Diageo plc

Well, good morning, everyone, and thank you for joining our interim results call for Fiscal 24. I hope you had a chance to read our press release and watch our presentation on Diageo.com. The first half of Fiscal 24 was challenging, as we lapped high single-digit growth in the prior year and faced an uneven consumer environment, alongside the inventory challenges in lack. Performance in the half was in line with the update we issued in November. The group's organic net sales, or NSV, declined 0.6% in the first half of fiscal 24, and organic operating margin declined by 167 basis points. Excluding LAC, organic net sales grew 2.5%, driven by good growth in Europe, Asia Pacific, and Africa. And our group organic Operating margin declined 53 basis points, excluding lack, and that's entirely driven by an increase of 70 basis points in our marketing reinvestment rate. We unlocked a further $335 million of productivity cost savings across cost of goods, marketings, and overheads. We generated strong free cash flow of $1.5 billion, up a half a billion dollars, while continuing to invest in the future growth potential of our brands. This is driven by strong working capital management. And once again, we increased our dividend up 5%. Specifically in North America, while NSB declined versus the prior year, we delivered sequential improvement when compared to the second half of fiscal 23, as our actions and interventions in the region began to show an early impact. We are focused on returning to high quality share growth as the US spirits category continues to normalize. Outside of the COVID period, This was the first time North America delivered operating margin improvement since the first half of fiscal 18. In LAC, having conducted a review of inventory levels and monitored performance in the critical holiday season, we've taken action and have further plans to reduce inventory to more appropriate levels for the current consumer environment by the end of fiscal 24. Looking to the second half in this uneven global consumer environment, we expect our organic net sales growth rate to gradually improve compared to the growth rate for the group in the first half, and we expect an organic operating profit decline compared to prior year, but we expect the rate of decline to improve compared to the first half of fiscal 24. While the operating environment in the near term will continue to present challenges, I am confident that we remain well positioned and resilient for the long term. We are diversified by category, price point, and region, and will continue to invest behind our iconic brands to maintain our position as an industry leader in total beverage alcohol, an attractive sector with a long runway for growth. My focus is to generate long-term, sustainable value for shareholders by driving performance of our brands, meeting global consumers' evolving tastes, and stepping up our operational excellence to win quality market share. Thank you very much, and I'll now hand back to the operator for the first question.

Thank you. Again, if you would like to ask a question, please press star followed by one on your telephone keypad. If you would like to remove that question for any reason, please press star followed by two. Again, to ask a question, please press star followed by one. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking your question, and please do ensure that you are unmuted locally. Our first question today comes from the line of Lawrence Wyatt from Barclays. Please go ahead. Your line is now open.

Good morning, Deborah and Avania. Thanks very much for the questions. Three for me, if that's OK. Firstly, you said that you've been a bit disappointed by these results in the presentation you gave. But have you seen anything in the last six months or otherwise that would shake your belief that the U.S. spirits market could grow at four to five medium term and that you'd expect to take share within that market? And could that happen in 2025 or at least FY25? And is there any reason why you can't hit your medium term total guidance range in FY25? Then secondly, on a Bloomberg interview that I saw yesterday, You mentioned that inflation was moderating, but it's still there. At your most recent CMD, you said that we should expect flat margins until inflation starts falling away. Do you maintain that it would be impossible to see margin expansion in FY25? And then finally, on India, it's facing an election this year. Are you aware of any other regulatory changes that could possibly take place in this market in the medium term that might improve reducing the regulation and help spirit sales? Thanks very much.