Diageo (DGE) H1 2026 earnings summary

Executive summary

• Organic net sales and organic operating profit declined 2.8% year-over-year, mainly due to weakness in US Spirits and Chinese white spirits; excluding Chinese white spirits, organic net sales were down 0.5% and organic operating profit grew 1.5%.

• Net sales declined 4.0% to $10.46bn, with operating profit down 1.2% to $3.12bn; operating margin before exceptionals rose 85bps to 29.8%.

• Free cash flow for the half was just over $1.5 billion, $164 million lower than last year due to adverse working capital movement.

• Dividend declared at $0.20 per share, with a new payout policy of 30%-50% and a minimum floor of $0.50 per annum.

• Strategic review and Accelerate savings program underway, with about 40%-50% of targeted $625 million savings delivered in H1.

Financial highlights

• Reported net sales declined 4%, with organic volume down 0.9%; gross profit declined $324 million organically, driven by top-line performance, adverse mix, cost inflation, and tariffs.

• EPS pre-exceptionals declined 2.5% to $0.953, mainly due to lower organic operating profit and disposals.

• CapEx was $590 million, down $40 million year-over-year; full-year CapEx guidance remains at the lower end of $1.2-$1.3 billion.

• Net debt at half-year end was $21.7 billion, slightly lower than fiscal 2025; adjusted net borrowings to adjusted EBITDA ratio was 3.4x.

• Marketing investment fell 10.2% to $1.70bn, reflecting efficiency gains.

Outlook and guidance

• Organic net sales growth guidance revised to down 2%-3% for fiscal 26, reflecting continued US and Chinese white spirits weakness.

• Organic operating profit now expected to be flat to up low single digits; free cash flow guidance reiterated at $3 billion for fiscal 26, excluding a $100 million one-off working capital impact.

• Tax rate before exceptionals expected at about 25%; effective interest rate at about 4%.

• CapEx guidance unchanged at the lower end of $1.2-$1.3 billion.