Delivered strong net sales and operating profit growth within medium-term guidance
– Reported net sales of £17.1 billion, increased 10.7%, primarily reflecting strong organic net sales growth, and favourable impacts from foreign exchange.
– Organic net sales grew 6.5%. Price/mix of 7.3 percentage points reflects a high single-digit contribution from price and premiumisation.
– Reported volume declined by 7.4%, and organic volume declined by 0.8%.
– Growth reflects our advantaged portfolio of strong brands, diversified footprint, and premiumisation.
Resilient operating margin despite increased cost inflation
– Reported operating profit grew 5.1% to £4.6 billion. Reported operating margin declined by 147bps, with organic margin expansion more than offset by exceptional operating items and foreign exchange.
– Organic operating profit grew 7.0% and organic operating margin expanded by 15bps, driven by disciplined cost management. Price increases more than offset the absolute cost inflation impact on gross margin.
Advantaged portfolio and premiumisation drove market share growth
– Growth in organic net sales was delivered across most categories, particularly in our three largest categories: scotch, tequila and beer.
– Premium-plus brands comprised 63% of reported net sales, a 7 percentage point increase from fiscal 19.
– Total trade market share grew or held in over 70%(1) of total net sales value in measured markets.
Optimisation of portfolio through acquisitions and disposals
– Acquired Mr Black, a leading Australian premium coffee liqueur, Balcones Distilling, a Texas craft distiller and one of the leading producers of American single malt whiskey and Don Papa Rum, a super-premium, dark rum from the Philippines.
– Completed the sale of Guinness Cameroun 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 5.6%, reflecting strong, consistent investment in our brands.
– Invested £1.2 billion of capital expenditure (capex) in supply capacity, sustainability, digital capabilities and consumer experiences.
Continued cash flow generation and strong balance sheet
– Net cash flow from operating activities declined £0.9 billion to £3.0 billion.
– Free cash flow of £1.8 billion, declined £1.0 billion as strong growth in operating profit and favourable foreign exchange impacts were more than offset by higher year-on-year working capital outflows, tax and interest payments, and capital investment. Increased working capital reflects normalisation of creditors relative to fiscal 22 as our growth rate moderated in fiscal 23.
– Strong balance sheet, with leverage ratio(2) of 2.6x as at 30 June 2023, at the lower end of our target range, as a result of strong operating profit performance.
Continued progress in delivering Society 2030: Spirit of Progress ESG goals and doing business the right way
– Continued to reduce our absolute Scope 1 and 2 greenhouse gas emissions, achieving a further 5.4% reduction versus fiscal 22 and a cumulative 14.7% improvement from our 2020 baseline.
– SMASHED programme now live in 38 countries, and educated over 1.9 million young people, parents and teachers on the impact of underage drinking in fiscal 23, bringing the total to more than 3.7 million to date.
Continued creation of long-term shareholder value
– Increased basic eps by 17.6% to 164.9 pence and pre-exceptional eps by 7.6% to 163.5 pence.
– Increased recommended final dividend by 5% to 49.17 pence per share.
– Annualised total shareholder return was -2%, mainly driven by lower year-on-year share price. Total shareholder return, for the 5-year and 10-year periods of 7% and 9% respectively, remains strong.
– Completed a total of £1.4 billion return of capital in fiscal 23, which included £0.9 billion related to the completion of our £4.5 billion multi-year programme, and returned an additional £0.5 billion during the second half. Today we announced a new return of capital programme of up to $1 billion.
– Starting in fiscal 24, in line with reporting requirements the functional currency of Diageo plc has changed from sterling to the US dollar. Diageo has also changed its presentation currency to US dollar.(3)
See page 48 for explanation and reconciliation of non-GAAP measures, including organic net sales, organic marketing investment, organic operating profit, free cash flow, eps before exceptionals, ROIC, adjusted net debt, adjusted EBITDA and tax rate before exceptional items.
(1)Internal estimates incorporating Nielsen, Association of Canadian Distillers, Dichter & Neira, Frontline, INTAGE, IRI, ISCAM, NABCA, Scentia, State Monopolies, TRAC, IPSOS and other third-party providers. All analysis of data has been applied with a tolerance of +/- 3 bps. Percentages represent percent of markets by total Diageo net sales contribution that have held or gained total trade share fiscal year to date. Measured markets indicate a market where we have purchased any market share data. Market share data may include beer, wine, spirits or other elements. Measured market net sales value sums to 87% of total Diageo net sales value in fiscal 23. Effective fiscal 23, market share now reflects total on and off trade.
(2)Ratio of adjusted net borrowings to adjusted EBITDA. For further details see page 57.
(3)For further details, please see pages 7-8 and 47.
Debra Crew, Chief Executive, said:
We have delivered strong fiscal 23 full-year results, with organic net sales growth of 6% and organic operating profit growth of 7%, both within our medium-term guidance. We expanded organic operating margin by 15 basis points in a challenging cost environment while continuing to invest in the business. These results demonstrate Diageo’s ability to consistently deliver resilient performance, even in challenging macro environments. I want to thank my colleagues, nearly 30,000 globally, for their dedication, creativity and agility in delivering these results. I am also proud of how our Diageo family has come together in recent weeks following the loss of our much loved and respected former CEO, Sir Ivan Menezes.
In fiscal 23, we drove double-digit organic net sales growth in scotch, tequila, and Guinness, with our premium-plus brands contributing 57% of overall organic net sales growth. We delivered strong growth in four of our five regions, with Europe and Asia Pacific growing double-digit. North America delivered stable performance as the US spirits industry continued to normalise post-pandemic, and we lapped strong comparators, particularly in the second half of fiscal 23. Globally, we gained or held share in over 70%(1) of total net sales value in our measured markets in fiscal 23.
Our culture of everyday efficiency and strong pipeline of productivity initiatives drove £450 million of savings in fiscal 23, fuelling sustained investment in brand building. Our revenue growth management capabilities, deep consumer insights, and smart reinvestment enabled us to take strategic pricing actions with precision and effectiveness. Through free cash flow delivery, we increased our capital expenditure, acquired a number of brands to strengthen our exposure to attractive categories and bolstered our investment in maturing stock in fiscal 23, positioning us well for sustainable, long-term growth.
Looking ahead to fiscal 24, I expect operating environment challenges to persist, with continued cost pressure and ongoing geopolitical and macroeconomic uncertainty. This requires us to move with greater speed and agility. My near term opportunities to drive the business focus on bolder and faster innovation, stepping up operational excellence to meet consumers’ evolving tastes and preferences while driving scotch, tequila and Guinness.
Fiscal 24 marks the start of Diageo’s next stage of evolution, and it is an incredible privilege to be leading the company through it. I believe total beverage alcohol (TBA) is an attractive sector underpinned by strong consumer fundamentals, including population growth, increased spirits penetration, and resilience in premiumisation globally. I see a long runway of future growth opportunities for Diageo to go after with our winning strategy. And, I firmly believe we have an advantaged portfolio to capitalise on, to drive sustainable long-term growth and generate value for shareholders. I am excited to work with our teams around the world to capture the opportunities ahead.
| Financial performance | |||||||||||
| Volume (equivalent units) | Operating profit | Earnings per share (eps) | |||||||||
| EU243.4m | £4,632m | 164.9p | |||||||||
| (F22: EU 263.0m) | (F22: £4,409m) | (F22: 140.2p) | |||||||||
| Reported movement | (7)% | i | Reported movement | 5% | h | Reported movement | 18% | h | |||
| Organic movement(2) | (1)% | i | Organic movement(2) | 7% | h | Eps before exceptional items(2) | 8% | h | |||
| Net sales | Net cash from operating activities | Total recommended dividendper share(3) | |||||||||
| £17,113m | £3,024m | 80.00p | |||||||||
| (F22: £15,452m) | (F22: £3,935m) | (F22: 76.18p) | |||||||||
| Reported movement | 11% | h | F23 free cash flow(2) £1,800m | Increase | 5% | h | |||||
| Organic movement(2) | 6% | h | F22 free cash flow(2) £2,783m | ||||||||
(1)Internal estimates incorporating Nielsen, Association of Canadian Distillers, Dichter & Neira, Frontline, INTAGE, IRI, ISCAM, NABCA, Scentia, State Monopolies, TRAC, IPSOS and other third-party providers. All analysis of data has been applied with a tolerance of +/- 3 bps. Percentages represent percent of markets by total Diageo net sales contribution that have held or gained total trade (on and off trade) share fiscal year to date. Measured markets indicate a market where we have purchased any market share data. Market share data may include beer, wine, spirits or other elements. Measured market net sales value sums to 87% of total Diageo net sales value in fiscal 23. Effective fiscal 23, market share now reflects total on and off trade.
(2)See page 48 for explanation and reconciliation of non-GAAP measures.
(3)Includes recommended final dividend of 49.17p.
Key financial information
For the year ended 30 June 2023
Summary financial information
| 2023 | 2022 | Organic growth% | Reported growth% | ||
| Volume | EUm | 243.4 | 263.0 | (1) | (7) |
| Net sales | £ million | 17,113 | 15,452 | 6 | 11 |
| Marketing | £ million | 3,051 | 2,721 | 6 | 12 |
| Operating profit before exceptional items | £ million | 5,254 | 4,797 | 7 | 10 |
| Exceptional operating items(1) | £ million | (622) | (388) | ||
| Operating profit | £ million | 4,632 | 4,409 | 5 | |
| Share of associate and joint venture profit after tax | £ million | 370 | 417 | (11) | |
| Non-operating exceptional items(1) | £ million | 328 | (17) | ||
| Net finance charges | £ million | (594) | (422) | ||
| Exceptional taxation credit(1) | £ million | 186 | 31 | ||
| Tax rate including exceptional items | % | 20.5 | 23.9 | (14) | |
| Tax rate before exceptional items | % | 23.0 | 22.5 | 2 | |
| Profit attributable to parent company’s shareholders | £ million | 3,734 | 3,249 | 15 | |
| Basic earnings per share | pence | 164.9 | 140.2 | 18 | |
| Basic earnings per share before exceptional items | pence | 163.5 | 151.9 | 8 | |
| Recommended full year dividend | pence | 80.00 | 76.18 | 5 |
(1)For further details on exceptional items see pages 22 and 34-35.
Reported growth by region
| Volume | Net sales | Marketing | Operating profit before exceptional items | Operating profit | ||||||
| % | EUm | % | £ million | % | £ million | % | £ million | % | £ million | |
| North America | (4) | (2.4) | 11 | 663 | 13 | 160 | 10 | 235 | 6 | 139 |
| Europe | – | 0.1 | 11 | 357 | 10 | 58 | 9 | 88 | 26 | 226 |
| Asia Pacific | (14) | (13.4) | 11 | 316 | 11 | 56 | 27 | 194 | (8) | (38) |
| Latin America and Caribbean | (3) | (0.9) | 18 | 274 | 22 | 53 | 23 | 123 | 23 | 123 |
| Africa | (8) | (3.0) | 1 | 17 | (2) | (4) | (30) | (95) | (44) | (139) |
| Corporate | – | – | 63 | 34 | 58 | 7 | (37) | (88) | (37) | (88) |
| Diageo | (7) | (19.6) | 11 | 1,661 | 12 | 330 | 10 | 457 | 5 | 223 |
Organic growth by region
| Volume | Net sales | Marketing | Operating profit before exceptional items | |||||
| % | EUm | % | £ million | % | £ million | % | £ million | |
| North America | (5) | (2.5) | – | 11 | 2 | 22 | (2) | (57) |
| Europe | – | 0.1 | 11 | 347 | 7 | 42 | 11 | 103 |
| Asia Pacific | 5 | 3.9 | 13 | 353 | 9 | 46 | 29 | 200 |
| Latin America and Caribbean | (3) | (0.9) | 9 | 142 | 14 | 34 | 12 | 62 |
| Africa | (7) | (2.4) | 5 | 83 | 2 | 4 | 12 | 37 |
| Corporate | – | – | 61 | 33 | 36 | 4 | (9) | (24) |
| Diageo | (1) | (1.8) | 6 | 969 | 6 | 152 | 7 | 321 |
| Fiscal 19 to fiscal 23 growth | |||||
| Reported net sales growth %(1) | Net sales growth on a constant basis %(1) | Organic volume CAGR %(2) | Organic net sales CAGR %(2) | ||
| North America | 52 | 41 | 2 | 9 | |
| Europe | 21 | 30 | 3 | 7 | |
| Asia Pacific | 19 | 24 | 1 | 6 | |
| Latin America and Caribbean | 59 | 62 | 4 | 15 | |
| Africa | 6 | 30 | 2 | 8 | |
| Corporate | 66 | 62 | – | 14 | |
| Diageo | 33 | 35 | 2 | 8 | |
See page 48 for explanation and reconciliation of non-GAAP measures
(1)For further details on fiscal 19 to fiscal 23 growth on a constant basis see pages 49-52.
(2)Fiscal 19 to fiscal 23 CAGR indicative. Calculated by applying each year’s individual organic growth rates.
Net sales (£ million)
Reported net sales grew 10.7%
Organic net sales grew 6.5%
Reported net sales grew 10.7%, driven by strong organic growth and favourable foreign exchange impacts.
Organic net sales growth of 6.5% reflects 7.3 percentage points of positive price/mix and a decline in organic volume of 0.8%. Four out of five regions delivered growth, despite lapping strong double-digit growth at the group level in fiscal 22. Price/mix was driven by price increases and premiumisation.
| Net sales | £ million |
| 2022 | 15,452 |
| Exchange(1) | 702 |
| Acquisitions and disposals | (114) |
| Hyperinflation(2) | 104 |
| Volume | (114) |
| Price/mix | 1,083 |
| 2023 | 17,113 |
(1)Exchange rate movements reflect the adjustment to recalculate the reported results as if they had been generated at the prior period weighted average exchange rates.
(2)See pages 36 and 49-52 for details of hyperinflation adjustment.
Operating profit (£ million)
Reported operating profit grew 5.1%, mainly driven by growth in organic operating profit and positive impacts from exchange rate movements. These favourable items were largely offset by the negative impact of exceptional operating items, primarily non-cash impairments related to India and the supply chain agility programme.
Organic operating profit grew 7.0%, ahead of organic net sales growth, driven by growth across all regions except North America.
| Operating profit | £ million |
| 2022 | 4,409 |
| Exceptional operating items(1) | (234) |
| Exchange | 122 |
| Acquisitions and disposals | (61) |
| FVR(2) | 53 |
| Hyperinflation(3) | 22 |
| Organic movement | 321 |
| 2023 | 4,632 |
(1)For further details on exceptional operating items see pages 22 and 34-35.
(2)Fair value remeasurements. For further details see page 22.
(3)See pages 36 and 49-52 for details of hyperinflation adjustment.
Operating margin (%)
Reported operating margin declined by 147bps
Organic operating margin expanded by 15bps
Reported operating margin declined by 147bps, with organic operating margin expansion more than offset by exceptional operating items, negative impact of foreign exchange, acquisitions, disposals and other items.
Organic operating margin expanded by 15bps, reflecting disciplined cost management despite inflation. Strong operating margin expansion in Asia Pacific, Africa and Latin America and Caribbean was partially offset by declines in North America and Europe.
Organic gross margin declined by 97bps, primarily driven by cost pressures. Price increases more than offset the absolute impact of cost inflation.
| Operating margin | ppt |
| 2022(1) | 28.5 |
| Exceptional operating items(2) | (1.12) |
| Exchange | (0.58) |
| Acquisitions and disposals | (0.15) |
| Other(3) | 0.23 |
| Gross margin | (0.97) |
| Marketing | 0.14 |
| Other operating items | 0.98 |
| 2023(1) | 27.1 |
(1)Operating margin in waterfall is rounded to nearest decimal place.
(2)For further details on exceptional operating items see pages 22 and 34-35.
(3)Fair value remeasurements and hyperinflation adjustment. For further details on fair value remeasurements see page 22. See pages 36 and 49-52 for details of hyperinflation adjustment.
Basic earnings per share (pence)
Basic eps increased 17.6% from 140.2 pence to 164.9 pence
Basic eps before exceptional items(1) increased 7.6% from 151.9 pence to 163.5 pence
Basic eps increased 24.7 pence, mainly driven by organic operating profit growth and exceptional items, partially offset by increased finance charges and higher tax.
Basic eps before exceptional items increased 11.6 pence.
(
| Basic earnings per share | pence |
| 2022 | 140.2 |
| Exceptional items after tax(2) | 13.1 |
| Exchange on operating profit | 5.3 |
| Acquisitions and disposals(3) | (1.7) |
| Organic operating profit | 13.8 |
| Associates and joint ventures | (2.0) |
| Finance charges(4) | (5.5) |
| Tax(5) | (4.3) |
| Share buyback(3) | 2.0 |
| Non-controlling interests | 0.8 |
| FVR(6) | 2.3 |
| Hyperinflation (operating profit)(7) | 0.9 |
| 2023 | 164.9 |
(1)See page 48 for explanation of the calculation and use of non-GAAP measures.
(2)For further details on exceptional items see pages 22 and 34-35.
(3)Includes finance charges net of tax.
(4)Excludes finance charges related to acquisitions, disposals, share buybacks and includes finance charges related to hyperinflation adjustments.
(5)Excludes tax related to acquisitions, disposals and share buybacks.
(6)Fair value remeasurements. For further details see page 22.
(7)Operating profit hyperinflation adjustment movement was £12 million compared to fiscal 22 (F23 – £22 million; F22 – £10 million).
Net cash from operating activities and free cash flow (£ million)
Generated £3,024 million net cash from operating activities(1) and £1,800 million free cash flow
Net cash from operating activities was £3,024 million, a decrease of £911 million compared to fiscal 22. Free cash flow declined by £983 million to £1,800 million.
Free cash flow declined as strong growth in operating profit and favourable foreign exchange impacts were more than offset by higher year-on-year working capital outflows, tax payments, interest paid and capital investment.
The higher year-on-year working capital outflow was primarily driven by normalisation of creditors relative to fiscal 22 as our growth rate moderated in fiscal 23.
The additional tax payments were the result of increased profit impacting tax instalments and higher balancing payments. The increase in interest paid reflects the higher interest rate environment globally
| Free cash flow | £ million |
| F22 Net cash from operating activities | 3,935 |
| F22 Capex and movements in loans and other investments | (1,152) |
| F22 Free cash flow | 2,783 |
| Exchange(2) | 122 |
| Operating profit(3) | 384 |
| Working capital(4) | (996) |
| Capex | (87) |
| Tax | (252) |
| Interest | (226) |
| Other(5) | 72 |
| F23 Free cash flow | 1,800 |
| F23 Capex and movements in loans and other investments | 1,224 |
| F23 Net cash from operating activities | 3,024 |
(1)Net cash from operating activities excludes net capex (2023 – £(1,167) million; 2022 – £(1,080) million) and movements in loans and other investments.
(2)Exchange on operating profit before exceptional items.
(3)Operating profit excludes exchange, depreciation and amortisation, post employment charges of £36 million and other non-cash items.
(4)Working capital movement includes maturing inventory.
(5)Other items include dividends received from associates and joint ventures, movements in loans and other investments and post employment payments.
Return on average invested capital (%)(1)
ROIC decreased 50bps
ROIC decreased 50bps, mainly driven by increased capex, maturing stock investment and continued portfolio optimisation through acquisitions and disposals. The decline was partially offset by higher organic operating profit growth, net of higher tax.
| Return on average invested capital | ppt |
| 2022 | 16.8 |
| Exchange | 0.01 |
| Acquisitions and disposals | (0.39) |
| Organic operating profit | 1.32 |
| Associates and joint ventures | (0.33) |
| Tax | (0.46) |
| Other | (0.65) |
| 2023 | 16.3 |
(1)ROIC calculation excludes exceptional operating items from operating profit. For further details on ROIC see page 56.
Fiscal 23 to fiscal 25 medium-term guidance
Organic net sales and organic operating profit
We believe in the fundamental strength of our business and expect our advantaged portfolio to benefit from international spirits continuing to gain share of TBA, premiumisation, and continued investment in marketing and innovation. Our portfolio is well-positioned across categories, geographies and price points. We will use our deep understanding of consumers to quickly adapt to changes in trends and behaviours while investing in marketing and innovation and leveraging our revenue growth management capabilities, including strategic pricing actions.
We continue to expect to deliver our medium-term guidance of consistent organic net sales growth in the range of 5% to 7% and sustainable organic operating profit growth in the range of 6% to 9%.
Fiscal 24 outlook
Organic net sales growth
In fiscal 23, strong net sales growth in the first half was followed by moderation in the second half. In the first half of fiscal 24, despite a tougher comparator, we expect gradual improvement from the second half of fiscal 23. We expect our organic net sales growth to accelerate in the second half of fiscal 24, given the softer comparator.
Organic operating profit growth
In a challenging, albeit moderating, inflationary environment, we will continue to focus on revenue growth management, including strategic pricing actions and everyday efficiency. We continue to expect organic operating margin to benefit from premiumisation trends and operating leverage while investing strongly in marketing. In line with organic net sales growth, we expect organic operating profit growth in fiscal 24 to improve from the second half of fiscal 23 and accelerate gradually through fiscal 24.
Taxation
We expect the tax rate before exceptional items to be in the region of 24% in fiscal 24.
Effective interest rate
We expect the effective interest rate to be just above 4% in fiscal 24.
Supply Chain Agility Programme
In July 2022, we announced our five-year programme to build a more agile and sustainable business by strengthening our end-to-end supply chain and making it fit for the future while driving productivity savings. The total implementation cost is expected to be up to $650 million (£500 million) which will comprise non-cash items and one-off expenses, the majority of which are expected to be recognised as exceptional operating items. The programme commenced in fiscal 23, and an exceptional charge was accounted for primarily relating to accelerated depreciation of assets and impairment of property, plant, and equipment directly attributable to the programme in North America and in India. Please see page 34 for details.
We expect the savings delivered from the supply chain agility programme to be incremental to our ongoing annual gross productivity savings (expected to be around $1.5 billion (£1.2 billion) in the period from fiscal 22 to fiscal 24). The programme is expected to have a five-year payback period, with most savings delivered in fiscal 25 and beyond.
Capital expenditure and free cash flow
In fiscal 24, we continue to expect capital expenditure for the full year to be in the range of $1.3-1.5 billion (£1.0-1.2 billion). We expect these levels of spend to continue in the coming years, but then decline again to historic levels as a percentage of net sales starting in fiscal 27. We expect cash flow to grow organically in fiscal 24 while we continue to invest in maturing stock to support long-term sustainable growth.