Interim results, six months ended 31 December 2014
A strong business improving in a challenging environment
- Organic net sales in the half were broadly flat (-0.1%) with volume down 1.9%. Performance improved in Q2
- Continued strong performance of reserve brands, up 10%, was a key driver of positive overall price/mix
- Marketing spend was in line with net sales, as effective spend benefitted from procurement efficiencies worth 3% of total marketing investment
- Restructuring benefits drove operating margin improvement of 28bps with organic operating profit up 0.7%
- Free cash flow was £699 million, up £373 million on the first half last year
- Eps before exceptional items was 53.7 pence per share, down 8.9 pence per share driven mainly by negative exchange impacts and lower income from associates and joint ventures
- Interim dividend up 9% to 21.5 pence per share
Ivan Menezes, Chief Executive, commenting on the six months ended 31 December 2014
"We have improved our performance during the half and we have again shown: the strength of our brands, which is driving our share gains; our strong innovation capability, which has enabled us to access new growth opportunities; and our focus on cost. We delivered the planned savings from our global efficiency programme together with procurement benefits in marketing spend which we have reinvested in our brands and we increased our investment in our routes to consumer while again expanding our margins.
We have already taken action to improve the performance of those brands and markets that have not performed as well as we would expect. This contributed to our stronger second quarter performance and I expect to maintain this momentum through the year.
The half saw Diageo acquire control of USL, putting us in the position to create an iconic leader in spirits in an attractive market. We have also reached agreement to acquire all of Don Julio, which will significantly strengthen our position in one of our fastest growing categories.
The quality of these results in a tough environment, with depletions ahead of shipments and improving cash flow, reinforce my confidence that Diageo can realise its full potential and deliver our performance ambition."