One of the world's largest producers of spirits and beers, Diageo has announced interim results, six months ended 31 December 2021.
Delivered strong net sales growth across all regions
• Reported net sales of £8bn increased 15.8%, with strong organic growth, partially offset by an adverse foreign exchange impact.
• Organic net sales grew 20%, driven by strong double-digit growth across all regions, supported by effective marketing and excellent commercial execution.
• Growth reflects continued recovery in the on-trade, resilient consumer demand in the off-trade and market share gains, and was underpinned by favourable industry trends of spirits taking share of total beverage alcohol and premiumisation(I).
operating margin while increasing marketing investment
• Reported operating profit of £2.7 billion increased 22.5%, and reported operating margin increased 190bps, primarily due to growth in organic operating profit.
• Organic operating profit grew 24.7%, with growth across all regions.
• Organic operating margin increased 131bps, primarily driven by a strong recovery in gross margin and leverage on operating costs, while increasing marketing investment.
• Supply productivity savings and price increases more than offset the impact of cost inflation.
Delivered broad-based category growth and gained market share
• Broad-based growth across most categories, with particularly strong performance in scotch, tequila and beer.
• Premium plus brands contributed 56% of reported net sales and drove 74% of organic net sales growth.
• Grew or held off-trade market share in over 85%(II) of total net sales value in measured markets.
Invested to sustain long-term growth
• Organic growth in marketing investment of 27.0%, ahead of organic net sales growth.
• Continued capex investment in production capacity, digital capabilities and consumer experiences.
Ivan Menezes, Chief Executive, said, “I am very pleased with our financial results, which build on our growth momentum in fiscal 21.
'We delivered strong organic net sales growth across all regions and operating margin expansion. This performance demonstrates our world-class brand building capability, supply chain excellence and agile culture, and reflects the strength of our portfolio across geographies, categories and price tiers.'
Menezes went on, 'In the off-trade channel, where consumer demand has remained resilient, we have gained or held market share across the majority of our measured markets. We also benefitted from the continued recovery of the on-trade channel, particularly in Europe and North America.
'Strong sales volume growth and continued premiumisation drove an improvement in organic operating margin during the half. This was achieved while increasing our investment in marketing to gain share and support innovation, particularly in North America and Greater China.
'In addition, our focus on revenue growth management and productivity savings are helping to mitigate the impact of cost inflation.'
Menezes continued, 'Strong cash flow generation is enabling re-investment in sustainable long-term growth. We are expanding our production capacity, enhancing our digital capabilities, investing in talent and progressing with our ambitious 10-year sustainability plan.
'During the half, we also returned £0.5 billion to shareholders via share buybacks and we are accelerating the timeline of our return of capital programme of up to £4.5 billion to now be completed during fiscal 23.
'We have made a strong start to fiscal 22. While we expect near-term volatility to remain, including potential impacts from Covid-19, global supply chain constraints and rising cost inflation, I am confident in our ability to successfully navigate these disruptions through the remainder of the year.'
Menezes concluded, 'Over the medium-term, from fiscal 23 to fiscal 25, we continue to expect organic net sales to consistently grow within a range of 5% to 7% and organic operating profit to grow sustainably within a range of 6% to 9%.”