Diageo plc

Good morning and welcome to Diageo's 2023 Interim Results Q&A call. Your call today will be hosted by Ivan, Diageo CEO, and Lavanya, Diageo CFO. This conference is being recorded. To ask a question today, please press star followed by one on your telephone keypads. We're now ready to start the call. Ivan, please go ahead.

Thank you. Hi, everyone, and thank you for joining our Interim Results call. I hope you've had a chance to read our press release and watch the presentation webcast I'm pleased with our results for the first half of fiscal 23. We delivered organic top line and operating profit growth above our medium-term guidance. Net sales up 9% with growth across all regions. Volume grew 2% even as we implemented strategic price increases. Operating profit up 10%. Organic margin expanded 9 basis points. We generated 800 million pounds of free cash flow, fueling continued investment in long-term growth. We expect to deliver stronger free cash flow in the second half as we lap more normalized working capital movements. We continue to gain or hold share in the majority of our markets, 75%. Our super premium plus brands grew organic net sales by 12%. I'm particularly pleased with the strong growth in scotch, up 19, tequila up 28%, and Guinness up 17%. On a constant basis, Diageo is 36% bigger than before pre-COVID, and with a four-year CAGR for organic net sales of 8%. In North America, organic net sales grew 3%, lapping strong double-digit growth in the first half of fiscal 22. U.S. spirits net sales grew 2% on top of strong double-digit growth for four consecutive halves, and we had depletions ahead of shipments. Our U.S. spirits business is 44% larger than fiscal 19, with net sales growing at a four-year CAGR of 9.4%. We took price and held share of TBA, As expected, growth in the U.S. spirits category is normalizing, trending towards the historical mid-single-digit range. Consumer demand remains resilient, and the market continues to premiumize. 33% of American drinkers surveyed said they had spent $50 or more on a bottle of alcohol in 2022. And that was up from just 24% in 2021. In Europe, organic net sales grew 10% and we maintained volume despite the challenging economic environment. Asia-Pac grew 17% despite greater China, which only grew two. Latin America grew sales by 20% and delivered the highest margin across all our regions in the half. This business is 64% larger versus fiscal 19, with net sales growing at a four-year CAGR of 15%. I'm very proud of our performance in Latin America. In Africa, net sales grew by 6%, with growth across all markets. And we're delivering consistent returns for shareholders, increasing our interim dividend by 5%. And today I'm pleased to announce an additional return of capital to shareholders up to 500 million pounds in fiscal 23. As I look ahead to the second half of fiscal 23, I am pleased with our start in January and the resilience of our business. I'm confident in our strategy and ability to deliver our medium-term guidance. And with that, I'll turn it to the operator. Let's take our first question.

Of course, if you'd like to ask a question via the telephone lines, you can do so by pressing star followed by one on your telephone keypad. If you choose to withdraw your question, please press star followed by two. And when preparing to ask your question, please ensure your phone is unmuted locally. As a reminder, that's star followed by one on your telephone keypad now. Our first question comes from Sanjit Orla of Credit Suisse. Sanjit, your line is open. Please go ahead.