FDBusiness.com

Diageo has reported an 8.7% decline in net sales to £11.8 billion and a 47.1% decrease in operating profit to £2.1 billion for the year ended June 2020 as a consistent first half performance was significantly impacted by COVID-19 in the second half. Organic net sales were down 8.4%, with growth in North America more than offset by declines in all other regions. Organic volumes were down 11.2% and organic operating profit fell by 14.4%, driven by volume declines, cost inflation and unabsorbed fixed costs that were partially offset by short-term cost reductions and ongoing productivity benefits.

Ivan Menezes, chief executive of Diageo, comments: “Fiscal 20 was a year of two halves: after good, consistent performance in the first half of fiscal 20, the outbreak of Covid-19 presented significant challenges for our business, impacting the full year performance. Through these challenging times we have acted quickly to protect our people and our business, and to support our customers, partners and communities.

“The actions we have taken to strengthen Diageo over the last six years provide a solid foundation to respond to the impacts of the pandemic. We are now a more agile, efficient and effective business.”

Ivan Menezes, chief executive of Diageo.

Measures have been put in place to reinforce Diageo’s already solid liquidity including pausing the current three-year return of capital programme, bringing forward a £2.0 billion USD bond issuance launched in April 2020 and putting in place an additional committed credit facility of £2.5 billion. Diageo incurred exceptional operating items included non-cash impairment charges of £1.3 billion for 2020. These were in India, Nigeria, Ethiopia and on the Windsor brand in Korea, reflecting the impact of Covid-19 and challenging trading conditions.

He continues: “We have taken decisive action through the second half of fiscal 20, tightly managing our costs, reducing discretionary expenditure and reallocating resources across the group. We are further enhancing our data analytics and technology tools to rapidly respond to local consumer and customer shifts triggered by the pandemic. We have strengthened liquidity, giving us flexibility to continue to invest effectively in the business for the long term.

“While the trajectory of the recovery is uncertain, with volatility expected to continue into fiscal 21, I am confident in our strategy, the resilience of our business and am very proud of the way our people have responded. We are well-positioned to emerge stronger.”