REG - Diageo PLC - Diageo Preliminary Results 2025

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RNS Number : 9305T  Diageo PLC  05 August 2025

Preliminary  results

 Year ended 30 June 2025  5 August 2025

 

                                          Reported results                                                         Adjusted results((1))
                                          F25        vs F24                                                        F25          vs F24
 Net sales                                $20,245m   (0.1)%     Organic net sales movement                         $338m        1.7%((2))
 Operating profit                         $4,335m    (27.8)%    Operating profit before exceptional items          $5,704m      (0.7)%((2))
 Operating profit margin                  21.4%      (819)bps   Operating profit margin before exceptional items   28.2%        (68)bps((2))
 Net profit                               $2,538m    (39.1)%
 Basic earnings per share                 105.9c     (38.9)%    Basic earnings per share before exceptional items  164.2c       (8.6)%
 Net cash flow from operating activities  $4,297m    $192m      Free cash flow                                     $2,748m      $139m

Organic net sales growth balanced between volume and price/mix

• Reported net sales of $20.2 billion declined 0.1% due to unfavourable
foreign exchange of (0.6)% and acquisition and disposal adjustments
of (1.1)%, partially offset by hyperinflation adjustments and organic net
sales growth.

• Organic net sales growth of 1.7% was driven by organic volume growth of
0.9% and positive price/mix of 0.8%. Excluding the impact of the Cîroc
transaction, organic net sales growth was 1.5%, with 0.8% volume growth and
0.7% price/mix.((3))

• Diageo grew or held total market share in 65%((4)) of total net sales in
measured markets, including in the US.

Gross margin expansion more than offset by investment in overheads, operating
profit slightly down

• Reported operating profit declined 27.8% and reported operating profit
margin declined 819bps, primarily due to exceptional impairment and
restructuring costs, unfavourable foreign exchange and a decline in organic
operating margin.

• Organic operating profit declined by 0.7%; organic operating profit margin
declined 68bps, mainly due to continued investment in overheads, partly offset
by slight gross margin expansion. Excluding the impact of the Cîroc
transaction,((3)) organic operating profit declined 1.0%, in line with prior
guidance, and organic operating margin declined 70bps.

• EPS pre-exceptionals was 164.2 cents, down 8.6%.

Increased cash flow, focus on reducing leverage through Accelerate

• Net cash flow from operating activities increased by $0.2 billion to $4.3
billion. Free cash flow increased by $0.1 billion to $2.7 billion.

• Net debt as at 30 June 2025 was $21.9 billion, with a leverage ratio of
3.4x net debt to adjusted EBITDA,((5)) in line with the guidance range of
3.3-3.5x.

• Recommended full year dividend of 103.48 cents.

Accelerate on track with savings target increased; fiscal 26 outlook provided

• Firm focus on productivity, driving cash and growth. Cost savings
programme target increased to c.$625 million, up from c.$500 million.

• In fiscal 26, expect organic sales growth to be similar to fiscal 25 and
organic operating profit growth to be mid-single-digit, including the impact
of tariffs as at this time.

Nik Jhangiani, Interim Chief Executive commented:

I am pleased to report on our fiscal 25 results which in a challenging year,
were in line with our guidance. We delivered 1.7% organic net sales growth
reflecting the strength of our portfolio and our diversified footprint. While
we are encouraged by areas of progress and the standout performance from Don
Julio, Guinness and Crown Royal Blackberry, there is clearly much more to do
across our broader portfolio and brands. We recognise the need to drive
meaningful growth opportunities in an evolving TBA landscape, and we are
sharpening our strategy to accelerate growth.

Our Accelerate programme is progressing well and is central to creating a more
agile operating model. As such, I am pleased to announce that we are
increasing our cost savings target by c.$125 million, to c.$625 million over
the next three years. We are also committed to strengthening our balance sheet
and expect to deliver c.$3 billion free cash flow in fiscal 26, increasing
financial flexibility whilst continuing to invest for longer term growth.

While macroeconomic uncertainty and the resulting pressure on consumers
continues to weigh on the spirits sector, we believe in the attractive
long-term fundamentals of our industry and in our ability to continue to
outperform as the TBA landscape evolves. We are focused on what we can manage
and control and executing at pace. The Board and management are committed to
delivering improved financial performance and stronger shareholder returns on
a sustained basis.

(1) See pages 39-46 for an explanation and reconciliation of non-GAAP
measures.

(2) Represents organic movement.

(3) On 7 April 2025, Diageo entered into a strategic partnership with Main
Street Advisors. As part of the transaction, Diageo transferred its majority
ownership interest in Cîroc in North America in exchange for interest in
Lobos 1707 Tequila globally. The transaction was completed in June 2025. As a
result, Cîroc in North America is no longer consolidated in the group's
financial statements and is now accounted for as an investment in associate.

(4) Internal estimates incorporating Nielsen, Association of Canadian
Distillers, Dichter & Neira, Frontline, INTAGE, IRI, ISCAM, NABCA, State
Monopolies, TRAC, IPSOS and other third-party providers. All analysis of data
has been applied with a tolerance of +/- 3 bps and the descriptions applied of
gaining, holding or losing share by the Company or brands are based on
estimated performance within that tolerance. Percentages represent percent of
markets by total Diageo net sales contribution that have held or gained total
trade share in the fiscal year to date. Measured markets indicate a market
where we have purchased any market share data. Market share data may include
beer, wine, spirits or other elements. Measured market net sales value sums to
89% of total Diageo net sales value for the twelve months ended 30 June 2025.

(5) Leverage ratio calculated using adjusted net debt which is the equivalent
to adjusted net borrowings (net borrowings plus post-employment benefit
liabilities before tax).

See pages 39-46 for an explanation and reconciliation of non-GAAP measures,
including organic net sales, organic marketing investment, organic operating
profit, free cash flow, EPS before exceptional items, adjusted net debt,
adjusted EBITDA and tax rate before exceptional items. Unless otherwise
stated, movements in results are for the year ended 30 June 2025 compared to
the year ended 30 June 2024.

 

Outlook

Outlook for fiscal 26

Organic net sales growth expected to be at a similar level to fiscal 25 given
a continued challenging market. Growth will be more weighted to the second
half, with organic net sales down slightly in the first half.

Organic operating profit growth expected to be mid-single-digit, skewed to the
second half, and will be supported by cost savings from the Accelerate
programme. This also includes the impact of tariffs as at this time.

Taxation - we expect the tax rate before exceptional items for fiscal 26 to be
c.25% (fiscal 25: 24.9%).

Effective interest rate - we expect the effective interest rate for fiscal 26
to be c.4.0% (fiscal 25: 4.1%).

Capital expenditure in fiscal 26 is expected to be lower than the spend in
fiscal 25 and in the range of $1.2 - $1.3 billion (fiscal 25: $1.5 billion).

Free cash flow expected to be c.$3 billion (fiscal 25: $2.7 billion). This
includes exceptional cash costs related to the Accelerate programme.

Strategy update - at a glance

In May 2025, we launched the Accelerate programme to strengthen Diageo's
foundations for long-term, sustainable growth. Phase one is progressing well,
with good momentum across markets. The programme sets out clear cash delivery
targets and a disciplined approach to operational excellence and cost
efficiency. It will also shift how we operate: creating a more agile
and efficient business, enabling us to optimise investment and allocate
resources more effectively. Collectively, we expect this to deliver better
growth.

Through our prioritisation tools and enhancing our data-driven frameworks, we
are focused on accelerating growth by directing investment to higher growth
opportunities. Don Julio delivered double-digit growth in all regions and
gained share in measured markets representing >90% of net sales, Guinness
delivered double-digit growth, and gained share in its three largest markets,
while Guinness Microdraught opened new global distribution opportunities. In
whisky, Johnnie Walker gained share of international whisky and scotch; with
innovation importantly supporting recruitment.

Optimising A&P spend remains a key focus, with more targeted investment
and greater efficiency across our marketing operations. This is well underway
and a key priority for the coming year. In fiscal 2025, we reduced development
costs (non-working) to 14% of A&P spend, down from 21% in fiscal 2024,
leveraging our AI-driven content production and agile ways of workings across
our marketing function, including Agile Brand Communities, and Conscious
Create Teams.

Moderation is a significant growth opportunity for Diageo, particularly in an
evolving TBA landscape. This is supported by our leadership in non-alcoholic
spirits, more than four times the size of our nearest competitor.((1)) In
fiscal 2025, our non-alc portfolio organic net sales grew c.40%. We extended
our non-alc leadership with the acquisition of Ritual Beverage Company LLC in
the US. Guinness 0.0 delivered double-digit growth. RTDs can also play a key
role in moderation - offering convenience and often lower ABV options. We
initiated a more targeted strategy for RTDs in selective key RTD markets, with
some encouraging early signs.

In the US, our spirits route-to-market has benefited from increased investment
in capability building, commercial execution and investing in key accounts,
and we are seeing early signs of incremental growth. We continue to optimise
our supply chain, with a new manufacturing and warehouse facility announced in
Montgomery, Alabama, to increase efficiency and sustainability. Additionally,
in Europe, we introduced a new strategy and operating model under Accelerate,
including targeted investments and more standalone markets. Across Diageo, we
are embedding a more performance-driven culture, focused on speed, agility,
continuous improvement, and leadership accountability.

(1) RSV IWSR 2024

 

Dividend

The recommended final dividend for the year ended 30 June 2025, to be proposed
to shareholders for approval at the Annual General Meeting to be held on 6
November 2025 is 62.98 cents per share. This will bring the recommended full
year dividend to 103.48 cents per share. Subject to approval by shareholders,
the final dividend will be per share paid to holders of ordinary shares and US
ADRs on the register as at 17 October 2025. The ex-dividend date is 16 October
2025 for holders of ordinary shares, and 17 October 2025 for holders of US
ADRs. The final dividend, once approved by shareholders, will be paid to
holders of ordinary shares and US ADRs on 4 December 2025. Holders of ordinary
shares will receive their dividends in sterling unless they elect to receive
their dividends in US dollars by 7 November 2025. The dividend per share in
pence to be paid to ordinary shareholders will be announced on 20 November
2025 and will be determined by the actual foreign exchange rates achieved by
Diageo buying forward contracts for sterling currency, entered into during the
three days preceding the sterling equivalent announcement of the interim
dividend. A dividend reinvestment plan is available to holders of ordinary
shares in respect of the final dividend and the plan notice date is 7 November
2025.

 

To view the final results document in full, please paste the following URL
into the address bar of your browser:

http://www.rns-pdf.londonstockexchange.com/rns/9305T_1-2025-8-4.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/9305T_1-2025-8-4.pdf)

In accordance with DTR 6.3.5(1A), the final results document has been
submitted to the National Storage Mechanism in full unedited text and will
shortly be available for inspection at:
https://data.fca.org.uk/#/nsm/nationalstoragemechanism

     Presentation for analysts and shareholders
     Pre-recorded audio webcast and presentation slides

     At 07:05 (UK time) on Tuesday 5 August 2025, Nik Jhangiani, Interim Chief
     Executive and Sonya Ghobrial, Global Head of Investor Relations, will present
     Diageo's preliminary results as a pre-recorded audio webcast. This will be
     available to view at
     https://www.diageo.com/en/investors/results-reports-and-events/2025-preliminary-results.
     The presentation slides and script will also be available to download.

     Live Q&A conference call

     Nik Jhangiani and Sonya Ghobrial will be hosting a Q&A conference call on
     Tuesday 5 August 2025 at 09:30 (UK time).

     For analysts and shareholders wishing to ask questions, please use the dial-in
     details below which will have a Q&A facility.

     Please dial in 15 minutes ahead of the scheduled start time to register before
     the call begins.
     From the UK:                                    +44 (0)20 3936 2999

     From the UK (free call):                        0808 189 0158

     From the USA:                                   +1 646 233 4753

     From the USA (free call):                       +1 855 979 6654

     Passcode:                                       341561
     Transcript and audio recording

     Following the Q&A conference call, a transcript and audio recording will
     be available from the link below:

     https://www.diageo.com/en/investors/results-reports-and-events/2025-preliminary-results

     Calendar for future events
     6 November 2025   Q1 F26 Trading update and AGM
     25 February 2026  Interim results for six months ending 31 December 2025
     May 2026          Q3 F26 Trading Update
     August 2026       Preliminary results for year ending 30 June 2026

 

     Enquiries
     Investors:       Sonya Ghobrial +44 (0)7392 784784

                      Andy Ryan +44 (0)7803 854842

                      Grace Murphy +44 (0)7514 726167

                      investor.relations@diageo.com
     Media:           Brendan O'Grady +44 (0)7812 183750

                      Rebecca Perry +44 (0)7590 809101

                      Clare Cavana +44 (0)7751 742072

                      Isabel Batchelor +44 (0)7731 988857

                      press@diageo.com
     Diageo plc LEI:  213800ZVIELEA55JMJ32

     About Diageo
     Diageo is a global leader in beverage alcohol with an outstanding collection
     of brands across spirits and beer categories. These brands include Johnnie
     Walker, Crown Royal, J&B and Buchanan's whiskies, Smirnoff, Ketel One,
     Captain Morgan, Baileys, Don Julio, Tanqueray and Guinness.

     Diageo is a global company, and our products are sold in nearly 180 countries
     around the world. The company is listed on both the London Stock Exchange
     (DGE) and the New York Stock Exchange (DEO). For more information about
     Diageo, our people, our brands, and performance, visit us at www.diageo.com.
     Visit Diageo's global responsible drinking resource, www.DRINKiQ.com for
     information, initiatives, and ways to share best practice.

     Celebrating life, every day, everywhere.

 

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