"Diageo's full year results demonstrate the resilience of the business
In a year of global economic downturn Diageo delivered organic net sales in line with the prior year; 4% organic growth in operating profit and 10% growth in reported eps.
- Exchange rate movements increased net sales by £1,095 million; brand additions, primarily Ketel One vodka, contributed £151 million and there was an organic decline of £25 million.
- Operating profit before exceptional items benefited by £167 million from exchange rate movements, £43 million from brand additions and £99 million from organic growth.
- Exceptional operating costs were £170 million, in respect of the global restructuring programme and the restructuring of Irish brewing operations.
- Associate income was £164 million.
- Finance charges were £592 million. Net interest was £516 million, including £14 million impact of IAS 39, and other finance charges were £76 million, including £44 million impact of IAS 21 and 39.
- Exchange rate movements increased finance charges by £66 million.
- The reported tax rate was 14.5% and the underlying tax rate was 22.2%.
- Free cash flow was £1,204 million.
- Recommended increase of 5% in final dividend per share to 22.20 pence.
Paul Walsh, Chief Executive Officer of Diageo, said:
"This has been a very challenging year. Overall however our results demonstrate the resilience of our business. Our brand range and our geographic reach enabled us to deliver 4% organic operating profit growth and 10% eps growth. While the economic downturn has affected all markets, the response of customers and consumers has not been uniform and therefore the impact on our business has been varied. By region, International, North America and Asia Pacific have been stronger than Europe. By category, we have delivered growth in categories which account for over 50% of our sales, primarily vodka, rum, tequila and beer. The gin and wine categories have been weaker and scotch and liqueurs have been most impacted by de-stocking.
"Smirnoff, Captain Morgan, Jose Cuervo and Guinness, two of our three largest local priority brands, Buchanan's and Windsor, and category brands, CÃ®roc, Cacique and Harp, all grew supported by innovation and effective marketing. We benefited from the addition of Ketel One vodka, Zacapa rum and Rosenblum Cellars wine, all of which have broadened our brand range in important categories. Johnnie Walker faced a tougher market environment being at a relatively higher price point and saw more impact from de-stocking. The consumer downturn in Spain and de-stocking in a number of markets also affected the performance of Baileys.
"We took action quickly to manage these difficult times, reducing our cost base and refocusing marketing spend as consumer trends changed. In fiscal 2010 we will benefit from cost reductions of £120 million as a result of our global restructuring initiative.
"While the global economy appears to be stabilising, there is still uncertainty as to the sustainability and pace of any recovery and F10 will be challenging, as we lap a strong first quarter and a reasonable first half performance this year. That being recognised, we expect to deliver low single digit organic operating profit growth in fiscal 2010."