Diageo will announce preliminary results for the year ended 30 June 2004 on 2 September 2004 and has today issued the following statement.
Diageo’s scale, geographic diversity and outstanding collection of brands are now driving more consistent performance. Trading in the second half of the financial year to 30 June 2004 was broadly in line with expectations as outlined at the time of the interim results. Consequently performance trends for the full year are expected to be similar to those delivered in the first half. Then organic volume grew 3% and organic growth of net sales (after deducting excise duties) was 6%. As in the first half, organic growth in marketing investment is expected to be above growth of net sales (after deducting excise duties).
During the year Diageo has undertaken a series of initiatives to drive greater cost efficiency across the business. These projects have given rise to restructuring costs in the full year, which have not been treated as exceptional items, of approximately £50 million before tax. Organic operating profit growth for the full year is still expected to be 6% continuing the trend of the first half. However, as previously advised adverse exchange rates are expected to impact reported profit before exceptionals and tax for the full year by c£95 to £100 million.
Diageo has re purchased a further 43 million shares for cancellation in the financial year and therefore the number of shares in issue at the end of the year was 3057 million. The weighted average number of shares used to calculate eps in the year ended 30 June 2004 is estimated to be approximately 3030 million shares. Eps before exceptional charges is expected to be approximately 48 pence per share. Free cash flow before dividends is expected to be in excess of £1 billion for another year.
Looking forward to the new financial year Diageo expects that organic growth in volume, net sales (after deducting excise duties) and operating profit will be similar to those achieved in the year ended 30 June 2004.
Based on current exchange rates, the adverse impact of exchange rate movements on profit before exceptionals and tax in fiscal 2005 is estimated to be £100 million mainly due to year on year weakness in the dollar and currencies such as the Nigerian Naira and the Venezuelan Bolivar which cannot be hedged.
On 23 June 2004 Diageo announced that General Mills had filed a universal shelf registration statement which included approximately 50 million common stock owned by Diageo and that its board representatives, Paul Walsh and Jack Keenan had resigned from the General Mills board. Consequently Diageo will no longer account for General Mills as an associate from the end of June 2004. Reported eps for the year ending 30 June 2005 will be adversely affected by this change, the impact of which on a proforma basis for fiscal 2004 is estimated at 3.0 pence per share. Following this change in accounting treatment Diageo expects that its effective tax rate will continue to be 25%.
For the full statement, click here.