Diageo : 2021 Preliminary Results presentation with script

DIAGEO PRELIMINARY RESULTS YEAR ENDED 30 JUNE 2021

29 July 2021

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DIAGEO HAS EMERGED STRONGER

Delivered strong performance across all key financial metrics

Responded to consumer demand enabling off‐trade share gains

Supported the on‐trade across key markets

Invested in marketing, innovation, capex and portfolio

Continued to do business the right way for all our stakeholders

Created long‐term shareholder value

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• Good morning everyone and thank you for joining us.
• I would like to start by first thanking Kathy for her significant contribution to Diageo over the last six years and to give a warm welcome to Lavanya as she assumes the CFO role at an exciting time for Diageo.
• I would also like to highlight that we continue to improve on our communications with our investor and analyst community. We have streamlined today's presentation compared to our prior approach. I will begin with an overview of our performance in fiscal 21, Lavanya will discuss our financial results and I will wrap‐ up with why we believe Diageo is well‐positioned for long‐term sustainable growth.
• Fiscal 21 has been an extraordinary year, as the entire world has been navigating through a very dynamic and challenging period.
• We expect this volatility to persist in the near‐term.
• We also know how challenging this year has been for our hospitality partners and we continue to support the on‐trade.
• In times of adversity, values and culture matter, and I am very proud of how my Diageo colleagues have responded.
• I am enormously grateful for the hard work, resilience and ingenuity that they have shown throughout this period.
• They inspire me and fuel my positive outlook for the future.
• There are three key messages that I hope you take away from today's call:
• • First, Diageo has emerged stronger
  • Second, Diageo is well‐positioned to deliver long‐term sustainable growth; and
  • Third, Diageo continues to do business the right way for all our stakeholders.

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STRONG PERFORMANCE ACROSS

ALL KEY FINANCIAL METRICS

Organic volume			Organic net sales			Organic operating margin
+11.2%		+16.0%			+46bps
Free cash flow			EPS pre‐exceptionals			Final dividend
+£1.4bn		+7.4%		+5.0%
to £3.0bn			to 117.5p			to 44.59p

Source: F21 Diageo internal data
For additional information, please see financial / legal appendix	3

• Our business delivered an excellent set of results in fiscal 21.
• Diageo performed strongly across all key financial metrics while we continued to invest in the business.
• We delivered top line organic growth of 16% versus fiscal 20.
• Operating profit growth and operating margin improvement were driven by strong growth in North America and partial recovery in emerging markets.
• Strong free cash flow generation was primarily driven by operating profit growth and continued discipline in working capital management.
• We are pleased to announce an increase of 5% for our final dividend for fiscal 21.

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RETURN TO TOP‐LINE GROWTH

ACROSS ALL REGIONS IN FISCAL 21

Organic net sales value movement by region

					30%
F21	16%	20%		20%		14%
vs
F20			4%
	Total Diageo	North America	Europe	Africa	Latin America	Asia Pacific
	and Turkey	and Caribbean

F21	+6%	+24%	‐9%	+4%	+9%	‐4%
vs

F19

F21 AHEAD OF F19 FOR TOTAL DIAGEO AT +6%

Source: Diageo internal data
For further details on fiscal 21 growth compared to fiscal 19 on a constant basis, please see financial / legal appendix	4

• Our strong performance in fiscal 21 was driven by top‐line organic growth across all regions, demonstrating the benefit of our broad geographic footprint.
• Diageo organic net sales is now ahead of fiscal 19 pre‐pandemic levels by over 6% on a constant basis.
• We have delivered extremely strong growth in North America - our largest and most profitable market - driven by resilient consumer demand, spirits continuing to take share of total beverage alcohol and the replenishment of stock levels by distributors and retailers.
• Europe benefitted from continued strong consumer demand in the off‐trade channel and the gradual recovery of the on‐trade channel in certain markets.
• There has been continued recovery in our other regions, which have rebounded faster than expected. However, there is still ongoing volatility in some key markets, including India, and we expect this to continue given the continuing impact of Covid‐19.
• Travel Retail remains heavily impacted by ongoing restrictions on global travel.
• Although the pace of recovery has differed across our regions, our performance has been strong.

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STRONG OFF‐TRADE MARKET SHARE PERFORMANCE WITH GROWTH OPPORTUNITY IN BROADER TBA

Percentage of Diageo total net sales value gaining/holding off‐trade share in measured markets

Held or grew off‐trade share in

~85%

100%		of total net sales value in
		measured markets
80%
60%	~65%
40%
20%
0%
F20	F21

Note: F20 restated from 55% (F21 H1: 70%) to 65% (F21 H1: 85%) in order to be on a comparable basis with F21 (e.g. to include additional categories in some markets and additional new measured markets).

Source: Internal estimates incorporating AC Nielsen, Association of Canadian Distillers, Dichter & Neira, Frontline, Intage, IRI, ISCAM, NABCA, Scentia, State Monopolies, TRAC and other third‐party providers For additional information, please see financial / legal appendix

Diageo share of total beverage alcohol by value in 2020 (all channels)

Diageo share of TBA

4.1%

by value

(1.6% by volume)

Rest of market

Source: IWSR 2021, RSV Share 2020

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• Across all our markets, our goal is to win quality market share.
• Off‐trade total beverage alcohol volumes grew 12% in 2020, an uplift driven by an on‐trade decline of 38%, as consumption moved between channels.
• We have responded to increased off‐trade demand with focused commercial execution, upweighted marketing investment and accelerated innovation.
• This has delivered strong results throughout the year.
• In fiscal 21, we held or grew our off‐trade share for over 85% of net sales in measured markets.
• I am delighted with what we have already achieved, and I am excited about what lies ahead.
• Based on IWSR data for calendar 2020, Diageo has less than 2% share of the global total beverage alcohol market by volume and 4% by value. This creates a significant growth opportunity for our business.

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