Diageo (DGE) H1 2025 earnings summary

Executive summary

• Organic net sales grew 1.0% in H1 FY25, with growth in four out of five regions and standout performances from Don Julio and Guinness, despite a challenging macro environment and cautious consumer sentiment.

• Market share was held or gained in 65% of measured markets, with notable gains in the US, most of Europe, and Greater China.

• Strategic focus on digital, innovation, and route-to-market investments is driving resilience and positioning for future growth.

• Portfolio and geographic diversity, along with broad price tiers, are supporting improved performance and resilience.

• US returned to topline growth, gaining share in TBA, led by Don Julio and Crown Royal.

Financial highlights

• Organic net sales up 1.0% year-over-year ($101 million), with reported net sales down 0.6% due to FX and disposals.

• Organic operating profit declined 1.2% ($42 million) due to higher overheads, mainly staff costs and strategic investments.

• Pre-exceptional EPS declined 9.6% to 97.7 cents per share, mainly due to lower Moët Hennessy contribution and FX headwinds.

• Free cash flow increased by $125 million to $1.7 billion, driven by working capital management.

• Dividend for the half announced at 40.5 cents, flat year-over-year.

Outlook and guidance

• Sequential improvement in organic net sales growth expected for the full year, but new US tariffs introduce significant uncertainty, especially for tequila and Canadian whisky.

• Slight decline in organic operating profit anticipated in the second half, reflecting higher staff costs and continued investments.

• Leverage ratio expected to remain above target range (2.5x-3.0x) at fiscal year-end.

• Medium-term guidance of 5%-7% organic net sales growth withdrawn due to macroeconomic and geopolitical uncertainty; near-term guidance to be provided more regularly.

• Tax rate before exceptionals expected at ~24% for FY25; capital expenditure to be at upper end of $1.3–$1.5 billion.