REG - Diageo PLC - Interim Results

DiageoAnnouncement

Wed 07:00

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RNS Number : 2513U  Diageo PLC  25 February 2026

This announcement contains inside information

Interim results

 Six months ended 31 December 2025                                    25 February 2026
                                          Reported results                                                               Adjusted results((1))

                                          F26 H1        vs F25 H1                                                        F26 H1       vs F25 H1
 Net sales                                $10,460m      (4.0)%        Organic net sales movement                         $(295)m      (2.8)%((2))
 Operating profit                         $3,116m       (1.2)%        Operating profit before exceptional items          $3,256m      (2.8)%((2))
 Operating profit margin                  29.8%         85bps         Operating profit margin before exceptional items   31.1%        1bps((2))
 Net profit                               $2,110m       1.7%
 Basic earnings per share                 89.7c         3.0%          Basic earnings per share before exceptional items  95.3c        (2.5)%
 Net cash flow from operating activities  $2,123m       $(202)m       Free cash flow                                     $1,532m      $(164)m

Growth in Europe, LAC and Africa offset by weakness in North America and China

•  Reported net sales of $10.5 billion declined 4.0% due to organic net
sales decline and the negative impact of disposals.

•  Organic net sales declined 2.8%, driven by organic volume down 0.9% and
negative price/mix of 1.9%. Strong organic net sales growth in Europe, Latin
America and Caribbean (LAC) and Africa was more than offset by softer
performance in North America given pressure on disposable income impacting US
Spirits, and the adverse impact of Chinese white spirits (CWS) in Asia
Pacific.

•  Negative price/mix primarily as a result of adverse mix due to US
Spirits performance and weaker results in CWS.

•  Excluding CWS, organic net sales for the group would have been c.2%
higher; with volume down c.0.5% and price/mix broadly flat.

Operating profit decline mainly from adverse mix and tariffs, partially offset
by efficiencies in A&P investment

•  Reported operating profit declined 1.2% due to organic operating profit
decline and lower exceptional operating charges. Reported operating profit
margin grew 85bps, primarily due to the positive impact of disposals.

•  Organic operating profit declined by 2.8%; organic operating profit
margin was broadly flat, mainly due to adverse market mix and tariff costs
offset by lower marketing investment given efficiencies.

•  EPS pre-exceptionals was 95.3 cents, down 2.5%.

Continued focus on cash flow and increased commitment to reduce leverage and
increase financial flexibility, dividend rebased

•  Net cash flow from operating activities decreased by $202 million to
$2.1 billion. Free cash flow decreased by $164 million to $1.5 billion.

•  Net debt as at 31 December 2025 was $21.7 billion.

•  In December 2025, Diageo announced an agreement to sell its shareholding
in East African Breweries plc and its shareholding in the Kenyan spirits
business, to Asahi Group Holdings, Ltd. Estimated net proceeds after tax and
transaction costs of $2.3 billion imply a 17x EBITDA multiple. This is
expected to complete in H2 calendar year 2026 and to reduce net debt to
adjusted EBITDA((3)) by c.0.25x.

•  Ongoing strategic review by United Spirits Limited (USL) of ownership of
Royal Challengers Bengaluru (RCB) cricket team well advanced.

•  Declared interim dividend of 20 cents. Committed to growing shareholder
distributions over time and targeting a 30-50% payout policy going forward,
with a minimum floor set for the dividend of 50 cents per annum.

Accelerate savings progressing well, fiscal 26 guidance updated

•  Cost savings programme progressing well with c.50% Accelerate savings
now expected in fiscal 26; savings in the first half driven by supply chain
agility and related cost savings, A&P efficiencies and overhead savings.

•  For fiscal 26, given further weakness through the first half in the US
we have updated both organic net sales and operating profit growth guidance.
We have reiterated free cash flow guidance of $3 billion.

Sir Dave Lewis, Chief Executive Officer commented:

Our performance in the first half of fiscal 26 was mixed. Strong performance
in Europe, LAC and Africa, was offset by a weakening performance in NAM and
continued weakness in Chinese white spirits in APAC. US Spirits performance
reflected pressure on disposable income, and competitive pressure from more
affordable alternatives addressing a more stretched consumer wallet.

Only several weeks in I can already see significant opportunities for Diageo
to act more decisively to enhance its competitiveness and broaden the
portfolio offering leading to higher growth. As we refine our new strategy to
deliver stronger shareholder value, the immediate priorities for the team are
clear:

- Build competitive category strategies, winning with relevant brands

- Customer, customer, customer

- Redesign of the Diageo operating framework to drive sustainable returns

To deliver on these opportunities, we need to create more financial
flexibility. Accordingly, the Board has taken the difficult decision to reduce
the dividend to a more appropriate level which will accelerate the
strengthening of our balance sheet. We are confident that this is the right
action which will ensure that Diageo can reinforce its position as the leading
international spirits business and drive stronger shareholder value over the
coming years.

I am encouraged by the depth of the passion and pride that our people have for
our brands across the business. This will be invaluable given the significant
work ahead.

(1)    See pages 36-43 for an explanation and reconciliation of non-GAAP
measures.

(2)    Represents organic movement.

(3)    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 36-43 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 six months ended 31 December 2025
compared to the six months ended 31 December 2024.

Outlook

Outlook for fiscal 26

Organic net sales we have updated guidance for fiscal 26 and now expect
organic net sales down 2-3% given further weakness in the US. This also
includes the impact of Chinese white spirits.

Organic operating profit growth we now expect this to be flat to up
low-single-digit. This reflects the revised net sales guidance due to the US,
as well as Chinese white spirits and the impact of tariffs (as detailed on
page 6). This also includes savings from the Accelerate programme.

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 - we expect capex at the lower end of the range of
$1.2-1.3 billion (fiscal 25: $1.5 billion).

Free cash flow - we continue to expect free cash flow of $3 billion (fiscal
25: $2.7 billion). This includes exceptional cash costs related to the
Accelerate programme. This does not include c.$100 million one-off impact
which is expected to be included in working capital at the end of fiscal 26
related to inventory build ahead of the implementation of the group SAP S/4
HANA ERP system in early fiscal 27.

Dividend

Dividend policy revision

The Board of Diageo has decided to reduce the dividend to a more appropriate
level to accelerate the strengthening of the balance sheet and create more
financial flexibility. This will also ensure that decisions made are taken for
the long-term best interests of the company. The Board is targeting a 30-50%
payout policy going forward which will enable Diageo to balance investment in
the business with attractive shareholder returns through dividends and where
appropriate share buybacks. The Board has also set a minimum floor for the
dividend of 50 cents per annum.

 

Dividend timetable

The interim dividend of 20 cents per share (fiscal 25 H1 - 40.50 cents per
share) will be paid to holders of ordinary shares and US ADRs on register as
of 17 April 2026. The ex-dividend date is 16 April 2026 for holders of
ordinary shares and 17 April 2026 for holders of US ADRs. Holders of ordinary
shares will receive their dividends in sterling unless they elect to receive
their dividends in US dollars by 8 May 2026. The dividend per share in pence
to be paid to ordinary shareholders will be announced on 21 May 2026 and will
be determined by the actual foreign exchange rates achieved by Diageo buying
forward contracts for sterling currency, entered into during the three trading
days preceding the sterling equivalent announcement of the final dividend. The
interim dividend will be paid to both holders of ordinary shares and US ADRs
on 4 June 2026. A dividend reinvestment plan is available to holders of
ordinary shares in respect of the final dividend and the plan notice date is 8
May 2026.

 

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

http://www.rns-pdf.londonstockexchange.com/rns/2513U_1-2026-2-24.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/2513U_1-2026-2-24.pdf)

In accordance with DTR 6.3.5(1A), the interim 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

Randall Ingber, General Counsel & Company Secretary, is responsible for
arranging the release of this announcement on behalf of Diageo.

 

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

     At 07:05 (UK time) on Wednesday 25 February 2026, Sir Dave Lewis, Chief
     Executive Officer and Nik Jhangiani, Chief Financial Officer will present
     Diageo's interim results as a pre-recorded audio webcast. This will be
     available to view at
     https://www.diageo.com/en/investors/results-reports-and-events/2026-interim-results.
     The presentation slides and script will also be available to download.

     Live Q&A conference call

     Sir Dave Lewis and Nik Jhangiani will be hosting a Q&A conference call on
     Wednesday 25 February 2026 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):                      0800 358 1035

     From the USA:                                 +1 646 233 4753

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

     Passcode:                                    522042
     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/2026-interim-results

 

 

 

 

     Calendar for future events
     6 May 2026       Q3 F26 Trading Update
     6 August 2026    Preliminary results for year ending 30 June 2026
     5 November 2026  Q1 F27 Trading Update and AGM

 

     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:           Rebecca Perry +44 (0)7590 809101

                      Clare Cavana +44 (0)7751 742072

                      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, JεB and Buchanan's whiskies, Smirnoff and Ketel One

    vodkas, 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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