Diageo today announced its preliminary results for the year ended 30 June 2000.*
Lord Blyth, Chairman of Diageo, said:
“The business and financial performance delivered in this financial year is in line with our goals and expectations for the year. On an organic basis turnover grew 4% to £11,870 million and operating profit grew 11% with particularly strong performances from Spirits and Wine, up 15% and Beer up 14%. Free cash flow was up nearly £500 million to £864 million. The new financial year has begun well. Our businesses continue to perform in line with our expectations and we look forward to the future with confidence.”
Paul Walsh, Group Chief Executive of Diageo, said:
“Our performance in this financial year illustrates the rationale behind our recently announced decision to focus on our core beverage alcohol business. Diageo’s combined Spirits, Wine and Beer business has achieved significantly higher top and bottom line growth in the year. Investment in our premium beverage alcohol brands, focus by individual market and innovation to find new ways of delivering our brands to consumers together with continued emphasis on the reduction of our cost base will continue to be the drivers of improved performance. We have made changes in marketing focus in Packaged Food during the year and our brands are now well positioned to benefit from the combination announced with General Mills. In Burger King, we believe we have the programmes which will deliver improved performance.”
*Unless otherwise stated percentage movements given throughout this statement for turnover, operating profit and marketing expenditure are organic movements (at level exchange and after adjusting for acquisitions and disposals). They include merger cost savings achieved in the year and are before goodwill amortisation and exceptional items. Comparisons are with the equivalent period last year.
PRELIMINARY STATEMENT OF RESULTS FOR THE YEAR ENDED 30 JUNE 2000
FINANCIAL HIGHLIGHTS
- Turnover up 4% to £11,870 million
- Operating profit up 11% to £1,980 million
- Spirits and Wine up 15% to £1,002 million
- Beer up 14% to £284 million
- Packaged Food up 1% to £492 million
- Quick Service Restaurants up 6% to £202 million
- Profit before goodwill amortisation, exceptional items and tax £1,815 million
- £125 million underlying improvement in economic profit
- Basic EPS excluding goodwill amortisation and exceptional items up 8% to 37.3 pence
- Final dividend 12.6 pence per share. Full year dividend
- 21 pence per share, up 8%
- Free cash flow up nearly £500 million to £864 million
IN THE YEAR
- Achieved turnover growth of 6% in the combined beverage alcohol businesses and operating profit growth of 15%
- Continued to invest behind beverage alcohol brands with marketing spend up 10%
- Improved overall operating margin by 1.0 percentage points driven by 1.4 percentage points growth in the operating margin in beverage alcohol
- Volume of the global priority brands in Spirits and Wine grew 5%
- 1,120 restaurants are committed to the transformation programme in Burger King
SINCE THE END OF THE YEAR
- The strategic decision to refocus as a leading global beverage alcohol business has been announced
- The integration of Guinness and UDV has begun
- The proposed combination of Pillsbury with General Mills, involving at least $4.5 billion in cash to be received by Diageo and the acquisition of an approximately 33% shareholding in the enlarged General Mills, was announced on 17 July 2000
GROUP CHIEF EXECUTIVE’S COMMENTS
Paul Walsh, Group Chief Executive of Diageo, commenting on the year ended 30 June 2000 said: “As we announced in July, the integration of Guinness and UDV has created a business with twelve of the world’s leading beverage alcohol brands. Its goal will be to achieve a winning share of the global market for beverage alcohol which Diageo estimates to be worth £5 billion in operating economic profit. The new integrated business will focus by market. The four major markets, the United States, United Kingdom, Ireland and Spain, have delivered the highest levels of operating profit growth this year and our strategy to focus on these countries and generate high levels of profitable organic growth through investment in our priority brands there will continue to drive Diageo’s overall performance.
Accelerated growth from the Spirits and Wine global priority brands and local priority brands will be the key to improved performance in Diageo. This is evidenced by their performance this year when these brands have achieved a 12% increase in net sales in the year. These are all high margin brands in highly profitable categories and Diageo has the infrastructure necessary to continue to grow these brands in the future. Marketing investment behind these important brands has been increased consistently over the last three years and will be maintained at current levels as a percentage of sales as we go forward.
In Beer, focus on the Guinness brand has generated 14% organic operating profit growth despite consumer changes in the beer market in Ireland which have affected volume growth of Guinness there. Diageo will continue to generate operating profit growth through volume growth of the Guinness brand as one of its global priority brands and by achieving further cost efficiencies in beer production. The integration of Guinness and UDV into one beverage alcohol business is progressing well. We have already announced the new management structure for Diageo. Changes to the membership of the Diageo Executive Committee were announced on 24 July 2000 and became effective on 1 September 2000. They reflect the fact that our beverage alcohol business is now at the core of Diageo. Our experience in merging UD and IDV has given us considerable ability to implement this integration while continuing to drive improved trading performance.
In Packaged Food, performance was in line with last year in overall terms despite stronger competitor activity in some key categories such as refrigerated cookies and frozen breakfast. A restructuring was put in place in the year to reduce costs and achieve more focus by customer. This will benefit sales and operating profit in the next financial year. The combination with General Mills which was announced on 17 July 2000 is expected to be completed around the end of this calendar year. In Quick Service Restaurants, operating profit growth of 6% was generated from a net increase of 635 restaurants in the year and comparable restaurant sales at the same level as last year. In the coming year it is expected that implementation of the restaurant transformation programme and a higher level of targeted promotional activity can improve comparable restaurant sales.”
Commenting on current trading, Paul Walsh said:
“The new financial year has begun well. In Guinness UDV, the performance of our global priority brands in the major markets continued to drive overall performance of the business. Investment in effective marketing behind our brands and innovation are the key drivers of growth in this business. New advertising campaigns introduced over the last twelve months such as those behind the Johnnie Walker brand are delivering net sales growth. Similarly, new products are continuing to attract consumers and are being rolled out to new markets, for example, Smirnoff Ice which is now in fourteen markets around the world. In Pillsbury, new products and a more focused sales organisation have led to improved sales and operating profit growth since the beginning of the financial year. Although comparable restaurant sales declined in July in Burger King, we believe that we have the programmes which can deliver an improvement in operating performance.
Diageo is now focused around beverage alcohol, driving growth through innovation around our unrivalled portfolio of brands and providing an improved base for sustained profitable top line growth.”