Diageo (DGE) H2 2025 (Q&A) earnings summary

Executive summary

• Organic net sales grew 1.7% year-over-year, driven by balanced volume and price/mix, despite reported net sales declining 0.1% due to FX and disposals.

• Results aligned with guidance despite a challenging macroeconomic environment, with a sharpened global brand strategy, focus on cash, deleveraging, and a more agile, performance-focused organisation.

• Accelerate programme progressing, with cost savings target raised to $625 million over three years, supporting sustainable long-term growth and improved financial performance.

• Continued confidence in the long-term fundamentals of the spirits industry, despite near-term cyclical pressures and a cautious consumer environment.

• Strategy includes commercial execution, portfolio expansion, premiumization, and innovation, with targeted investments and local market execution to drive growth.

Financial highlights

• Organic net sales: $20,245m, up 1.7% year-over-year; reported net sales down 0.1% due to FX and disposals.

• Organic operating profit declined 0.7% (1.0% excluding Ciroc); reported operating profit fell 27.8% to $4,335m, mainly due to $1,369m in exceptional impairment and restructuring costs.

• Free cash flow increased to $2.7bn, with net cash from operating activities up to $4.3bn; leverage ratio at 3.4x net debt/adjusted EBITDA.

• Pre-exceptional EPS fell 8.6% to 164.2c; basic EPS down 38.9% to 105.9c, impacted by lower Moët Hennessy contribution and adverse FX.

• Disposals in Ghana, Seychelles, and other brands reduced operating profit by $15m and net sales by $350m in fiscal 2026.

Outlook and guidance

• Fiscal 26 organic net sales growth expected to be similar to fiscal 25, with growth weighted to H2 and a slight decline in H1.

• Organic profit growth projected at mid-single-digit, skewed to H2 and supported by Accelerate cost savings; includes impact of tariffs.

• Tax rate expected at ~25%, effective interest rate at ~4.0%, capex $1.2–1.3bn, and free cash flow target of ~$3bn after exceptional costs.

• Commitment to deleveraging, targeting net debt/EBITDA of 2.5–3.0x by fiscal 28.

• Savings and reinvestment in commercial execution and media scale are expected to support future growth.