertising for, beverage alcohol, changes in
accounting standards, taxation requirements, such as the impact of excise
tax increases with respect to the premium drinks business, and environmental
laws;
• developments in the alcohol advertising class actions and any similar
proceedings;
• developments in the Colombia litigation and any similar proceedings;
• changes in the food industry in the United States, including increased
competition and changes in levels of consumer preferences;
• changes in consumer preferences and tastes, demographic trends or
perception about health related issues;
• changes in the cost of raw materials and labour costs;
• changes in economic conditions in countries in which Diageo operates,
including changes in levels of consumer spending;
• levels of marketing, promotional and innovation expenditure by Diageo and
its competitors;
• renewal of distribution rights on favourable terms when they expire;
• termination of existing distribution rights on agency brands;
• technological developments that may affect the distribution of products or
impede Diageo's ability to protect its intellectual property rights; and
• changes in financial and equity markets, including significant interest
rate and foreign currency rate fluctuations, which may affect Diageo's
access to or increase the cost of financing or which may affect Diageo's
financial results.
All oral and written forward-looking statements made on or after the date of
this announcement and attributable to Diageo are expressly qualified in their
entirety by the above factors and the 'risk factors' contained in the annual
report on Form 20-F for the year ended 30 June 2004 filed with the U.S.
Securities and Exchange Commission. 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 in based. The reader should,
however, consult any additional disclosures that Diageo may make in documents it
files with the U.S. Securities and Exchange Commission.
The information in this announcement does not constitute an offer to sell or an
invitation to buy shares in Diageo plc or any other invitation or inducement to
engage in investment activities.
Past performance cannot be relied upon as a guide to future performance.
For further information
Diageo's interim results presentation to analysts and investors will be
broadcast at 09.30 (UK time) on Thursday 17 February 2005. The presentation will
be available on the Diageo website www.diageo.com and also at www.cantos.com.
Prior to the event the presentation slides will also be available to download
from Diageo's home page.
You will be able to listen to a live broadcast of the presentation and to the
question and answer session.
The number to call is:
France +33 1 70 75 00 02
Germany +49 69 2222 52100
Ireland +353 1 246 0034
Netherlands +31 20 710 0075
Spain +34 91 414 15 45
UK +44 20 7019 0810
USA (toll free) 1 877 951 7311
Passcode: Diageo results
After the presentation the slides and accompanying text will be available to
download from Diageo's home page.
You will be able to view a recording of the presentation and question and answer
session on the Diageo website from 14.00 (UK time) on the day. This facility
will be available until 17 March 2005.
A press conference will take place beginning at 12.30 (UK time) on Thursday 17
February and will be broadcast live from a link on www.diageo.com.
Diageo management will host a conference call for analysts and investors at
15.00 (UK time) on Thursday 17 February 2005. Call this number to participate:
France +33 1 70 75 00 02
Germany +49 69 2222 52100
Ireland +353 1 246 0034
Netherlands +31 20 710 0075
Spain +34 91 414 15 45
UK +44 20 7019 0810
USA (toll free) 1 877 951 7311
Passcode: Diageo results
The teleconference will be available on instant replay from 17.00 (UK time) and
will be available until 31 March 2005. The number to call is:
UK/Europe +44 20 7970 8446
USA/Canada +1 203 369 4894
Investor enquiries to: Catherine James +44 (0) 20 7927 5272
Michael Mulhall +44 (0) 20 7927 4471
Investor.relations@diageo.com
Media enquiries to: Kathryn Partridge +44 (0) 20 7927 5225
Media@diageo.com
This information is provided by RNS
The company news service from the London Stock Exchange
Friday, 22nd November 2024
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