REG - Diageo Capital plc - Half-year Report
26/03/2025 19:15
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RNS Number : 3819C Diageo Capital plc 26 March 2025
Diageo Capital
plc
LEI: 213800L23DJLALFC4O95
Half-year results for the six months ended 31 December 2024
The Directors present their interim financial report for the six months ended
31 December 2024.
Activities
Diageo Capital plc (the "company") is engaged in the provision of treasury,
risk and cash management for Diageo plc and its subsidiary undertakings (the
"group"). Diageo Capital plc's principal activity is to raise external funds,
principally using the London and New York financial markets. The company
finances other companies of the group via intragroup loans and deposits.
Foreign exchange translation hedging, interest rate risk management and cash
management are also performed by the company.
The company does not anticipate any changes in its activities in the remaining
six months of the financial year.
Business review
Development and performance of the business of the company during the period
and position of the company as at 31 December 2024
The results of the company and the development of its business are influenced
to a considerable extent by group financing requirements. Further information
on the risk management policies of the group is included in the Annual Report
2024 of Diageo plc (see note 16 of the consolidated financial statements of
Diageo plc).
Net finance income was $81 million in the six months ended 31 December 2024,
which is a $4 million increase from net finance income of $77 million in the
six months ended 31 December 2023.
External borrowings decreased by $1,034 million in the six months ended
31 December 2024 to $8,504 million from $9,538 million in the year ended
30 June 2024, mainly due to two bond repaying during the period.
Financial and other key performance indicators
As the company forms part of the group's treasury operations, the company's
performance is measured at the group level.
$85 million profit was transferred to reserves in the six month ended
31 December 2024, (six months ended 31 December 2023 - $63 million) and the
other comprehensive loss is $2 million (six months ended 31 December 2023 -
$3 million income).
The Directors do not propose the payment of an interim dividend to be
distributed to shareholders in regard to the six months ended 31 December
2024 (six months ended 31 December 2023 - $nil).
Going concern
The company's business activities, together with the factors likely to affect
its future development and position, are set out below. The company is
expected to continue to generate profit for its own account and to remain in a
positive net asset position for the foreseeable future. The company is in net
current liability position, however the company participates in the group's
centralised treasury arrangements and the parent will provide financial
support for the foreseeable future. The Directors have no reason to believe
that a material uncertainty exists that may cast significant doubt about the
ability of the company to continue as a going concern.
Going concern (continued)
On the basis of their assessment, the company's Directors have a reasonable
expectation that the company will be able to continue in operational existence
for a period of at least 12 months from the date the financial statements are
approved and signed, as the ultimate parent undertaking has agreed its policy
is to provide financial support for a period of at least 12 months from the
date the financial statements are approved and signed. Thus they continue to
adopt the going concern basis of accounting in preparing the annual financial
statements.
In arriving at this conclusion, the Directors have also considered the
potential impact that the principal risks outlined below may have on the
company and believe that any impact would be minimal.
Principal and financial risks and uncertainties facing the company as at
31 December 2024
The principal risks identified by the group are disclosed on page 77 to 85 of
the Diageo plc Annual Report 2024. The most relevant of the group risks to
this entity are the ones we have selected and articulated below, together with
specific considerations relating to the company's operations and
environment. If any of these risks occur, the company's business, financial
condition and operational results could suffer. As the company forms part of
the group's financial operations, the financial risk management measures used
by management to analyse the development, performance and position of the
company's business are mainly similar to those facing the group as a whole and
are managed by the group's treasury department.
In addition, given that the company performs treasury functions for the group,
it may be exposed to interest rate risk arising on changes in US dollar
interest. The company may use derivative financial instruments to hedge its
exposures to fluctuations in interest. Fair value hedges may be carried out to
manage interest rate risks to which the fair value of certain assets and
liabilities are exposed.
The Directors monitor and have assessed the potential risk of future interest
rate hikes and resulting increase in cost of borrowing on the operation and
the financial statements of the company. Considering the company forms part of
the group's financial operations, it will be reimbursed for any potential
increase in the charges of its financial instruments. Consequently any impact
potentially materialising on this risk is considered to be very limited.
Geopolitical and macroeconomic volatility
Geopolitical forces, driven by several vectors globally, coupled with
macroeconomic stress, increase the likelihood of international and domestic
tensions, disputes, conflict, unrest, and crime that might impact the
business. Macroeconomic conditions include inflationary pressures,
unemployment and global trade tensions. Financial volatility risk could arise
from variability in financial markets, interest rate fluctuations and currency
instability. Failure to react quickly enough to changing economic and/or
political conditions, e.g. inflationary pressures, currency instability,
global trade tensions, heightened political protectionism, changes to customs
duties and tariffs, and/or eroded consumer confidence, may impact on the
freedom to operate in a market and could adversely impact financial
performance.
The group monitors key business drivers and performance, to prepare for rapid
changes in the external environment and there is an enhanced group-level
strategic analysis and scenario planning to strengthen market strategies and
risk management.
The group has continued to improve long-term forecasting and planning
capabilities, to better assess and respond to long-term opportunities and
risks. The group has also continued to operate the strategic planning and
performance function with a stronger governance model for financial and
non-financial decision-making. This will enable closer monitoring of external
volatility/risk and multi-country investment strategy with central hedging and
currency monitoring to manage volatility.
Cyber and IT resilience
Cyber-attacks are becoming more prevalent, and there is an increased
dependency on third-party IT services and solutions. As geopolitical tensions
are growing, there is a rise in more sophisticated cyber threats affecting all
organisations, therefore the risk of a cyber-attack is heightened.
The group has strong enterprise-wide cyber risk management processes and
policies and next generation security technologies to tackle advanced attacks.
There is IT and Operations Technology ("OT") disaster recovery and business
continuity testing across the key systems. The group continues to enhance and
deploy next generation security technologies to tackle advanced attacks and
upgrade the enterprise resource planning system and associated processes to
ensure they remain resilient.
Climate Risk
Considering that the company forms part of the group's treasury operations,
the probability of climate change related risks having a significant and
direct impact on the activities and operation of the company is remote. The
Directors believe that the risk mitigation actions taken in relation to
climate risk by the group are appropriate measures in managing direct or
indirect risks posed by climate change. Including the risk to the company of
being able to access financing at competitive rates where borrowings could
become sustainability linked. Based on the climate risk assessment performed
by the group, the risk attached to the recoverability of intercompany balances
is considered to be remote.
Further information on the group's risk assessment and risk management
measures in relation to climate change is disclosed on pages 61-76 and 78 of
Diageo plc's 2024 Annual Report.
Business transformation
There is a group strategic initiative in respect of business transformation
through the implementation of SAP S/4 HANA, where delays or changes in
expected benefits may have an adverse impact on business processes or on the
group's operating and financial performance.
To mitigate this risk, the business transformation project has steering groups
in place led by a senior executive and regular progress updates are provided
to the Executive Committee and Board.
The group has hired additional employees fully dedicated to the projects and
external consultants and partners who also bring in new skills, which includes
a a focus on process improvement, business resilience and controls.
Statement on Section 172 of the Companies Act 2006
Section 172 of the Companies Act 2006 requires the Directors to promote the
success of the company for the benefit of the members as a whole, having
regard to the interests of stakeholders in their decision-making. In making
decisions, the Directors consider what is most likely to promote the success
of the company for its shareholders in the long term, as well as the interests
of the group's stakeholders. The Directors understand the importance of taking
into account the views of stakeholders and the impact of the company's
activities on local communities, the environment, including climate change,
and the group's reputation.
The Company is a member of the group of companies (the "Group") whose ultimate
holding company is Diageo plc ("Diageo"). In accordance with the requirements
of UK company law, Diageo has included in its 2024 Annual Report and Accounts
on page 9 a statement as to how the directors of Diageo have had regard to the
matters set out in Section 172 of the Companies Act 2006.
In order to ensure consistency in how the Group operates with regard to its
wider stakeholders, the Group has adopted an internal Code of Business Conduct
alongside a comprehensive framework of global policies and standards that are
designed to ensure, amongst other things, that all companies throughout the
Group, including the Company, have regard to its wider stakeholders in a
consistent manner.
The Company has therefore had regard to the matters set out in Section 172 of
the Act in a manner that is consistent with the approach adopted by Diageo,
while at the same time ensuring the directors of the Company are fulfilling
their duties.
Main activities of the Board
The principal activities of the Board during the year include:
• Approval of the financial statements for the year ended 30 June
2024.
Business Relationship Statement
The business of the Company is that of an intermediate holding company and as
such it has a more limited number of third-party business relationships than
other companies within the Group. However, in order to ensure consistency in
how the Group operates, the Company has adopted an internal Code of Business
Conduct alongside a comprehensive framework of global policies and standards
that are designed to ensure, amongst other things, that all companies
throughout the Group, including the Company, have regard to its wider
stakeholders, including those in a business relationship with the Company, in
a consistent manner. Decisions taken by Directors are informed by the
interests of its wider stakeholders, including those in a business
relationship with the Company, as guided by, amongst other things, the Code of
Business Conduct and framework of polices and standards.
On behalf of the Board
J M C Edmunds
Director
11 Lochside Place
Edinburgh
Scotland
EH12 9HA
26 March 2025
Independent review
This interim report has not been audited or reviewed by auditors.
Statement of Directors' responsibilities
The Directors confirm that this condensed set of interim financial information
has been prepared in accordance with Financial Reporting Standard 104: Interim
Financial Reporting, issued by the Financial Reporting Council, and that the
interim management report includes a fair review of the information required
by DTR 4.2.7R and DTR 4.2.8R namely:
• an indication of important events that have occurred during the
first six months of the financial year and their impact on the condensed set
of financial statements, and a description of the principal risks and
uncertainties for the remaining six months of the financial year, and
• material related party transactions in the first six months of the
financial year and any material changes in the related party transactions
described in the last annual report.
The Directors of the company are listed in the company's annual report and
financial statements for the year ended 30 June 2024.
James Edmunds
Director
26 March 2025
INCOME STATEMENT (UNAUDITED)
Six months ended Six months ended
31 December 2024 31 December 2023
Notes $ million $ million
Other operating income/(charge) 4 (14)
Finance income 1 364 355
Finance charges 1 (283) (278)
Operating profit 85 63
Profit before taxation on ordinary activities 85 63
Profit for the period 85 63
STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
Six months ended Six months ended
31 December 2024 31 December 2023
Notes $ million $ million
Other comprehensive income
Items that may be recycled subsequently to the income statement
Effective portion of changes in fair value of cash flow hedges
-recycled to income statement (3) (3)
Tax charge on effective portion of changes in fair value of cash flow hedge 2 1 6
Other comprehensive (loss)/ income (2) 3
Profit for the period 85 63
Total comprehensive income for the period 83 66
BALANCE SHEET (UNAUDITED)
31 December 2024 30 June 2024
Notes $ million $ million
Non-current assets
Other receivables 5 10,230 11,083
10,230 11,083
Current assets
Trade and other receivables 5 4 3
4 3
Total assets 10,234 11,086
Current liabilities
Trade and other payables 6 (850) (710)
Other financial liabilities 4 (22) -
Borrowings and bank overdrafts 3 (1,249) (1,079)
(2,121) (1,789)
Non-current liabilities
Borrowings 3 (7,255) (8,459)
Other financial liabilities 4 (231) (294)
Deferred tax liability 2 (36) (36)
(7,522) (8,789)
Total liabilities (9,643) (10,578)
Net assets 591 508
Equity
Share premium 315 315
Fair value and hedging reserves 106 108
Other reserves 88 88
Retained surplus/(deficit) 82 (3)
Total equity 591 508
STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
ATTRIBUTABLE TO SHAREHOLDERS OF THE COMPANY
Subtotal
Share Hedging Other Other Retained
premium reserve reserves reserves surplus/(deficit) Total
$ million $ million $ million $ million $ million $ million
Balance at 30 June 2023 315 116 88 204 (204) 315
Other comprehensive loss for the period - (8) - (8) - (8)
Profit for the period - - - - 201 201
Balance at 30 June 2024 315 108 88 196 (3) 508
Other comprehensive income for the period - (2) - (2) - (2)
Profit for the period - - - - 85 85
Balance at 31 December 2024 315 106 88 194 82 591
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED)
The company is incorporated and domiciled as a public limited company in the
United Kingdom.
The interim financial statements of the company for the six months ended
31 December 2024 were authorised for issue in accordance with a resolution of
the Directors on 31 March 2025.
Basis of preparation
The annual report and financial statements of the company for the year ended
30 June 2024 were prepared in accordance with Financial Reporting Standard
101 Reduced Disclosure Framework (FRS 101) and Companies Act 2006.
The interim condensed financial statements for the six months ended
31 December 2024 have been prepared in accordance with Financial Reporting
Standard 104 Interim Financial Reporting (FRS 104), issued by the Financial
Reporting Council. The interim condensed financial statements do not include
all of the information and disclosures required in the annual financial
statements, and should be read in conjunction with the company's annual
financial statements at 30 June 2024.
The accounting policies adopted in the preparation of the interim financial
statements are consistent with those followed in the preparation of the
company's annual report and financial statements for the year ended 30 June
2024.
These condensed interim financial statements have not been subject to a full
audit or audit review and do not constitute statutory financial statements as
defined in section 434 of the Companies Act 2006. The annual report and
financial statements for the year ended 30 June 2024 were approved by the
Directors of the company on 29 October 2024 and have been filed with the
Registrar of Companies. The report of the auditors on those financial
statements was unqualified, did not contain an emphasis of matter paragraph
and did not contain any statement under section 498 of the Companies Act 2006.
The company is a wholly owned subsidiary of Diageo plc and is included in the
consolidated financial statements of Diageo plc which are publicly available.
These financial statements are separate financial statements.
Functional and presentational currency
These financial statements are presented in US dollar ($), which is the
company's functional currency.
All financial information presented in US dollar has been rounded to the
nearest million.
Going concern
The financial statements have been prepared on a going concern basis as a
fellow group undertaking has agreed to provide financial support for the
foreseeable future.
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) (continued)
1. FINANCE INCOME AND CHARGES
Six months ended Six months ended
31 December 2024 31 December 2023
$ million $ million
Finance income from fellow group undertakings 319 293
Amortisation of fair value changes 4 3
Fair value gain on intra-group derivative financial instruments 41 59
Total finance income 364 355
Finance charge to fellow group undertakings (54) (36)
Finance charge on all other borrowings (184) (176)
Fair value adjustment on borrowings (41) (62)
Discount and fee amortisation (4) (4)
Total finance charges (283) (278)
Net finance income 81 77
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) (continued)
2. TAXATION
The total tax credit for the six months ended 31 December 2024 was $1 million
income (31 December 2023 - $6 million income), in accordance with decrease in
deferred tax liability in relation to the effective portion of changes in fair
value of cash flow hedges. The change in deferred tax liability is presented
as part of the other comprehensive income.
3. BORROWINGS AND BANK OVERDRAFTS
31 December 2024 30 June 2024
$ million $ million
Commercial paper - 479
US$ 600 million 2.125% bonds due 2024 - 600
US$ 750 million 1.375% bonds due 2025 749 -
US$ 500 million 5.2% bonds due 2025 500 -
Borrowings due within one year and bank overdrafts 1,249 1,079
US$ 750 million 1.375% bonds due 2025 - 749
US$ 500 million 5.2% bonds due 2025 - 499
US$ 800 million 5.375% bonds due 2026 798 797
US$ 750 million 5.3% bonds due 2027 748 748
US$ 500 million 3.875% bonds due 2028 499 498
US$ 1,000 million 2.375% bonds due 2029 994 993
US$ 1,000 million 2% bonds due 2030 995 995
US$ 750 million 2.125% bonds due 2032 744 744
US$ 750 million 5.5% bonds due 2033 745 744
US$ 900 million 5.625% bonds due 2033 894 894
US$ 600 million 5.875% bonds due 2036 594 594
US$ 500 million 3.875% bonds due 2043 492 492
Fair value adjustment to borrowings (248) (288)
Borrowings due after one year 7,255 8,459
Total external borrowings 8,504 9,538
The interest rates of external borrowings shown in the table above are those
contracted on the underlying borrowings before taking into account any
interest rate hedges. Bonds are stated net of unamortised finance costs of
$47 millions (30 June 2024 - $51 millions).
Bonds are reported at amortised cost with a fair value adjustment shown
separately. These fair value adjustments are determined using discounted cash
flow method based on observable market input (Level 2). All bonds, medium-term
notes and commercial paper issued by the company are fully and unconditionally
guaranteed by Diageo plc.
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) (continued)
4. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Fair value measurements of financial instruments are presented through the use
of a three-level fair value hierarchy that prioritises the valuation
techniques used in fair value calculations.
The group maintains policies and procedures to value instruments using the
most relevant data available. If multiple inputs that fall into different
levels of the hierarchy are used in the valuation of an instrument, the
instrument is categorised on the basis of the most subjective input.
Interest rate swaps are valued using discounted cash flow techniques. These
techniques incorporate inputs at levels 1 and 2, such as foreign exchange
rates and interest rates. These market inputs are used in the discounted cash
flow calculation incorporating the instrument's term, notional amount and
discount rate, and taking credit risk into account. As significant inputs to
the valuation are observable in active markets, these instruments are
categorised as level 2 in the hierarchy. There were no significant changes in
the measurement and valuation techniques, or significant transfers between the
levels of the financial assets and liabilities in the period ended
31 December 2024.
The company's financial assets and liabilities measured at fair value are
categorised as follows:
31 December 2024 30 June 2024
$ million $ million
Derivative liabilities (253) (294)
Valuation techniques based on observable market input (253) (294)
(Level 2)
5. TRADE AND OTHER RECEIVABLES
31 December 2024 30 June 2024
Due within one Due after one Due within one Due after one
year year year year
$ million $ million $ million $ million
Amounts owed by fellow group
undertakings 3 10,230 2 11,083
Prepayments 1 - 1 -
4 10,230 3 11,083
Amounts owed by fellow group undertakings represent transactions with
companies in the group with which the company has a long-term financing
relationship. These financing relationships are expected to continue for the
foreseeable future. Certain amounts owed by fellow group undertakings are
repayable on demand, but reclassified to non-current assets as they are not
expected to be repaid in the foreseeable future. Amounts owed by group
undertakings are considered to have a fair value which is not materially
different to the book value. Expected credit loss is immaterial for amounts
owed by fellow group undertakings.
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) (continued)
6. TRADE AND OTHER CREDITORS
31 December 2024 30 June 2024
$ million $ million
Amounts owed to fellow group undertakings 770 626
Interest payable 80 84
850 710
Amounts owed to fellow group undertakings represent transactions with
companies in the group with which the company has a long-term financing
relationship. These financing relationships are expected to continue for the
foreseeable future. Amounts owed to group undertakings are considered to have
a fair value which is not materially different to the book value.
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