Diageo achieved strong sales growth in all regions

Diageo brands are made in more than 30 countries, at 200 locations and with the help of 33,000 employees worldwide. Its portfolio includes brands such as Johnnie Walker, Smirnoff, Baileys, Captain Morgan, Tanqueray and Guinness. Zwack Unicum Nyrt is the Hungarian distributor of the products of Diageo, the world’s leading producer and distributor of alcoholic beverages.

Delivered strong net sales growth, with growth across all regions

• Reported net sales of £9.4 billion, increased 18.4%, primarily reflecting strong organic net sales growth as well as favourable impacts from foreign exchange, mainly due to the strengthening of the US dollar.
• Organic net sales grew 9.4%, with growth in all regions. Price/mix of 7.6 percentage points reflects a high single-digit price contribution to net sales growth, premiumisation and organic volume growth of 1.8%.
• Growth was enabled by our diversified footprint, advantaged portfolio, strong brands and underpinned by favourable industry trends of premiumisation.

Resilient operating margin despite increased cost inflation

• Reported operating profit grew 15.2% to £3.2 billion. Reported operating margin declined by 92bps, with organic margin expansion more than offset by exceptional operating items and foreign exchange.
• Organic operating profit grew 9.7% and organic operating margin expanded by 9bps, driven by leverage on operating cost reflecting disciplined cost management, despite inflation.
• Price increases and supply productivity savings more than offset the impact of absolute cost inflation on gross margin.

Advantaged portfolio and premiumisation drove market share growth

• Growth was delivered across most categories, primarily scotch, tequila and beer.
• Premium-plus brands contributed 57% of reported net sales and drove 65% of organic net sales growth.
• Total trade market share grew or held in over 75%⁽¹⁾ of total net sales value in measured markets.

Continued optimisation of portfolio through acquisitions and disposals

• Acquired Mr Black, a leading Australian premium-priced coffee liqueur, and Balcones Distilling, a Texas craft distiller and one of the leading producers of American single malt whisky.
• Announced an agreement to acquire Don Papa rum, a super-premium, dark rum from the Philippines.
• Agreed to dispose of Guinness Cameroon S.A., disposed of Archers and completed the disposal and franchising of a portfolio of brands in India.

Invested to sustain long-term growth

• Increased organic marketing investment by 6.8%, reflecting strong, consistent investment in our brands.
• Invested £0.4 billion of capex in supply capacity, sustainability, digital capabilities and consumer experiences.

Cash flow generation

• Net cash flow from operating activities declined by £0.7 billion to £1.2 billion.
• Free cash flow of £0.8 billion, declined £0.8 billion. Operating profit and positive foreign exchange impact were offset by higher year-on-year working capital outflow primarily due to lapping a larger increase in creditors, phasing of spend and higher tax payments.
• Strong balance sheet, with leverage ratio⁽²⁾ of 2.5x as at 31 December 2022, at the lower end of our target range, as a result of strong profit performance.

Continued progress in delivering Society 2030 ESG goals and doing business the right way

• Launched ‘Drops of Advice’, a new global festive responsible drinking campaign.
• Announced plans for a hydrogen powered furnace in the UK to create the world’s first net zero glass bottles to be produced at scale.
  Diageo North America was named in the Top 10 Inclusive Companies for 2022.
• Included in Dow Jones World Sustainability Index for the fifth consecutive year.

Continued creation of long-term shareholder value

• Increased basic eps by 19.7% to 100.9 pence and pre-exceptional eps by 15.2% to 98.6 pence.
• Increased declared interim dividend by 5% to 30.83 pence per share.
• Total shareholder return was 5%, in the top half of our peer group.
• Expect to complete remaining £0.3 billion of current programme to return up to £4.5 billion of capital to shareholders in February 2023 and return up to an additional £0.5 billion in fiscal 23.