Market highlights

East Africa

Strong growth lapping a decline in the first half of fiscal 2021

Net sales grew 22%, with all markets growing double-digit. Kenya grew 27%, lapping a decline in the first half of fiscal 2021, with strong growth in beer as the on-trade recovered, and spirits, with particular strength in mainstream gin. Double-digit growth in Uganda and Tanzania was primarily driven by strong performance in beer, which benefitted from a partial recovery of the on-trade.

Africa Regional Markets

Growth driven primarily by strong beer performance

Net sales grew 12%, with growth in all markets except Ethiopia. Double-digit growth in beer was led by Guinness and Malta Guinness, which benefitted from the recovery of the on-trade channel and price increases.

Nigeria

Strong growth across total beverage alcohol categories

Net sales grew 51%, benefitting from price increases, resilient consumer demand and the benefit from improved route to consumer across the business. Double-digit growth in beer, mainstream spirits and international premium spirits reflects continued recovery of the on-trade channel and momentum in the off-trade. Growth in beer was primarily driven by Malta Guinness and Guinness. Double-digit growth in ready to drink was primarily driven by Smirnoff.

South Africa

Continued impact from economic and social challenges and Covid-19 related restrictions

Net sales grew by 7%, lapping a decline in the first half of fiscal 21. Growth was primarily driven by Johnnie Walker and Smirnoff, partially offset by a decline in gin.

Marketing

Investing ahead of net sales as region recovers

Marketing investment increased 28%, ahead of net sales growth, lapping a decline in the first half of fiscal 21. Investment focused on key categories, as well as e-commerce and new route to consumer opportunities.

Latin America and Caribbean

-   Reported net sales grew 41%, primarily reflecting strong organic growth. Net sales were unfavourably impacted by foreign exchange, mainly due to weakening of the Colombian peso and the Brazilian real.

-   Organic net sales increased 45%, lapping a slight decline in the first half of fiscal 21, driven by strong double-digit growth in all markets.

-   Growth was driven by the recovery in the on-trade channel and resilient consumer demand in the off-trade channel, where Diageo continued to gain market share. Growth also reflects positive mix from strong growth of premium plus scotch and price increases across key markets.  

-    Spirits net sales grew 46%, with growth across key categories, particularly scotch.

-   Organic operating margin improved by 797bps driven by premiumisation, price increases and leverage on operating costs. This was partially offset by an increase in marketing investment and cost inflation.

 

Key financials £ million:
	F21 H1	Exchange	Acquisitions and disposals	Organic movement	Other(i)	F22 H1	Reported movement  %
Net sales	579	(18)	-	258	-	819	41
Marketing	78	(3)	-	50	-	125	60
Operating profit	197	(13)	-	152	(3)	333	69

 

Markets:						Global giants and local stars(ii):
	Organic volume movement	Reported volume movement	Organic net sales movement	Reported net sales movement			Organic volume movement(iii)	Organic net sales movement	Reported net sales movement
	%	%	%	%			%	%	%
Latin America and Caribbean						Johnnie Walker	43	63	60
	16	16	45	41		Buchanan's	58	72	67
						Old Parr	56	70	65
PUB	4	4	30	25		Smirnoff	32	25	23
Mexico	-	-	13	13		Black & White	(13)	(1)	(5)
CCA	37	37	68	68		Tanqueray	45	40	36
Andean	19	19	52	40		Baileys	34	45	41
PEBAC	63	63	107	100
Spirits	15	15	46	42
Beer	19	19	12	7
Ready to drink	38	38	55	48

(i)     Fair value remeasurements. For further details see Summary income statement, (d) Fair value remeasurement.

(ii)    Spirits brands excluding ready to drink and non-alcoholic variants. 

(iii)   Organic equals reported volume movement.

Latin America and Caribbean contributed		Latin America and Caribbean organic net sales grew
11% of Diageo reported net sales in first half of fiscal 22		45% in first half of fiscal 22

 

Market highlights

PUB (Paraguay, Uruguay and Brazil)

Strong broad-based growth in several key categories

Net sales increased 30%, primarily driven by scotch. Growth in ready to drink, gin, and vodka was partially offset by a decline in cachaça. Scotch net sales increased 35%, with double-digit growth in Johnnie Walker, Buchanan's, White Horse and Old Parr. Brazil net sales grew 27%, reflecting continued momentum in the off-trade channel, price increases and recovery in the on-trade channel. 

Mexico

Partial recovery as restrictions ease

Net sales increased 13%, lapping a decline in the first half of fiscal 21. Scotch net sales grew 24%, driven by Johnnie Walker and Buchanan's, which both benefitted from price increases. Tequila declined 5% due to constraints on the supply of certain aged variants. 

CCA (Central America and Caribbean)

Resilient domestic consumption and partial recovery of the on-trade

Net sales grew 68%, lapping a decline in the first half of fiscal 21. Growth was driven by resilient domestic consumption and partial recovery of the on-trade. Scotch net sales increased 74%, driven by strong growth in Johnnie Walker, Buchanan's and Old Parr.

Andean (Colombia and Venezuela)

Growth driven by strong scotch performance in Colombia

Net sales increased 52%, driven by Colombia. Growth was primarily driven by scotch, which grew 45% due to double-digit growth in Buchanan's, Old Parr and Johnnie Walker.

PEBAC (Peru, Ecuador, Bolivia, Argentina and Chile)

Partial easing of restrictions drives strong growth across all markets

Net sales increased 107%, benefitting from strong performance of the off-trade, price increases, favourable category mix and recovery in the on-trade channel. Scotch delivered strong double-digit net sales growth, primarily driven by Johnnie Walker.

Travel Retail Latin America and Caribbean

Recovery as travel restrictions eased

Net sales recovered ahead of pre-Covid-19 levels due to the reopening of international travel.

Marketing

Investing ahead of net sales as region recovers 

Marketing investment increased 65%, ahead of net sales, lapping a decline in the first half of fiscal 21. Investment focussed on strategic growth priorities.

 

Category and brand review

-    Spirits grew 20%, with growth across most categories, with particularly strong performance in scotch, tequila, vodka and gin. US whiskey declined due to glass supply constraints which impacted production volumes of Bulleit.

-    Scotch grew 27%, with Johnnie Walker growing 31%; both grew double-digits across all regions.

-    Tequila grew 56%, with Don Julio and Casamigos continuing to gain share of the fast-growing tequila category in US Spirits.

-    Vodka grew 14%, with growth across all regions, particularly in Europe and North America. Smirnoff, Ketel One and Cîroc grew strongly.

-    Gin grew  across all regions with strong double-digit growth in Europe, Africa and Latin America and Caribbean.

-    Beer grew 22%, primarily driven by strong growth of Guinness in Ireland, Great Britain and Africa.

-    Ready to drink grew 17%, with growth in all regions except Asia Pacific.

 

Key categories:
	Organic volume movement(i) %	Organic net sales movement %	Reported net sales movement %
Spirits(ii)	8	20	16
Scotch	18	27	23
Vodka(iii)(iv)	13	14	10
Canadian whisky	2	10	7
Rum(iii)	2	2	(2)
Liqueurs	13	11	7
Indian-Made Foreign Liquor (IMFL) whisky	2	3	(2)
Tequila	49	56	51
Gin(iii)	19	21	19
US whiskey	(10)	(8)	(11)
Beer	16	22	16
Ready to drink	15	17	17

 

(i)      Organic equals reported volume movement.

(ii)     Spirits brands excluding ready to drink and non-alcoholic variants.

(iii)    Vodka, rum, gin, including IMFL brands.

(iv)    Vodka includes Ketel One Botanical.

 

 

Scotch

26% of Diageo's reported net sales and grew 27%, following a decline in the first half of fiscal 2021

Growth in all regions, particularly Latin America and Caribbean, Asia Pacific and Europe.

-   Johnnie Walker net sales increased 31%, with double-digit growth in all regions.

-   Johnnie Walker Black Label grew 33%, with growth across all regions.

-   Johnnie Walker Blue Label grew 65%, with growth in all regions, particularly North America and Asia Pacific.

-   Johnnie Walker Red Label grew 20% with double-digit growth in Europe, Latin America and Caribbean, and Asia Pacific.

-   Primary scotch brands grew 13%, primarily driven by double-digit growth of Black Dog and Black & White in India.

-   Scotch malts grew 12%, primarily driven by strong growth in Asia Pacific.

-   Buchanan's and Old Parr net sales grew 42% and 64% respectively, primarily driven by strong growth in Latin America and Caribbean.

Vodka

10% of Diageo's reported net sales and grew 14%

Growth in all regions, with particularly strong performance in Europe and North America.

-   Smirnoff net sales increased 8%, with double-digit growth in all regions except North America, where net sales declined.

-   Cîroc grew 22%, primarily driven by strong growth in North America and Europe.

-   Ketel One grew 24%, primarily driven by North America, with strong growth in the core variant and Ketel One Botanical.

Tequila

9% of Diageo's reported net sales and grew 56%

Growth was mainly driven by the strong performance of Casamigos and Don Julio within the fast-growing tequila category in US Spirits, which benefitted from its broad occasion appeal.

Canadian whisky

7% of Diageo's reported net sales and grew 10%

Growth of Crown Royal in North America was primarily driven by continued momentum in the core variant. Supply constraints of aged liquid led to slower growth of flavour variants and a decline in Crown Royal's share of the Canadian whisky category.

Rum

5% of Diageo's reported net sales and grew 2%

Growth in Europe and Latin America and Caribbean was partially offset by a decline in North America. The decline of Captain Morgan in North America was partially offset by double-digit growth in Europe. Zacapa performed strongly, with double-digit growth in Europe, Latin American and Caribbean and North America.

Liqueurs

6% of Diageo's reported net sales and grew 11%

Growth was driven by Baileys Original in Europe and Latin America and Caribbean, partially offset by a decline in North America due to lapping strong growth in the first half of fiscal 2021. 

Gin

5% of Diageo's reported net sales and grew 21% 

Growth across all regions with strong double-digit growth in Europe, Africa and Latin America and Caribbean. 

-   Strong growth in Europe was largely driven by Tanqueray and Gordon's in Southern Europe.

-   Strong growth in Africa was mainly driven by Gilbey's in Kenya.

-   Strong growth in Latin America and Caribbean was driven by double-digit growth of Tanqueray and Gordon's.

IMFL whisky

4% of Diageo's reported net sales and grew 3%, following a decline in the first half of fiscal 2021

Growth was primarily driven by McDowell's.

US whiskey

2% of Diageo's reported net sales and declined 8%

The decline was primarily driven by Bulleit, which was affected by glass supply constraints that impacted production volumes.

Beer

15% of Diageo's reported net sales and grew 22%

-   Guinness grew 27%, with strong growth in Europe and Africa, driven by the recovery of the on-trade.

-   Strong double-digit growth in Malta Guinness, which benefitted from the continued recovery of the on-trade and price increases in some markets.

-   Beer in Africa grew 24%, following a decline in the first half of fiscal 2021, driven by Malta Guinness and Guinness as the on-trade continued to recover and restrictions eased.

-   Smirnoff flavoured malt beverages declined, with growth in Smirnoff Ice more than offset by a decline in seltzers.

Ready to drink 

4% of Diageo's reported net sales and grew 17%

Growth across all regions except Asia Pacific. Performance in Asia Pacific was impacted by the slight decline of Bundaberg in Australia due to lapping a strong performance in the first half of fiscal 2021.

 

Global giants, local stars and reserve(i):
	Organic volume movement(ii) %	Organic net sales movement %	Reported net sales movement %
Global giants
Johnnie Walker	25	31	28
Smirnoff	12	8	6
Baileys	13	10	6
Captain Morgan	2	(2)	(5)
Tanqueray	24	25	21
Guinness	16	27	20
Local stars
Crown Royal	4	11	7
Yenì Raki	10	11	(14)
Buchanan's	39	42	37
JƐB	18	20	15
Windsor	(7)	(5)	(11)
Old Parr	53	64	59
Bundaberg	-	(1)	(3)
Black & White	(1)	13	9
Ypióca	(24)	(11)	(15)
McDowell's	2	4	(1)
Shui Jing Fang(iii)	17	26	27
Reserve
Scotch malts	11	12	9
Cîroc vodka	15	22	18
Ketel One(iv)	15	24	19
Don Julio	25	38	34
Bulleit	(14)	(16)	(20)
Casamigos	84	88	81

(i)      Spirits brands excluding ready to drink and non-alcoholic variants.

(ii)     Organic equals reported volume movement.

(iii)    Growth figures represent total Chinese white spirits of which Shui Jing Fang is the principal brand.

(iv)    Ketel One includes Ketel One vodka and Ketel One Botanical.

 

Global giants

39% of Diageo's reported net sales and grew by 20%, following a decline in the first half of fiscal 2021

All brands grew net sales, except for Captain Morgan, which declined in North America. Johnnie Walker grew across all regions. Double-digit growth in Guinness was driven by strong performance in Europe and Africa.

Local stars

20% of Diageo's reported net sales and grew 17%

Growth was largely driven by double-digit growth in Buchanan's in Latin America and Caribbean and North America, Chinese white spirits in Greater China, Crown Royal in North America and Old Parr in Latin America and Caribbean.

Reserve

27% of Diageo's reported net sales and grew 31%

Growth was largely driven by the strong performance of Casamigos and Don Julio in US Spirits, Johnnie Walker Reserve variants in all regions and Chinese white spirits in Greater China. Bulleit net sales declined 16% and the brand lost share of the US whiskey category due to glass supply constraints which impacted production volumes.

  

 

Additional financial information

Six months ended 31 December 2021

Summary income statement

.

	31 December 2020	Exchange (a)	Acquisitions and disposals (b)	Organic movement(i)	Fair value remeasurement (d)	Reclassification(ii)	31 December 2021
	£ million	£ million	£ million	£ million	£ million	£ million	£ million
Sales	10,436	(491)	15	1,793	-	-	11,753
Excise duties	(3,562)	220	2	(449)	-	(7)	(3,796)
Net sales	6,874	(271)	17	1,344	-	(7)	7,957
Cost of sales	(2,661)	112	(13)	(400)	-	7	(2,955)
Gross profit	4,213	(159)	4	944	-	-	5,002
Marketing	(1,085)	37	(16)	(288)	1	-	(1,351)
Other operating items	(872)	35	2	(106)	33	-	(908)
Operating profit before exceptional items	2,256	(87)	(10)	550	34	-	2,743
Exceptional operating items (c)	(17)						-
Operating profit	2,239						2,743
Non-operating items (c)	5						(31)
Net finance charges	(200)						(180)
Share of after tax results of associates and joint ventures	154						190
Profit before taxation	2,198						2,722
Taxation (e)	(537)						(634)
Profit for the period	1,661						2,088

(i)     For the definition of organic movement see Explanatory notes.

(ii)    For the six months ended 30 December 2021, £7 million has been reclassified from cost of good sold to excise duties.

 

(a) Exchange

The impact of movements in exchange rates on reported figures for net sales and operating profit is principally in respect of the translation exchange impact of the strengthening of sterling against the US dollar, the euro, the Indian rupee and the Turkish lira.

The effect of movements in exchange rates and other movements on profit before exceptional items and taxation for the six months ended 31 December 2021 is set out in the table below.

	Gains/(losses)
	£ million
Translation impact	(101)
Transaction impact	14
Operating profit before exceptional items	(87)
Net finance charges - translation impact	7
Net finance charges - transaction impact	(2)
Net finance charges	5
Associates - translation impact	(9)
Profit before exceptional items and taxation	(91)

 

	Six months ended 31 December 2021	Six months ended 31 December 2020
Exchange rates
Translation  £1 =	$1.36	$1.31
Transaction £1 =	$1.30	$1.34
Translation  £1 =	€1.17	€1.11
Transaction £1 =	€1.15	€1.11

 

(b) Acquisitions and disposals

The acquisitions and disposals movement was primarily attributable to prior years' acquisitions in the six months ended 31 December 2021 partially offset by the impact of prior years' disposal.

See Movements in net borrowings and equity; Notes, 11. Acquisition of businesses; and Explanatory notes, Organic growth excluding Travel Retail and Guinness for further details.

(c) Exceptional items

Exceptional operating items in the six months ended 31 December 2021 were £nil before tax (2020 - £17 million loss).

In the six months ended 31 December 2020, an additional provision of TRY 152 million (£15 million) was recorded as an exceptional item in respect of the ongoing litigation in Turkey.

On 20 November 2020, the High Court of Justice of England and Wales issued a ruling that requires schemes to equalise pension benefits for men and women for the calculation of their guaranteed minimum pension liability (GMP) on historic transfers out, which resulted in an additional liability of £5 million. The corresponding expense was recognised as an exceptional operating item in the six months ended 31 December 2020, consistent with the charge in relation to the initial GMP ruling in the year ended 30 June 2019.

In the six months ended 31 December 2020, an inventory provision of £3 million was released in respect of inventories that had earlier been expected to be returned and destroyed as a consequence of the Covid-19 pandemic, resulting in an exceptional gain.

Non-operating items in the six months ended 31 December 2021 were £31 million loss (2020 - £5 million gain).

On 21 January 2022, Diageo agreed the sale of its Ethiopian subsidiary, Meta Abo Brewery Share Company (Meta). At 31 December 2021, the assets and liabilities of Meta were classified as held for sale and were measured at their fair value less costs to dispose. In the six months ended 31 December 2021, a loss of ETB 2,254 million (£33 million) was recognised as a non-operating item attributable to the prospective sale of Meta. At the completion of the transaction, the cumulative translation losses will be recycled to the income statement. At 31 December 2021, cumulative translation losses recognised in exchange reserves were £65 million.  

In the six months ended 31 December 2021, ZAR 43 million (£2 million) (2020 - £5 million) of deferred consideration was paid to Diageo in respect of the sale of United National Breweries, resulting in a non-operating gain, which has been classified as exceptional item consistent with the original charge.

Exceptional tax charges in the six months ended 31 December 2021 were £nil (2020 - £42 million, attributable to a change in the applicable corporate tax rate in the Netherlands).

See Explanatory notes, (c) Exceptional items for the definition of exceptional items.

(d) Fair value remeasurement

The adjustment to cost of sales reflects the elimination of fair value changes for biological assets in respect of growing agave plants of £3 million gain for the six months ended 31 December 2021 and £3 million gain for the six months ended 31 December 2020. The adjustments to marketing and other operating expenses are the elimination of fair value changes to contingent consideration liabilities and earn out arrangements in respect of prior year acquisitions of £23 million gain for the six months ended 31 December 2021 and £11 million loss for the six months ended 31 December 2020.

(e) Taxation

The reported tax rate for the six months ended 31 December 2021 was 23.3% compared with 24.4% for the six months ended 31 December 2020.

For the six months ended 31 December 2021, income tax expense has been recognised based on management's best estimate of the weighted average annual income tax rate expected for the full financial year applied to the pre-tax income of the interim period in line with the relevant accounting standard.

On 15 December 2020, legislation was substantively enacted in the Netherlands to maintain the headline corporate tax rate at 25%, reversing a previously enacted reduction in the corporate tax rate to 21.7% from 2021. As a result of the change, an exceptional tax charge of £42 million was recognised for the six months ended 31 December 2020 in relation to the remeasurement of deferred tax liabilities.

The tax rate before exceptional items for the six months ended 31 December 2021 was 23.0% compared with 22.4% for the six months ended 31 December 2020.

We expect the tax rate before exceptional items for the year ending 30 June 2022 to be in the range of 22% - 24%.

(f) Dividend 

The group aims to increase the dividend each year and the decision in respect of the dividend is made with reference to dividend cover as well as current performance trends including sales and profit after tax together with cash generation. Diageo targets dividend cover (the ratio of basic earnings per share before exceptional items to dividend per share) within the range of 1.8-2.2 times. For the year ended  30 June 2021 dividend cover was 1.6 times. It is expected that dividend increases will be maintained at roughly a mid-single digit rate as we look to build dividend cover and operate comfortably within the policy range.

An interim dividend of 29.36 pence per share will be paid to holders of ordinary shares and ADRs on the register as of 25 February 2022. The ex-dividend date is 24 February 2022. This represents an increase of 5% on last year's interim dividend. The interim dividend will be paid to ordinary shareholders on 7 April 2022. Payment to ADR holders will be made on 12 April 2022. A dividend reinvestment plan is available to holders of ordinary shares in respect of the interim dividend and the plan notice date is 11 March 2022.

(g) Return of capital 

On 25 July 2019, the Board approved a return of capital programme to return up to £4.5 billion to shareholders over the three-year period from 1 July 2019 to 30 June 2022. Under the first phase of the programme, which ended on 31 January 2020, the company returned £1.25 billion to shareholders via share buybacks. Due to the impact of Covid-19, the original completion date for the programme has been extended by two years to 30 June 2024. The second phase of the programme of up to £1 billion to shareholders via share buybacks was initiated on 12 May 2021 and is expected to be completed no later than 4 March 2022.

 

Diageo will accelerate the return of capital programme to return up to £4.5 billion to shareholders, which we now expect to complete during the year ending 30 June 2023. The Board expects to consider the next phase of the programme in due course. 

 

In the six months ended 31 December 2021, the company purchased 14.6 million ordinary shares at a cost of £538 million (including £3 million of transaction costs) (2020 - £nil). All shares purchased under the share buyback programme were cancelled. A financial liability of £184 million was established at 31 December 2021 representing the shares that were expected to be purchased by 27 January 2022.

 

 

Movements in net borrowings and equity

Movements in net borrowings

	2021	2020
	£ million	£ million
Net borrowings at 30 June	(12,109)	(13,246)
Free cash flow (a)	1,575	1,753
Acquisitions (b)	(134)	(364)
Sale of businesses and brands	2	5
Share buyback programme	(538)	-
Net sale of own shares for share schemes (c)	42	9
Purchase of treasury shares in respect of subsidiaries	(13)	-
Dividends paid to non-controlling interests	(51)	(53)
Net movements in bonds (d)	(769)	(216)
Purchase of shares of non-controlling interests (e)	-	(34)
Net movements in other borrowings (f)	38	(345)
Equity dividends paid	(1,040)	(992)
Net decrease in cash and cash equivalents	(888)	(237)
Net decrease in bonds and other borrowings	729	561
Exchange differences (g)	(31)	420
Other non-cash items (h)	(32)	(159)
Net borrowings at 31 December	(12,331)	(12,661)

(a) See Explanatory Notes, Free cash flow for the analysis of free cash flow.

(b) In the six months ended 31 December 2021, Diageo paid £110 million in relation to past acquisitions. 

In the six months ended 31 December 2020, Diageo completed the acquisition of Aviation Gin and Davos Brands for a total consideration of $337 million (£263 million) in cash and contingent consideration of up to $275 million (£214 million) over a ten-year period linked to performance targets.

In both periods acquisitions also include additional investments as part of the Distill Ventures programme as well as deferred and contingent consideration paid in respect of previous acquisitions.

(c) Net sale of own shares comprised receipts from employees on the exercise of share options of £56 million (2020 - £10 million) less purchase of treasury shares for the future settlement of obligations under the employee share option schemes of £14 million (2020 - £1 million). 

(d) In the six months ended 31 December 2021, the group repaid bonds of €900 million (£769 million).

In the six months ended 31 December 2020, the group issued bonds of €700 million (£636 million - net of discount and fee) and £395 million (including £5 million discount and fee) and repaid bonds of $696 million (£551 million) and €775 million (£696 million).

(e) In the six months ended 31 December 2020 , East African Breweries Limited, a subsidiary of Diageo, completed the purchase of 30% of the share capital of Serengeti Breweries Limited for $55 million (£42 million).

(f) In the six months ended 31 December 2021, the net movements in other borrowings principally arose from cash movement of foreign exchange swaps and forwards partially offset by the repayment of lease liabilities.

In the six months ended 31 December 2020, the net movements in other borrowings principally arose from cash movement of foreign exchange swaps and forwards.

(g) In the six months ended 31 December 2021, the exchange differences arising on net borrowings of £31 million is primarily driven by adverse exchange movements on US dollar denominated borrowings, partially offset by beneficial movement on euro denominated borrowings, cash and cash equivalents, foreign exchange swaps and forwards.

In the six months ended 31 December 2020, the exchange differences arising on net borrowings of £420 million was primarily driven by favourable exchange movements on US dollar and euro denominated borrowings, moderately offset by an unfavourable movement on cash and cash equivalents, foreign exchange swaps and forwards.

(h) In the six months ended 31 December 2021, other non-cash items are principally in respect of additional leases entered into during the period.

In the six months ended 31 December 2020, other non-cash items are principally in respect of fair value changes of cross currency interest rate swaps.

Movements in equity

	2021	2020
	£ million	£ million
Equity at 30 June	8,431	8,440
Profit for the period	2,088	1,661
Exchange adjustments (a)	29	(590)
Remeasurement of post employment plans net of taxation	453	(115)
Purchase of shares of non-controlling interests (b)	-	(42)
Dividends to non-controlling interests	(26)	(24)
Equity dividends paid	(1,040)	(992)
Share buyback programme (c)	(631)	-
Other reserve movements	27	40
Equity at 31 December	9,331	8,378

(a) Exchange movements in the six months ended 31 December 2021 primarily arose from exchange gains driven by the US dollar and the Indian rupee partially offset by the Turkish lira. Exchange movements in the six months ended 31 December 2020 primary arose from exchange losses driven by the US dollar, Indian rupee and the Turkish lira. 

(b) In the six months ended 31 December 2020, East African Breweries Limited completed the purchase of 30% of the share capital of Serengeti Breweries Limited for $55 million (£42 million).

(c) See Summary income statement, (g) Return of capital for details of Diageo's return of capital programmes.

Post employment plans 

The net surplus of the group's post employment benefit plans has increased by £614 million from £444 million at 30 June 2021 to £1,058 million at 31 December 2021. The increase in net surplus is predominantly attributable to the favourable change in the market value of assets held by the post employment schemes in the United Kingdom and Ireland.

The operating profit charge before exceptional items has decreased by £5 million from £54 million for the six months ended 31 December 2020 to £49 million for the six months ended 31 December 2021. The operating profit charge for the six months ended 31 December 2021 includes curtailment gains of £5 million in respect of redundancies in Diageo Pension Scheme and Guinness Ireland Group Pension Scheme.

Total cash contributions by the group to all post employment plans in the year ending 30 June 2022 are estimated to be approximately £120 million.

 

 Diageo condensed consolidated income statement

		Six months ended 31 December 2021	Six months ended 31 December 2020
	Notes	£ million	£ million
Sales	2	11,753	10,436
Excise duties		(3,796)	(3,562)
Net sales	2	7,957	6,874
Cost of sales		(2,955)	(2,661)
Gross profit		5,002	4,213
Marketing		(1,351)	(1,085)
Other operating items		(908)	(889)
Operating profit	2	2,743	2,239
Non-operating items	3	(31)	5
Finance income	4	130	127
Finance charges	4	(310)	(327)
Share of after tax results of associates and joint ventures		190	154
Profit before taxation		2,722	2,198
Taxation	5	(634)	(537)
Profit for the period		2,088	1,661
Attributable to:
Equity shareholders of the parent company		1,965	1,580
Non-controlling interests		123	81
		2,088	1,661
Weighted average number of shares		million	million
Shares in issue excluding own shares		2,331	2,336
Dilutive potential ordinary shares		8	7
		2,339	2,343
		pence	Pence
Basic earnings per share		84.3	67.6
Diluted earnings per share		84.0	67.4

 

Diageo condensed consolidated statement of comprehensive income

	Six months ended 31 December 2021	Six months ended 31 December 2020
	£ million	£ million
Other comprehensive income
Items that will not be recycled subsequently to the income statement
Net remeasurement of post employment plans
Group	585	(128)
Associates and joint ventures	4	(1)
Tax on post employment plans	(136)	14
Changes in the fair value of equity investments at fair value through other comprehensive income	7	-
	460	(115)
Items that may be recycled subsequently to the income statement
Exchange differences on translation of foreign operations
Group	74	(887)
Associates and joint ventures	(45)	(78)
Non-controlling interests	46	(138)
Net investment hedges	(46)	513
Tax on exchange differences	(5)	(3)
Effective portion of changes in fair value of cash flow hedges
Hedge of foreign currency debt of the group	66	(280)
Transaction exposure hedging of the group	(87)	138
Commodity price risk hedging of the group	12	14
Hedges by associates and joint ventures	(10)	13
Recycled to income statement - hedge of foreign currency debt of the group	(53)	150
Recycled to income statement - transaction exposure hedging of the group	26	(18)
Recycled to income statement - commodity price risk hedging of the group	(18)	5
Tax on effective portion of changes in fair value of cash flow hedges	12	(4)
Hyperinflation adjustment	(3)	(16)
Tax on hyperinflation adjustment	1	5
	(30)	(586)
Other comprehensive income/(loss), net of tax, for the period	430	(701)
Profit for the period	2,088	1,661
Total comprehensive income for the period	2,518	960
Attributable to:
Equity shareholders of the parent company	2,349	1,017
Non-controlling interests	169	(57)
Total comprehensive income for the period	2,518	960

 

 

Diageo condensed consolidated balance sheet

		31 December 2021		30 June 2021		31 December 2020
	Notes	£ million	£ million	£ million	£ million	£ million	£ million
Non-current assets
Intangible assets		10,921		10,764		10,877
Property, plant and equipment		5,091		4,849		4,757
Biological assets		75		66		63
Investments in associates and joint ventures		3,473		3,308		3,578
Other investments		50		40		36
Other receivables		28		36		41
Other financial assets		319		327		410
Deferred tax assets		83		100		114
Post employment benefit assets		1,544		1,018		1,083
			21,584		20,508		20,959
Current assets
Inventories	6	6,235		6,045		5,750
Trade and other receivables		3,328		2,385		3,075
Assets held for sale		16		-		-
Corporate tax receivables	5	151		145		173
Other financial assets		66		121		84
Cash and cash equivalents	7	1,780		2,749		2,763
			11,576		11,445		11,845
Total assets			33,160		31,953		32,804
Current liabilities
Borrowings and bank overdrafts	7	(1,184)		(1,862)		(1,214)
Other financial liabilities		(388)		(257)		(332)
Share buyback liability		(184)		(91)		-
Trade and other payables		(5,327)		(4,648)		(4,624)
Liabilities held for sale		(30)		-		-
Corporate tax payables	5	(380)		(146)		(364)
Provisions		(111)		(138)		(176)
			(7,604)		(7,142)		(6,710)
Non-current liabilities
Borrowings	7	(12,693)		(12,865)		(14,063)
Other financial liabilities		(378)		(384)		(376)
Other payables		(278)		(338)		(267)
Provisions		(278)		(274)		(295)
Deferred tax liabilities		(2,112)		(1,945)		(1,900)
Post employment benefit liabilities		(486)		(574)		(815)
			(16,225)		(16,380)		(17,716)
Total liabilities			(23,829)		(23,522)		(24,426)
Net assets			9,331		8,431		8,378
Equity
Share capital		737		741		742
Share premium		1,351		1,351		1,351
Other reserves		1,551		1,621		1,835
Retained earnings		4,019		3,184		2,890
Equity attributable to equity shareholders of the parent company			7,658		6,897		6,818
Non-controlling interests			1,673		1,534		1,560
Total equity			9,331		8,431		8,378

 

Diageo condensed consolidated statement of changes in equity

				Retained earnings/(deficit)
	Share capital	Share premium	Other reserves	Own shares	Other retained earnings	Total	Equity attributable to parent company shareholders	Non-controlling interests	Total equity
	£ million	£ million	£ million	£ million	£ million	£ million	£ million	£ million	£ million
At 30 June 2020	742	1,351	2,272	(1,936)	4,343	2,407	6,772	1,668	8,440
Profit for the period	-	-	-	-	1,580	1,580	1,580	81	1,661
Other comprehensive loss	-	-	(437)	-	(126)	(126)	(563)	(138)	(701)
Total comprehensive (loss)/income	-	-	(437)	-	1,454	1,454	1,017	(57)	960
Employee share schemes	-	-	-	41	(20)	21	21	-	21
Share-based incentive plans	-	-	-	-	17	17	17	-	17
Share-based incentive plans in respect of associates	-	-	-	-	(1)	(1)	(1)	-	(1)
Purchase of non-controlling interests	-	-	-	-	(15)	(15)	(15)	(27)	(42)
Change in fair value of put option	-	-	-	-	(1)	(1)	(1)	-	(1)
Dividends paid	-	-	-	-	(992)	(992)	(992)	(24)	(1,016)
At 31 December 2020	742	1,351	1,835	(1,895)	4,785	2,890	6,818	1,560	8,378
At 30 June 2021	741	1,351	1,621	(1,877)	5,061	3,184	6,897	1,534	8,431
Profit for the period	-	-	-	-	1,965	1,965	1,965	123	2,088
Other comprehensive (loss)/income	-	-	(74)	-	458	458	384	46	430
Total comprehensive (loss)/income	-	-	(74)	-	2,423	2,423	2,349	169	2,518
Employee share schemes	-	-	-	30	36	66	66	-	66
Share-based incentive plans	-	-	-	-	30	30	30	-	30
Share-based incentive plans in respect of associates	-	-	-	-	2	2	2	-	2
Purchase of treasury shares in respect of subsidiaries	-	-	-	-	(8)	(8)	(8)	(5)	(13)
Associates' transactions with non-controlling interests	-	-	-	-	1	1	1	-	1
Unclaimed dividends	-	-	-	-	3	3	3	1	4
Change in fair value of put option	-	-	-	-	(11)	(11)	(11)	-	(11)
Share buyback programme	(4)	-	4	-	(631)	(631)	(631)	-	(631)
Dividends paid	-	-	-	-	(1,040)	(1,040)	(1,040)	(26)	(1,066)
At 31 December 2021	737	1,351	1,551	(1,847)	5,866	4,019	7,658	1,673	9,331

 

 

Diageo condensed consolidated statement of cash flows

	Six months ended 31 December 2021		Six months ended 31 December 2020
	£ million	£ million	£ million	£ million
Cash flows from operating activities
Profit for the period	2,088		1,661
Taxation	634		537
Share of after tax results of associates and joint ventures	(190)		(154)
Net finance charges	180		200
Non-operating items	31		(5)
Operating profit		2,743		2,239
Increase in inventories	(187)		(112)
Increase in trade and other receivables	(976)		(1,078)
Increase in trade and other payables and provisions	653		1,161
Net increase in working capital		(510)		(29)
Depreciation, amortisation and impairment	224		219
Dividends received	1		82
Post employment payments less amounts included in operating profit	(23)		(14)
Other items	34		(1)
		236		286
Cash generated from operations		2,469		2,496
Interest received	41		84
Interest paid	(185)		(266)
Taxation paid	(378)		(316)
		(522)		(498)
Net cash inflow from operating activities		1,947		1,998
Cash flows from investing activities
Disposal of property, plant and equipment and computer software	7		8
Purchase of property, plant and equipment and computer software	(382)		(250)
Movements in loans and other investments	3		(3)
Sale of businesses and brands	2		5
Acquisition of businesses	(134)		(364)
Net cash outflow from investing activities		(504)		(604)
Cash flows from financing activities
Share buyback programme	(538)		-
Net sale of own shares for share schemes	42		9
Purchase of treasury shares in respect of subsidiaries	(13)		-
Dividends paid to non-controlling interests	(51)		(53)
Proceeds from bonds	-		1,031
Repayment of bonds	(769)		(1,247)
Purchase of shares of non-controlling interests	-		(34)
Cash inflow from other borrowings	136		-
Cash outflow from other borrowings	(98)		(345)
Equity dividends paid	(1,040)		(992)
Net cash outflow from financing activities		(2,331)		(1,631)
Net decrease in net cash and cash equivalents		(888)		(237)
Exchange differences		14		(236)
Net cash and cash equivalents at beginning of the period		2,637		3,153
Net cash and cash equivalents at end of the period		1,763		2,680
Net cash and cash equivalents consist of:
Cash and cash equivalents		1,780		2,763
Bank overdrafts		(17)		(83)
		1,763		2,680

 

Notes

1. Basis of preparation 

On 31 December 2020, International Financial Reporting Standards (IFRSs) as adopted by the European Union (EU) at that date were brought into UK law and became UK-adopted International Accounting Standards, with future changes being subject to endorsement by the UK Endorsement Board. Diageo plc transitioned to UK-adopted International Accounting Standards in its consolidated financial statements on 1 July 2021. This change constitutes a change in accounting framework. However, there is no impact on recognition, measurement or disclosure in the period reported as a result of the change in framework.

These unaudited condensed consolidated financial statements have been prepared in accordance with UK adopted IAS 34 'Interim Financial Reporting', IAS 34 'Interim Financial Reporting' as issued by the International Accounting Standards Board ('IASB'), IAS 34 'Interim Financial Reporting' as adopted by the EU and The Disclosure Guidance and Transparency Rules sourcebook of the UK's Financial Conduct Authority. These financial statements should be read in conjunction with the company's published consolidated financial statements for the year ended 30 June 2021, which were prepared in accordance with international accounting standards in conformity with the requirements of the Companies Act 2006 and International Financial Reporting Standards adopted pursuant to Regulation (EC) No 1606/2002 as it applies in the EU, and International Financial Reporting Standards as issued by the IASB, including interpretations issued by the IFRS Interpretations Committee.

At 31 December 2021, there were no unendorsed standards effective for the six months ended 31 December 2021 affecting these financial statements, and there was no difference between IFRSs adopted by the UK, IFRSs as adopted by the EU and IFRSs issued by the IASB in terms of their application to the group.

In preparing these condensed consolidated financial statements, the significant judgements made by management when applying the group's accounting policies and the significant areas where estimates were required were the same as those that applied to the consolidated financial statements for the year ended 30 June 2021, with the exception of changes in estimates disclosed in note 12 - Contingent liabilities and legal proceedings.

The financial statements for Diageo plc for the year ended 30 June 2022 will be prepared in accordance with IFRS as adopted by the UK, IFRSs as adopted by the EU and IFRSs, as issued by the IASB, including interpretations issued by the IFRS Interpretations Committee.

 

Management has prepared cash flow forecasts which have also been sensitised to reflect severe but plausible downside scenarios taking into consideration the group's principal risks. In the base case scenario, net sales momentum is expected to continue, however, near-term volatility is also expected to remain. The potential financial impact of a slower Covid-19 pandemic recovery has been modelled in the plausible downside scenarios. Even with these negative sensitivities for each region taken into account, the group's cash position is still considered to remain strong, as the group's liquidity has been protected by launching and pricing €700 million of fixed rate Euro and £400 million of fixed rate sterling denominated bonds under Diageo's European Debt Issuance Programme in the year ended 30 June 2021. Mitigating actions, should they be required, are all within management's control and could include reductions in discretionary spending as acquisitions and capital expenditure, as well as a temporary suspension of the share buyback programme and dividend payments in the next 12 months or drawdowns on committed facilities. Having considered the outcome of these assessments, the Directors are comfortable that the company is a going concern for at least 12 months from the date of signing the company's condensed consolidated financial statements.

 

Weighted average exchange rates used in the translation of income statements were US dollar - £1 = $1.36 (2020 - £1 = $1.31) and euro - £1 = €1.17 (2020 - £1 = €1.11). Exchange rates used to translate assets and liabilities at the balance sheet date were US dollar - £1 = $1.35 (31 December 2020 - £1 = $1.36) and euro - £1 = €1.19 (31 December 2020 - £1 = €1.11). The group uses foreign exchange transaction hedges to mitigate the effect of exchange rate movements.

New accounting standards and interpretations

The following amendment to the accounting standards, issued by the IASB and endorsed by the UK and EU, have been adopted by the group from 1 July 2021 with no impact on the group's consolidated results, financial position or disclosures: 

-      Amendments to IFRS 16 - Covid-19 - related rent concessions beyond 30 June 2021

 

The following amendment issued by the IASB and endorsed by the UK and EU, has been adopted by the group:  

-    Amendments to IFRS 9, IAS 39 and IFRS 7 - Interest rate benchmark reform (phase 2). The amendment to IFRS 9 provides relief from applying specific hedge accounting and financial instrument derecognition requirements directly affected by interbank offered rate (IBOR) reform. By applying the practical expedient, Diageo will not be required to discontinue its hedging relationships as a result of changes in reference rates due to IBOR reform. The amendment to IFRS 7 will require additional disclosure explaining the nature and extent of risk related to the reform and the progress of the transition.

The following standard issued by the IASB has been endorsed by the EU, but has not yet been endorsed by the UK, and has not been adopted by the group: 

-    IFRS 17 - Insurance contracts (effective in the year ending 30 June 2024) is ultimately intended to replace IFRS 4. Based on a preliminary assessment the group believes that the adoption of IFRS 17 will not have a significant impact on its consolidated results or financial position.

There are a number of other amendments and clarifications to IFRSs, effective in future years, which are not expected to significantly impact the group's consolidated results or financial position. 

The comparative figures for the financial year ended 30 June 2021 are not the company's statutory accounts for that financial year. Those accounts have been reported on by the company's auditor, PricewaterhouseCoopers LLP, and delivered to the Registrar of Companies. The report of the auditor (i) was unqualified, (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006. 

2. Segmental information

The segmental information presented is consistent with management reporting provided to the Executive Committee (the chief operating decision maker).  

The Executive Committee considers the business principally from a geographical perspective based on the location of third-party sales and the business analysis is presented by geographical segment. In addition to these geographical selling segments, a further segment reviewed by the Executive Committee is the Supply Chain and Procurement (SC&P) segment, which manufactures products for other group companies and includes production sites in the United Kingdom, Ireland, Italy, Guatemala and Mexico, as well as comprises the global procurement function.

The group's operations also include the Corporate function. Corporate revenues and costs are in respect of central costs, including finance, marketing, corporate relations, human resources and legal, as well as certain information systems, facilities and employee costs that are not allocable to the geographical segments or to the SC&P. They also include rents receivable and payable in respect of properties not used by the group in the manufacture, sale or distribution of premium drinks. 

Diageo uses shared services operations to deliver transaction processing activities for markets and operational entities. These centres are located in India, Hungary, Colombia and the Philippines. These captive business service centres also perform certain central finance activities, including elements of financial planning and reporting, treasury and HR services. The costs of shared services operations are recharged to the regions.    

For planning and management reporting purposes, Diageo uses budgeted exchange rates that are set at the prior year's weighted average exchange rate. In order to ensure a consistent basis on which performance is measured through the year, prior period results are also restated to the budgeted exchange rate. Segmental information for net sales and operating profit before exceptional items are reported on a consistent basis with management reporting. The adjustments required to retranslate the segmental information to actual exchange rates and to reconcile it to the group's reported results are shown in the tables below. The comparative segmental information, prior to retranslation, has not been restated at the current year's budgeted exchange rates but is presented at the budgeted rates for the respective year.  

In addition, for management reporting purposes, Diageo presents the result of acquisitions and disposals completed in the current and prior year separately from the results of the geographical segments. The impact of acquisitions and disposals on net sales and operating profit is disclosed under the appropriate geographical segments in the tables below at budgeted exchange rates.

(a) Segmental information for the consolidated income statement

	North America	Europe	Asia Pacific	Africa	Latin America and Caribbean	SC&P	Eliminate inter- segment sales	Total operating segments	Corporate and other	Total
Six months ended 31 December 2021	£ million	£ million	£ million	£ million	£ million	£ million	£ million	£ million	£ million	£ million
Sales	3,257	3,178	2,999	1,244	1,052	972	(972)	11,730	23	11,753
Net sales
At budgeted exchange rates(i)	2,959	1,782	1,544	888	822	1,027	(979)	8,043	23	8,066
Acquisitions and disposals	18	3	-	-	-	-	-	21	-	21
SC&P allocation	6	29	5	2	6	(48)	-	-	-	-
Retranslation to actual exchange rates	(19)	(62)	(18)	(22)	(9)	(7)	7	(130)	-	(130)
Net sales	2,964	1,752	1,531	868	819	972	(972)	7,934	23	7,957
Operating profit/(loss)
At budgeted exchange rates(i)	1,288	647	454	192	333	(8)	-	2,906	(132)	2,774
Acquisitions and disposals	(16)	(1)	-	-	-	-	-	(17)	-	(17)
SC&P allocation	10	(23)	(3)	(1)	9	8	-	-	-	-
Fair value remeasurement of contingent considerations, equity option and earn out arrangements	5	21	-	-	(3)	-	-	23	-	23
Fair value remeasurement of biological assets	-	-	-	-	3	-	-	3	-	3
Retranslation to actual exchange rates	8	(31)	-	(15)	(9)	-	-	(47)	7	(40)
Operating profit/(loss)	1,295	613	451	176	333	-	-	2,868	(125)	2,743
Non-operating items										(31)
Net finance charges										(180)
Share of after tax results of associates and joint ventures										190
Profit before taxation										2,722

 

	North America	Europe	Asia Pacific	Africa	Latin America and Caribbean	SC&P	Eliminate inter- segment sales	Total operating segments	Corporate and other	Total
Six months ended 31 December 2020	£ million	£ million	£ million	£ million	£ million	£ million	£ million	£ million	£ million	£ million
Sales	3,022	2,727	2,837	1,064	775	785	(785)	10,425	11	10,436
Net sales
At budgeted exchange rates(i)	2,790	1,442	1,418	790	641	824	(786)	7,119	11	7,130
Acquisitions and disposals	7	-	-	5	-	-	-	12	-	12
SC&P allocation	5	21	4	2	6	(38)	-	-	-	-
Retranslation to actual exchange rates	(101)	(20)	(27)	(52)	(68)	(1)	1	(268)	-	(268)
Net sales	2,701	1,443	1,395	745	579	785	(785)	6,863	11	6,874
Operating profit/(loss)
At budgeted exchange rates(i)	1,325	461	391	124	246	(23)	-	2,524	(98)	2,426
Acquisitions and disposals	(9)	-	-	-	-	-	-	(9)	-	(9)
SC&P allocation	(13)	-	-	-	(10)	23	-	-	-	-
Fair value remeasurement of contingent considerations	(4)	(7)	-	-	-	-	-	(11)	-	(11)
Fair value remeasurement of biological assets	-	-	-	-	3	-	-	3	-	3
Retranslation to actual exchange rates	(73)	(8)	(5)	(29)	(42)	-	-	(157)	4	(153)
Operating profit/(loss) before exceptional items	1,226	446	386	95	197	-	-	2,350	(94)	2,256
Exceptional items	-	(17)	-	-	-	-	-	(17)	-	(17)
Operating profit/(loss)	1,226	429	386	95	197	-	-	2,333	(94)	2,239
Non-operating items										5
Net finance charges										(200)
Share of after tax results of associates and joint ventures										154
Profit before taxation										2,198

(i)      These items represent the IFRS 8 performance measures for the geographical and SC&P segments.

(1)     The net sales figures for SC&P reported to the Executive Committee primarily comprise inter-segment sales and these are eliminated in a separate column in the above segmental analysis. Apart from sales by the SC&P segment to the other operating segments, inter-segment sales are not material.

(2)    The group's net finance charges are managed centrally and are not attributable to individual operating segments.    

(3)    Approximately 44% of calendar year net sales occurred in the last four months of  2021.

(b) Category and geographical analysis

	Category analysis					Geographical analysis
Six months ended 31 December 2021	Spirits £ million	Beer £ million	Ready to drink £ million	Other £ million	Total £ million	Great Britain £ million	United States £ million	India £ million	Rest of world £ million	Total £ million
Sales(i)	9,680	1,520	418	135	11,753	1,204	3,072	1,704	5,773	11,753
Six months ended 31 December 2020
Sales(i)	8,648	1,310	363	115	10,436	1,044	2,817	1,650	4,925	10,436

(i)      The geographical analysis of sales is based on the location of third-party sales.