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PRESS RELEASE30 Jan 2014

Interim results, six months ended 31 December 2013Download file

The strength of a diverse portfolio in a tougher environment

  • Net sales grew 1.8% in the first half, following growth of 2.2% in Q1*
    • North America up 4.6%
    • Western Europe down 1.0%, continuing the improving trend seen in Q1
    • Emerging markets up 1.3%, impacted by weakness in baijiu in China and in Nigeria
  • Continued strong price/mix in both developed and emerging markets at 4ppts
  • Marketing investment up 2.7%, ahead of net sales growth, to 15.6% of net sales
  • Super and ultra premium brands grew strongly, with reserve brands up 18.5%
  • Beer was the only category to decline, down 2.6%, with weakness in Nigeria and Ireland
  • Operating profit grew 2.9% with 0.4ppts of operating margin improvement
  • Free cash flow was £326 million
  • eps pre-exceptional items 62.6 pence per share, up 4%
  • Interim dividend increased 9%
  • Detailed plans to be developed to de-layer the organisation and deliver further operating efficiencies
  • Savings of £200 million a year by year ending 30 June 2017 will fund future change programmes, investment in growth and improved margin
  • Restructuring costs, expected to be taken as an exceptional charge, will be between £200 million and £250 million

*Q1 organic growth restated to $1 = VEF19 (Venezuelan Bolivars). See explanatory note on organic movements on page 35.

Ivan Menezes, Chief Executive, commenting on the six months ended 31 December 2013

"We have continued to demonstrate the strength of our broad portfolio and diverse global business in a period which saw a more challenging emerging market environment. Sustained performance in the US and improved performance in Western Europe enabled Diageo to absorb the current challenges in some of our emerging markets. We reacted quickly to the changing emerging market environment, reducing inventory levels in several key markets, which led to a weaker Q2, and tightly managing our cost base to deliver improved operating margins in line with our expectations. We continued to invest in the business increasing marketing spend ahead of net sales growth and keeping our strong focus on innovation and route to consumer improvements.

In the first half the organisation has aligned behind the six key performance drivers which I identified when I was appointed CEO; premium core brands, reserve, innovation, route to consumer, cost and talent. This clarity of focus at a market level enables me to take the changes I have already made to the operating model to the next level. Over the next two months we will set out detailed plans to simplify our processes and de-layer our organisation. This will create a more agile, accountable and effective organisation to deliver our performance ambition. I expect this to deliver cost savings of £200 million a year by the end of fiscal 2017.

We do expect some top line improvement in the second half and our focus across the business on the six key performance drivers means that even though some markets may remain challenging, this business is in good shape for the medium and long term and we remain committed to achieving our performance ambition."

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