Diageo announces its preliminary results for the year ended 30 June 2003
Diageo has now completed its strategic realignment behind premium drinks and is well placed to continue to deliver profitable growth.
|
|
|
2003 |
2002 |
Reported movement |
Organic movement |
|
|
|
£mil |
£mil |
% |
% |
|
Turnover |
|
|
|
|
|
|
Premium drinks |
|
8,961 |
8,704 |
3 |
3 |
|
Discontinued operations |
|
|
|
|
|
|
- Pillsbury |
|
- |
1,455 |
|
|
|
- Burger King |
|
479 |
1,123 |
|
|
|
|
|
|
|
|
|
|
|
|
9,440 |
11,282 |
(16) |
|
|
Operating profit before exceptional items |
|
|
|
|
|
|
Premium drinks |
|
1,976 |
1,766 |
12 |
7 |
|
Discontinued operations |
|
|
|
|
|
|
- Pillsbury |
|
- |
184 |
|
|
|
- Burger King |
|
53 |
156 |
|
|
|
|
|
2,029 |
2,106** |
(4) |
|
|
|
|
|
|
|
|
Associate income* increased to £478 million (2002 - £324 million)
- EPS* up 13% to 49.0 pence (2002 – 43.2 pence)
- Recommended final dividend up 8.3% to 15.7 pence per share, making 25.6 pence per share for the full year, an increase of 7.6%
PREMIUM DRINKS ORGANIC MOVEMENT
- Volume up 1%
- Net sales up 4%
- Marketing investment up 5%
- Operating profit* up 7%
- Operating margin* improved by 1.8 percentage points to 22.1%
OTHER KEY FINANCIALS
- £97 million improvement in economic profit to £544 million
- Free cash flow up £352 million to £1,144 million
- Return on invested capital improved by 0.8 percentage points to 12.8%
- £852 million returned to shareholders via share buy-back programme
- Exceptional costs before taxation, £1,502 million, mainly the disposal of Burger King, £1,457 million
- Profit before tax and minority interests, £654 million
- Basic EPS of 2.4p, impacted by loss on disposal of Burger King
* Before exceptional items
** Restated to deduct goodwill amortisation of £12 million (discontinued operations £10 million, premium
drinks £2 million)
Paul Walsh, Chief Executive of Diageo, commenting on the year ended 30 June 2003 said:
"In the year ended 30 June 2003, Diageo’s performance proved resilient despite tough trading conditions. Our goals for the year were: deliver top and bottom line growth, successfully integrate the Seagram brands, improve our route to market and enhance our brand positions. In a year when the international business environment posed significant challenges, we have made substantial progress against these goals.
"In premium drinks, we have delivered value creating growth despite the challenges we have faced in a number of markets, including weakness in the ready to drink segment in the United States and Great Britain. On an organic basis volume is up 1%, net sales up 4% and operating profit up 7%. Diageo's operating margin, return on invested capital and free cash flow have all improved and EPS before exceptional items is up 13%.
"The Seagram brands are now fully embedded in the organisation. They are making a substantial contribution to our business performance. The acquisition of the Seagram business has allowed us to improve our route to market in South Korea and especially in the United States. The implementation of our Next Generation Growth distribution strategy in the United States means Diageo is uniquely placed in the US market. Almost 80% of our US volume is now sold through dedicated sales teams.
"We have enhanced our brand positions, increasing share through effective marketing campaigns and excellent execution against marketing initiatives. We are taking a proactive approach on the issues facing the beverage alcohol industry and our marketing campaigns reflect our long-term commitment to the responsible consumption of our brands."
Commenting on current trading, Paul Walsh said:
"As we begin the new financial year, some of the issues we faced at the beginning of last year, including economic pressures in Latin America have receded but the future still remains difficult to predict. There are signs that trading conditions are improving in North America, Great Britain and Spain but further evidence of a more broadly based recovery will be required before we conclude that there is a sustainable upturn. However, Diageo has demonstrated that it can generate growth in challenging times and, as a result of the sustained investment we have made in our brands and markets, Diageo is well positioned to benefit if general trading conditions improve."
Explanatory notes
Unless otherwise stated, percentage movements given throughout this statement for volume, turnover, net sales, marketing investment, contribution after marketing and operating profit are organic movements (at level exchange and after adjusting for acquisitions and disposals) for continuing operations. They are before exceptional items. Comparisons are with the equivalent period last year.
Volume has been measured on an equivalent servings basis to nine litre cases of spirits. Equivalent units are calculated as follows: beer in hectolitres is divided by 0.9, wine in nine litre units is divided by 5, ready to drink in nine litre units is divided by 10. An equivalent unit represents approximately 272 servings. A serving comprises 33ml of spirits; 165ml of wine; or 330ml of ready to drink or beer.
Net sales are turnover less excise duty.
References to ready to drink include flavored malt beverages in the United States. References to Smirnoff ready to drink include Smirnoff Ice, Smirnoff Black Ice, Smirnoff Twisted V, Smirnoff Mule and Smirnoff Spin. References to Smirnoff Black Ice include Smirnoff Ice Triple Black in the United States.
The market data contained in this results announcement is taken from independent industry sources in the markets in which Diageo operates.
This document 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 ‘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 licence to Diageo for its use.
The reporting format has been revised to separate goodwill amortisation from exceptional items. Goodwill amortisation is now included in the ‘before exceptional items’ column of the profit and loss account.
For further information
Diageo’s preliminary results presentation to analysts and investors will be broadcast at 09.30 (BST) on Thursday 4 September 2003 on Diageo's internet home page at the address: www.diageo.com. Prior to the live link, the presentation slides and accompanying text 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 questions and answers session. The number to call is:
From: UK/Europe: +44 (0) 20 8400 6304
Back up no: +44 (0) 20 8400 6320
An instant replay facility will be available from 13.00 (BST) to call in and listen to the morning session. The facility will be available until 18 September 2003 and the number to call is:
From: UK/Europe: +44 (0) 20 8797 2499 Access code: 925047#
US/Canada: +1 303 590 3060 Access code: 21013118#
You will be able to view a recording of the presentation and Q&A session on the Diageo website from 14.00 (BST) on the day. This facility will be available until October 2003.
A press conference will take place beginning at 12.30 (BST) on Thursday 4 September and will be broadcast live from a link on www.diageo.com.
Diageo management will host a teleconference to US and European analysts and investors at 15.00 (BST) on Thursday 4 September. Call this number to listen or ask a question:
From: UK/Europe: +44 (0) 20 8901 6901
US/Canada: +1 613 287 8027
The teleconference will be available on instant replay from 17.00 (BST) and will be available until 18 September 2003. The number to call is:
From: UK/Europe : +44 (0) 20 8797 2499 Access code: 925049#
US/Canada : +1 303 590 3060 Access code: 21013117#
The full text of this annoucement is available to download in PDF format HERE