Diageo (DGE) H2 2025 earnings summary

Executive summary

• Organic net sales grew 1.7% year-over-year, with results aligned to guidance despite challenging macroeconomic conditions and a sharpened strategy to accelerate growth, cash generation, and deleveraging.

• Free cash flow increased to $2.7 billion, up $100 million year-over-year, reflecting strong working capital management.

• EPS before exceptionals declined 8.6% to 164.2c, mainly due to lower associate contributions and adverse FX.

• Dividend held flat year-over-year at 103.48c, with a commitment to sustainable growth and capital discipline.

• Accelerate programme target raised to $625 million cost savings over three years, with 50% reinvested for growth.

Financial highlights

• Net sales were $20.2 billion, flat reported, up 1.7% organic; organic operating profit declined 0.7% (1% excluding Cîroc).

• Free cash flow improved by $139 million to $2.7 billion, driven by working capital improvements.

• EPS before exceptionals fell 8.6% year-over-year; reported net profit was $2,538 million, down 39.2%.

• CapEx was $1.5 billion, with plans to reduce to $1.2–1.3 billion in fiscal 2026.

• Gross margin improved by 9 basis points to 60.5%.

Outlook and guidance

• Fiscal 2026 organic net sales growth expected to be similar to 2025, with mid single digit organic operating profit growth, weighted to the second half.

• Free cash flow guidance for fiscal 2026 is around $3 billion after exceptional costs.

• CapEx to decrease to $1.2–1.3 billion; tax rate expected at ~25%, effective interest rate at ~4.0%.

• U.S. tariffs expected to have a $200 million annualized impact, with about 50% mitigated in the first year.

• Commitment to deleveraging, targeting net debt/EBITDA within 2.5x–3.0x by fiscal 2028.