Diageo today admitted profits for the past year plunged 47% hit by the closure of the on-trade activities and the cancellation of sports events around the world.
Diageo revealed in results for the year ending 30 June 2020 that the reported net sales (£11.8 billion) were down 8.7% driven by organic declines. Reported operating profit (£2.1 billion) declined 47.1%, driven mainly by exceptional operating items and organic net sales.
Organic net sales for Diageo were down 8.4%, with growth in North America more than offset by declines in all other regions. Organic volumes were down 11.2%.
Diageo’s Organic operating profit was down 14.4%, ahead of organic net sales, driven by volume declines, cost inflation and unabsorbed fixed costs that were partially offset by short term cost reductions and ongoing productivity benefits.
Solid cash flow delivery with net cash from operating activities at £2.3 billion, £0.9 billion lower than a prior period and free cash flow at £1.6 billion, £1.0 billion lower than the prior period, in each case largely due to lower organic operating profit, lower dividends from associates, one-off tax impacts and increased working capital use.
Measures have been put in place to reinforce Diageo’s already solid liquidity including pausing the current three-year return of the capital programme, bringing forward a £2.0bn USD bond issuance launched in April 2020 and putting in place an additional committed credit facility of £2.5 billion.
Exceptional operating items included non-cash impairment charges of £1.3 billion. These were in India, Nigeria, Ethiopia and on the Windsor brand in Korea, reflecting the impact of Covid-19 and challenging trading conditions.
Basic eps of 60.1 pence decreased by 54.0% primarily due to exceptional operating items. Pre-exceptional eps declined 16.4% to 109.4 pence, driven primarily by lower operating profit.
The final recommended dividend of 42.47 pence per share is the same as the final dividend for fiscal 19. This brings the full-year dividend for fiscal 20 to 69.88 pence per share, an increase of 2%.
Africa net sales declined by 13%. Growth in the first half was offset by the impact of Covid-19 in the second half.
East Africa declined 10% where continued beer growth in Tanzania was offset by lockdown closures affecting the on-trade in Kenya and Uganda. Net sales in Nigeria declined 20%, driven by double-digit declines in beer and scotch.
In South Africa, Diageo’s net sales declined 25%, driven by scotch and vodka, as a result of both on-trade and off-trade closures and a troubled economic climate. Africa Regional Markets declined 8%, as strong beer growth in Ghana was offset by on-trade closures and the impact of significant excise increases in Ethiopia.