Reported net sales (£12.2 billion) and operating profit (£3.7 billion) were up 0.9% and 3.7%, respectively, as organic growth was partially offset by adverse exchange
All regions contributed to broad based organic growth, with organic net sales up 5.0% and organic volume up 2.5%
Organic operating profit was up 7.6%, improving organic operating margins by 78 basis points, as higher marketing investment was more than offset by efficiencies from our productivity program.
Cash flow continued to be strong, broadly in line with last year, with £3.1 billion net cash from operating activities and £2.5 billion free cash flow
Basic eps of 121.7 pence was up 14.8%. Pre-exceptional eps was 118.6 pence, up 9.3%, principally due to higher organic operating profit
On 26 July the Board approved a share buyback programme to return up to £2.0 billion to shareholders during the year ending 30 June 2019
The board recommended a final dividend increase of 5% bringing the full year dividend to 65.3 pence per share
“Diageo has delivered another year of strong, consistent performance. Organic volume and net sales growth is broad based across regions and categories. We have expanded organic operating margin while increasing investment behind our brands ahead of organic net sales growth.
These results reflect the high performance culture we have created in Diageo, the ongoing rigorous execution of our strategy, our focus on the consumer and our ability to move swiftly on trends and insights.
During the year we returned £1.5 billion to shareholders through a share buyback. We have delivered another year of strong cash flow generation in F18. Consequently, the Board has approved an additional share buyback programme of up to £2.0 billion during F19.
The changes we have made in the business and the shifts in culture we continue to drive, ensure we are well placed to capture opportunities and deliver sustained growth. Our financial performance expectations are unchanged and we expect to continue to invest in the business to deliver our mid-term guidance of consistent mid-single digit organic net sales growth and 175bps of organic operating margin expansion for the three years ending 30 June 2019.”
Key financial information
For the year ended 30 June 2018
|
Summary financial information |
|||||
|
|
|
2018 |
2017 |
Organic growth % |
Reported growth % |
|
Volume |
EUm |
240.4 |
242.2 |
2 |
(1) |
|
Net sales |
£ million |
12,163 |
12,050 |
5 |
1 |
|
Marketing |
£ million |
1,882 |
1,798 |
7 |
5 |
|
Operating profit before exceptional items |
£ million |
3,819 |
3,601 |
8 |
6 |
|
Exceptional operating items(i) |
£ million |
(128) |
(42) |
|
|
|
Operating profit |
£ million |
3,691 |
3,559 |
|
4 |
|
Share of associate and joint venture profit after tax |
£ million |
309 |
309 |
|
– |
|
Exceptional non-operating gain(i) |
£ million |
– |
20 |
|
|
|
Net finance charges |
£ million |
260 |
329 |
|
|
|
Exceptional taxation credit(i) |
£ million |
203 |
4 |
|
|
|
Tax rate including exceptional items |
% |
15.9 |
20.6 |
|
(23) |
|
Tax rate before exceptional items |
% |
20.7 |
20.6 |
|
– |
|
Discontinued operations (after tax)(i) |
£ million |
– |
(55) |
|
|
|
Profit attributable to parent company's shareholders |
£ million |
3,022 |
2,662 |
|
14 |
|
Basic earnings per share |
pence |
121.7 |
106.0 |
|
15 |
|
Earnings per share before exceptional items |
pence |
118.6 |
108.5 |
|
9 |
|
Recommended full year dividend |
pence |
65.3 |
62.2 |
|
5 |
(i) For further details of exceptional items and discontinued operations items see Notes 3. Exceptional Items.
Outlook for exchange
Using exchange rates £1 = $1.33; £1 = €1.13, the exchange rate movement for the year ending 30 June 2019 is estimated to adversely impact net sales by approximately £70 million and operating profit by approximately £10 million.
Outlook for tax
The tax rate before exceptional items for the year ended 30 June 2018 was 20.7%. Our current expectation is that the tax rate before exceptional items for the year ending 30 June 2019 will be in the range of 21% to 22% which reflects changing business mix and the increased levels of uncertainty in the current tax environment for most multinationals. For further details on taxation see Additional Financial Information (d) Taxation.
Share buyback programme
On 26 July 2017 the Board approved a share buyback programme to return up to £1.5 billion to shareholders during F18. The programme was completed in February 2018 with 58.9 million shares being repurchased. On 26 July 2018 the Board approved a new share buyback programme to return up to £2.0 billion to shareholders during the year ending 30 June 2019.
Acquisitions and disposals
The impact of acquisitions and disposals on the reported figures was primarily attributable to the acquisition of the Casamigos brand which was completed on 15 August 2017 and to the prior year change to a franchise model for some popular segment brands in India.
For further details on the impact of acquisitions and disposals see Explanatory Notes.
|
Net sales (£ million) |
|
Reported net sales up 0.9% with organic growth partially offset by unfavourable exchange Organic net sales growth of 5.0% driven by 2.5% volume growth and 2.5% positive price/mix |
|
Net sales |
£ million |
|
2017 |
12,050 |
|
Exchange(i) |
(454) |
|
Acquisitions and disposals |
(5) |
|
Volume |
288 |
|
Price/mix |
284 |
|
2018 |
12,163 |
(i) Exchange rate movements reflect the translation of prior year reported results at current year exchange rates.
Reported net sales grew 0.9%, driven by organic growth which was partially offset by unfavourable exchange.
Organic volume growth of 2.5% and 2.5% of positive price/mix drove 5% organic net sales growth with organic growth delivered across all regions.
|
Operating profit (£ million) |
|
Reported operating profit grew 3.7% Organic operating profit grew 7.6% |
Reported operating profit was up 3.7% with organic growth partially offset by exceptional operating items and adverse exchange. Organic operating profit grew ahead of net sales at 7.6%.
|
Operating profit |
£ million |
|
2017 |
3,559 |
|
Exceptional operating items |
(86) |
|
Exchange |
(56) |
|
Acquisitions and disposals |
4 |
|
Organic movement |
270 |
|
2018 |
3,691 |
|
Operating margin (%) |
|
Reported operating margin increased 81bps Organic operating margin increased 78bps |
|
Operating margin |
ppt |
|
2017 |
29.5 |
|
Exceptional operating items |
(0.70) |
|
Exchange |
0.69 |
|
Acquisitions and disposals |
0.04 |
|
Gross margin |
(0.43) |
|
Marketing |
(0.27) |
|
Other operating expenses |
1.48 |
|
2018 |
30.3 |
Reported operating margin increased 81bps driven by organic operating margin improvement and the positive impact on operating margin from exchange, due to the stronger negative impact of exchange on net sales relative to operating profit, which more than offset the impact from exceptional operating items. Organic operating margin improved 78bps driven primarily by our productivity programme partially offset by higher marketing spend.
|
Basic earnings per share (pence) |
|
Basic eps epBasic eps increased 14.8% from 106.0 pence to 121.7 pence Eps before exceptional items increased 9.3% from 108.5 pence to 118.6 pence |
|
Basic earnings per share |
pence |
|
2017 |
106.0 |
|
Exceptional items after tax |
3.3 |
|
Discontinued operations after tax |
2.2 |
|
Exchange on operating profit |
(2.3) |
|
Acquisitions and disposals |
0.2 |
|
Organic operating profit growth(i) |
10.8 |
|
Net finance charges |
3.0 |
|
Tax |
(2.6) |
|
Share buyback |
1.2 |
|
Non-controlling interests |
(0.1) |
|
2018 |
121.7 |
(i) Excluding exchange