Business review PDF (2035KB) - Diageo Annual Report 2011

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Performance 2010 Reported £ million Exchange £ million Acquisitions and disposals £ million Organic movement £ million Operating results 2011 2011 Reported £ million Reported movement % Key financials Net sales 1,018 65 – 98 1,181 16 Marketing spend 233 12 1 32 278 19 Operating profit before exceptional items 176 8 (1) 25 208 18 Exceptional items (30) (50) Operating profit 146 158 8 Volume * movement % Organic net sales movement % Reported net sales movement % Brand performance Key countries and categories: Asia Pacific 9 9 16 Australia 4 4 15 Korea 1 8 12 China 1 (4) (1) India 42 79 34 Southeast Asia 12 14 25 Spirits 10 11 17 Beer – 7 14 Wine 2 10 (8) Ready to drink 7 7 19 The strategic brands:** Johnnie Walker 16 12 19 Smirnoff 8 5 12 Windsor 3 8 12 Guinness (1) 6 12 * Organic equals reported movement for volume, except for wine where the reported movement is (25)% due to the disposal of Barton & Guestier. ** Spirits brands excluding ready to drink. 57 Performance summary Business description Business review Governance Financial statements Additional information
58 Diageo Annual Report 2011 Business review Operating results 2010 compared with 2009 Summary consolidated income statement Sales and net sales On a reported basis, sales increased by £675 million from £12,283 million in the year ended 30 June 2009 to £12,958 million in the year ended 30 June 2010. On a reported basis net sales increased by £469 million from £9,311 million in the year ended 30 June 2009 to £9,780 million in the year ended 30 June 2010. Exchange rate movements increased reported sales by £346 million and reported net sales by £267 million. Operating costs before exceptional items On a reported basis, operating costs before exceptional items increased by £306 million in the year ended 30 June 2010 due to an increase in cost of sales of £175 million, from £3,878 million to £4,053 million, an increase in marketing spend of £92 million from £1,327 million to £1,419 million, and an increase in other operating expenses before exceptional costs of £39 million, from £1,518 million to £1,557 million. The impact of exchange rate movements increased total operating costs before exceptional items by £141 million. Exceptional operating items Exceptional items are those that, in management’s judgement, need to be disclosed by virtue of their size or incidence in order for the user to obtain a proper understanding of the financial information. Exceptional operating costs of £177 million for the year ended 30 June 2010 (2009 – £170 million) comprised a net charge of £142 million (2009 – £170 million) in respect of restructuring programmes and an impairment charge of £35 million (2009 – £nil) in respect of the Ursus brand reflecting the impact of the significant downturn in the economy in one of its principal market, Greece. Restructuring programmes comprise £85 million (2009 – £166 million) for the global restructuring programme announced in February 2009 primarily in respect of employee and contract termination charges, 2010 £ million Year ended 30 June 2009 £ million Sales 12,958 12,283 Excise duties (3,178) (2,972) Net sales 9,780 9,311 Operating costs before exceptional items (7,029) (6,723) Operating profit before exceptional items 2,751 2,588 Exceptional operating items (177) (170) Operating profit 2,574 2,418 Sale of businesses (15) – Net finance charges (462) (592) Share of associates’ profits after tax 142 164 Profit before taxation 2,239 1,990 Taxation (477) (286) Profit from continuing operations 1,762 1,704 Discontinued operations (19) 2 Profit for the year 1,743 1,706 Attributable to: Equity shareholders 1,629 1,605 Non controlling interests 114 101 1,743 1,706 £93 million (2009 – £nil) for the restructuring of Global Supply operations announced in July 2009 principally in Scotland, £12 million (2009 – £4 million) for the restructuring of brewing operations in Ireland announced in 2008 in respect of accelerated depreciation, and a £48 million net credit (2009 – £nil) for the restructuring of the wines business in the United States comprising an £89 million gain on the sale and leaseback of land, a £17 million charge for the write down of inventories and other charges of £24 million. The total restructuring cash expenditure in the year ended 30 June 2010 is £145 million (2009 – £53 million) of which £122 million relates to the global restructuring programme. Post employment plans Post employment net costs for the year ended 30 June 2010 were a charge of £133 million (2009 – £63 million) comprising £92 million (2009 – £98 million) included in operating costs before exceptional items, pension curtailment gains of £6 million (2009 – £33 million) in exceptional operating items and a charge of £47 million (2009 – gain of £2 million) in net finance charges. The deficit before taxation in respect of post employment plans decreased by £178 million from £1,383 million at 30 June 2009 to £1,205 million at 30 June 2010. The reduction in the deficit included £147 million transferred into the UK Diageo Pension Scheme (the UK Scheme) from escrow under the deficit funding arrangements paid by the company in prior years. Deficit funding contributions to the group’s UK and Irish pension schemes in the year ended 30 June 2010, other than the transfer to the UK Scheme of amounts paid into escrow in prior years, were £55 million.
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