Diageo (DGE) H1 2025 (Q&A) earnings summary

Executive summary

• Organic net sales grew 1.0% to $10.9 billion in H1 FY25, with 65% of net sales gaining or holding share in measured markets, led by Don Julio and Guinness.

• US returned to topline growth, supported by innovation and permanent SKUs, with strong market share gains for Don Julio and Crown Royal.

• Investments in digital, supply agility, and route-to-market are driving resilience and positioning for sustainable long-term growth, with benefits expected from fiscal 2026 onward.

• Free cash flow increased to $1.7 billion, supported by strong working capital management.

• Medium-term guidance withdrawn due to macro/geopolitical uncertainty and tariffs; near-term guidance to be updated as needed.

Financial highlights

• Organic net sales up 1.0% year-over-year to $10,901m; organic operating profit down 1.2% to $3,155m due to higher overheads and strategic investments.

• Free cash flow rose to $1.7bn, and net cash from operating activities reached $2.3bn.

• Pre-exceptional EPS fell 9.6% to 97.7 cents, mainly from lower Moët Hennessy contribution and FX headwinds.

• Interim dividend held flat at 40.5c per share; dividend cover below 1.8x-2.2x target.

• Don Julio tequila grew 48% year-over-year, outpacing category growth; Guinness organic net sales up 17%.

Outlook and guidance

• Sequential improvement in organic net sales growth expected in H2, but new US tariffs and macro/geopolitical uncertainty may disrupt momentum.

• Organic operating profit for H2 expected to decline slightly, in line with H1, with tariffs and one-off incentive costs impacting results.

• Tax rate before exceptionals for FY25 expected around 24%; effective interest rate near 4.3%.

• Capex to be at the upper end of $1.3–$1.5bn; leverage ratio to remain above target range (3.1x at H1 FY25).

• Medium-term guidance removed; more frequent updates planned.