2020 preliminary results presentation

DIAGEO PRELIMINARY RESULTS YEAR ENDED 30 JUNE 2020

DELIVERING OUR STRATEGY

Four measures of our progress

Reflecting our ambition to be one of the best performing, most trusted and respected consumer products companies in the world

Delivering through our six priorities with clear goals defined by our performance ambition

2

Efficient growth

Value creation

Credibilityand trust

Engaged people

SUPPORTING OUR COMMUNITIES

• Donated alcohol to make over 10 million bottles of hand sanitiser in 20 countries

• Supported local charity and relief efforts with donations – drinking water, food parcels, masks and hygiene products

• Launched ‘Raising the Bar’ – our $100 million global programme to support the on-trade recovery

SUPPORTING OUR CUSTOMERS

• Took back c.500,000 kegs of Guinness from customers

• Provided financial support packages and assistance to bartenders and bar owners

• Raised money for the hospitality industry through benefit concerts and other fund-raising programmes

• Helped the bar professional community stay informed, connected and inspired through World Class and Diageo Bar Academy

ENGAGING OUR CONSUMERS

• Used our insights and technology to connect with consumers and maintain brand relevance

• Pivoted to capture increased opportunities in the at-home occasion

• Responded to the rise in demand for home delivery – including ‘cocktails to go’

• Leveraged our e-commerce capabilities and accelerated investment

OUR LEADING PORTFOLIO, EFFICIENT OPERATIONSAND AGILE CULTURE PROVIDE A STRONG FOUNDATION

6

Advantaged route to consumer and marketing effectiveness

Experienced leadership team and high employee engagement

Broad portfolio with leading brandsacross categories, geographies and price points

Consumer-led, sustainable innovation executed at scale

Embedded culture of everyday efficiency

Strong financial position and good liquidity

CONSISTENT & SOLID FREE CASH FLOW

£bn

EVERYDAY EFFICIENCY, FUELLING INCREASED INVESTMENT AND

DRIVING MARGIN IMPROVEMENT

SUSTAINABLE ORGANIC TOPLINE PERFORMANCE %

Organic operating margin

F17-19(Cumulative)

F20 H1

+198bps

Marketing investment rate*

+30bps

2.1

2.72.5

2.6

1.0

F16 F20 H1F17 F18 F19

+25bps

+13bps

All numbers are organic. * Organic movement

2.8

4.3

5.0

6.1

4.2

F19F16 F20 H1F17 F18

Mid-single digit 4-6%

SUCCESSFUL STRATEGIC EXECUTION HAS DELIVERED CONSISTENT GROWTH PRIOR TO COVID-19

7

8

COVID-19 IS SIGNIFICANTLY DISRUPTING OUR BUSINESS ACROSS ALL REGIONS

(i) The above map is intended to illustrate general geographic regions where Diageo has a presence and/or in which its products are sold. It is not intended to imply that Diageo has a presence in and/or that its products are sold in every country within a geographical region.

North America

Latin America and Caribbean

Africa

Asia Pacific

Europe and Turkey

Organic net sales growth by region in F20(i)

(12)%

(16)%

(13)%(15)%

2%H1 F20: 6% H2 F20: (1)%

H1 F20: 2%H2 F20: (40)%

H1 F20: 5%H2 F20: (33)%

H1 F20: 4%H2 F20: (38)%

H1 F20: 3%H2 F20: (31)%

9

Free cash flow

£1.6bn

Organic volume

11.2%

EPS pre-exceptionals

16.4%

Returned £1.25bn to shareholders through share buyback to end January 2020

Full year dividend

2% to 69.88p

Organic net sales

8.4%Organic operating margin

212 bps

FINANCIAL PERFORMANCE IN F20 WAS SEVERELY IMPACTED

FOCUSED ON MANAGING THROUGH THE CRISIS TO EMERGE STRONGER

ONE OF THE BEST PERFORMING,

MOST TRUSTED and RESPECTED

SIGNIFICANT IMPACT FROM COVID-19 ON F20 RESULTS

11

ROICOrganic net sales growth

Organic operating margin expansion

Free cash flow Pre-exceptional eps Total Shareholder Return

Value creationEfficient growth

12.4%(8.4)% (212)bps

£1,634m 109.4p 19%

267 bps

16.4%

Supporting customers and consumers

AN AGILE RESPONSE TO SIGNIFICANT DISRUPTION

12

Supportingcommunities

Protectingour people

WE FOCUSED

ON

Protectingour business

4.2%

(23.0)%

5.0%

(8.4)%

6.1%

AFTER A SOLID FIRST HALF ORGANIC NET SALES DECLINED 8.4% FOR THE FULL YEAR

1.3%4.0%

(11.2)%

2.5%0.2%

2.3%2.5%

(24.3)%

3.8% 2.8%

Organic volume growth Organic net sales growthPrice/mix

13

F20H1F18 F19 F20H2 F20

(1)%

(17)%

(8)% (7)%(4)%

(14)%

(4)%

(15)%

ORGANIC DECLINE IN MOST CATEGORIES AFTER BROAD BASED GROWTH IN THE FIRST HALF

US Whiskey

Vodka* Canadian Whisky

LiqueursScotch Rum IMFL Whisky

Gin Tequila Beer

0%

31%

25%

7%3%

7%

2%2%3%6%

8%11%

14* Vodka includes Ketel One Botanical

F20H1 F20FY

(15)%

(4)%

(14)%

(7)%

(17)%

(1)%

(8)%

(4)%

Organic net sales movement

COVID-19 IMPACTED PERFORMANCE ACROSS OUR PORTFOLIO

15

(7)%

Local stars Reserve

(13)%

(4)%

Organic net sales decline*

Smirnoff

(22)% Johnnie Walker

Captain Morgan

Guinness

Baileys

Global giants

Tanqueray

(6)%

(2)%

(3)%

(4)%

(16)%

*Spirits brands excluding ready to drink

Global giants

REPORTED OPERATING PROFIT BEFORE EXCEPTIONAL ITEMS DOWN 15.1% ORGANIC OPERATING PROFIT DOWN 14.4%

16

£m F20 F19

PRIOR PERIOD OPERATING PROFIT * 4,116 3,819

Exchange (1) 25

Fair value remeasurement 2 -

Acquisitions & Disposals (34) (64)

Organic growth (589) 336

CURRENT PERIOD OPERATING PROFIT * 3,494 4,116

* Reported operating profit before exceptional items** Reported operating margin before exceptional items

Reported operating margin** F19 Exchange

Acquisitions and disposals Other

Organic growth

Reported operating margin** F20

32.0% (9)bps (8)bps 3 bps (212)bps 29.7%

ORGANIC OPERATING MARGIN DOWN 212BPSAFTER 13BPS EXPANSION IN THE FIRST HALF

17

Movement in organic operating margin

F19 Gross margin Marketing Other operating items

F20

32.3%

30.2%

22bps

(60)bps

(174)bps

2,608

1,634

CONSISTENT FREE CASH FLOW DELIVERY IN H1 SIGNIFICANTLY IMPACTED BY COVID-19 IN H2

18

Other(iv)

F19

(47)

Operating profit (ii)

Exchange (i)

Working capital (iii)

TaxCapex Interest

2,608

F20

(541) (106)(96)

(127)(56)

(i) Exchange on operating profit before exceptional items.(ii) Operating profit excluding exchange, depreciation and amortisation, post employment charges and non cash items. Free cash

flow for the year ended 30 June 2020 has benefited by £74m following the adoption of IFRS16 on 1 July 2019.(iii) Working capital includes maturing inventory. (iv) Other items include post employment payments, dividends received from associates and joint ventures, and loans and other

investments.

£ m

illio

n1,634

(1)

INCREASED DEBT SUPPORTED BY FAVOURABLE FUNDING

F20 F19 Movement

Closing net debt* £m (13,246) (11,277) (1,969)

Average net debt* £m (12,708) (10,393) (2,315)

Net interest charge £m (333) (248) (85)

Net other finance charges £m (20) (15) (5)

Net finance charges £m (353) (263) (90)

Effective interest rate % 2.6 2.4 0.2

Adjusted** net debt* / EBITDA x 3.3 2.5 0.8

19

* Net debt is equivalent to net borrowings ** Adjusted to include net debt and post employment plan benefit liabilities

Return excess cash to shareholders

A CONSISTENT AND DISCIPLINED APPROACH TO CAPITAL STRUCTURE

20

* Net debt is equivalent to net borrowings. Adjusted net debt includes net debt and post employment plan benefit liabilities.

Organicgrowth

Dividends1.8x to 2.2x

dividend cover

M&A and portfolio management

Leverage policyAdjusted Net Debt* to EBITDA: 2.5x – 3.0x

F20 EXCHANGE IMPACT IS MODEST FOR BOTH OPERATING PROFIT AND NET SALES

21

Exchange rates Total Exchange Impact

* Average rate ** Current spot rate

£m F20

Net Sales 32

Operating profit (1)

Net Interest (2)

***Weighted average rates

Translation rate

F20* F21**

$/£ 1.26 1.30

€/£ 1.14 1.11

Transaction rate

F20* F21***

$/£ 1.35 1.32

€/£ 1.12 1.12

BASIC EPS DECREASED 54.0%EPS BEFORE EXCEPTIONAL ITEMS DOWN 16.4%

22

Pence per share

F19 eps before exceptional items 130.8

Exchange on operating profit -

Acquisitions and disposals(i) (1.2)

Fair value remeasurement 0.1

Organic operating profit growth (24.4)

Associates and joint ventures (1.2)

Tax(iii) 3.9

Net finance charges(ii) (1.2)

Non-controlling interests 1.5

Share buyback(i) 1.1

F20 eps before exceptional items 109.4

(i) Includes finance charges net of tax(ii) Excludes finance charges related to acquisitions, disposals and share buyback.(iii) Excludes tax related to acquisitions, disposals and share buyback

More agile performance management to respond to changes quickly

CONSISTENT PERFORMANCE SIGNIFICANTLY IMPACTED BY COVID-19 IN THE SECOND HALF

We supported our customers and suppliers

We took quick actions to protect our people and our business

We strengthened liquidity to support smart investment for the long term

23

Our confidence in our business strategy is unchanged

A CLEAR STRATEGY DELIVERED THROUGH OUR SIX PRIORITIES

1 Sustain Quality Growth

2 Embed Everyday Efficiency

3 Invest Smartly

4 Promote Positive Drinking

5 Champion Inclusion and Diversity

6 Pioneer Grain to Glass Sustainability

24

DELIVERING A RESILIENT PERFORMANCE IN US SPIRITS

Organic volume and net sales growth (%)

25

1.51.2

2.0

(0.7)

3.4 3.3

5.0

2.2

F19F17 F20F18

Volume

Net sales

ENGAGING CONSUMERS WITH CREATIVITY AND AGILITY ACROSS OUR BRANDS

26

GAINING MARKET SHARE IN SEVERAL CATEGORIES AND BRANDS IN THE US

27

* FYTD: Nielsen to 15 June 2019, NABCA to 31 May 2019, ** FYTD Nielsen to 13 June 2020, NABCA to 31 May 2020, *** includes Ketel One Botanical

F20 category value share change**

11

1

7

(1)

42

23

5

14

(4)

64

12

2 3 2

38

89

16

(7)

66

Crown Royal Johnnie Walker

Smirnoff Captain Morgan

CasamigosCîrocBulleitKetel One vodka***

Don Julio

Nielsen and NABCA combined value growth (%)

F19*

F20**

Baileys

1.9

8.8 8.2

(17.2)

6.9

12.2 12.4

(14.0)

DISRUPTION TO GROWTH MOMENTUM IN INDIA

F17 F18 F19 F20

India organic net salesgrowth, %

Total India

Prestige and above

India organic operating margin progression, bps

77

252

(571)

F18 F19 F20

FOCUSING INVESTMENT, SUPPORTING PARTNERS AND CAPTURING NEW OPPORTUNITIES IN INDIA

Strategic Choices

• End-to-end portfolio play

• Focused investment to drive growth

Business Partnerships

• Support to key customers (off-trade and on-trade), third party manufacturers and suppliers

Supply Chain Readiness

• Demand-driven supply

• Innovative manufacturing

Regulatory Interventions

• Industry-led advocacy

• Maximise and sustain new avenues (e.g. home delivery)

29

4.76.0

16.2

2.54.8

(4.5)

1.9

5.4

(2.2)

1.2

7.1

(13.1)

5.7 6.8 6.3

11.68.9

(9.3)

(16.9)

(21.9)

(12.0)

(3.4)

(8.8)

(18.7)

30

SIGNIFICANT IMPACT ON SCOTCH FROM COVID-19

Organic net sales growth (%)

30

% of Scotchnet sales

55% 9% 15% 12% 10%

Total Scotch Johnnie Walker Buchanan’s Scotch Malts OtherPrimary Scotch

F17 F18

F20F19

BENEFITTING FROM OUR BROAD PORTFOLIO

PRIMARY

STANDARD

PREMIUM

PRESTIGE

ULTRA-PREMIUM

SUPER-PREMIUM

* Indicative relative pricing

31

BUILDING VIBRANCY IN SCOTCH

32

WINNING WITH OUR GLOBAL GIANT PREMIUMISING ASPIRATIONALLY

SHARP REDUCTION IN BEER SALES DUE TO ON-TRADE CLOSURES

2.1

3.83.1

(15.0)

F19F18F17 F20

Total Beer Organic net sales growth %

0.4

4.8

1.9

(15.9)

F18F17 F19 F20

GuinnessOrganic net sales growth %

MAINTAINING RELEVANCE AND ENGAGEMENT WITH CONSUMERS

INVESTING IN INNOVATION AND CONSUMER EXPERIENCES

ROLLING OUT SUCCESSFUL INNOVATION RECRUITING THROUGH CONSUMER EXPERIENCES




3 Invest Smartly




36

LEVERAGING BEST-IN-CLASS TECHNOLOGY TOOLS AND DATA ANALYTICS

SUPERIOR CONSUMER INSIGHTS & MARKETING EFFECTIVENESS

EVERY DAY GREAT EXECUTION

FORESIGHT SYSTEM

RAPIDLY RESPONDING TO CONSUMER INSIGHTS IN REAL TIME

INCREASE IN BAKING AND TREATS INCREASE IN COCKTAIL MAKING

ACCELERATING OUR INVESTMENT IN E-COMMERCE

INVESTING IN THE ON-TRADE RECOVERY TO EMERGE STRONGER

COCKTAILS TO GO WELCOME BACKDIAGEO BAR ACADEMY




3 Invest Smartly




41

PROMOTING POSITIVE DRINKING

42

INTERACTIVE DRINK IQ QUIZ SMASHED AND UNITAR(i) TRAINING ONLINE

(i) United Nations Institute for Training and Research




3 Invest Smartly




43

CHAMPIONING INCLUSION AND DIVERSITY

4444

Female representation on Diageo’s Board

50%

Gender diversity in senior roles

39%

For gender equality in the EquileapGender Equality Report and Ranking

#1




3 Invest Smartly




45

46

INVESTING IN SUSTAINABLEMANUFACTURING AND PACKAGING

PROVIDING CLEAN WATER AND SANITATION

PIONEERING GRAIN TO GLASS SUSTAINABILITY

Using superior insight to rapidly respond to changing consumer opportunities

Partnering with customers to win across all channels and support the on-trade recovery

47

Ensuring Diageo emerges stronger through the recovery

CONFIDENT IN THE RESILIENCE OF OUR BUSINESS AND INDUSTRY

Investing with agility in marketing and innovation

Continuing to do business in the right way from grain to glass

Driving efficiency in cost and cash management

48

APPENDIX

Organic net sales growth F20H1 F20H2* F20

North America 6% (1)% 2%

Europe and Turkey 3% (31)% (12)%

Africa 5% (33)% (13)%

Latin America and Caribbean 2% (40)% (15)%

Asia Pacific 4% (38)% (16%)

Diageo 4% (23)% (8)%

*F20 H2 growth rates are based on unrounded numbers and not necessarily identical to the difference of full year less first half due to acquisitions and disposals and reclassification.

APPENDIX 1: 1/2FORWARD LOOKING STATEMENTS

49

Net salesWe are not providing specific guidance for fiscal 21. Broadly we expect organic net revenue in the first half to be significantly impacted with sequential improvement in the first and second quarter as the on-trade further reopens, and consumer demand begins to recover.

Operating marginWhile volumes are expected to improve sequentially we expect our first half of F21 to continue to be significantly impacted and margin diluted

compared to an unaffected first half of last fiscal. Additionally we will increase marketing investment as demand recovers. We exited fiscal 2020 with

Q4 margin dilution of over 10 ppt. Going into fiscal 21, we expect some sequential improvement in our operating margin in our first half compared to

our second half of F20.

Exchange rate outlookGiven the continued uncertainty caused by the ongoing Covid-19 pandemic, we are not able to provide specific financial guidance and as such not able to provide the expected impact of exchange for the year ending 30th June 2021.

Net finance chargesEffective interest rate is expected to rise to roughly 3.0% for fiscal 21 due to a further reduction in swap portfolio gains along with the increased costsfrom our liquidity enhancement measures. Other finance charges are ahead of last year, driven by discount unwinds of financial liabilities. I expect fiscal21 charges to be at a similar level.

Taxation before exceptionalsOur tax rate before exceptional items was 21.7%, within our guidance range of 21 to 22% for fiscal 20 which we are maintaining for fiscal 21.

APPENDIX 1: 2/2FORWARD LOOKING STATEMENTSCapital expenditureWe do not expect to see material opportunities to decrease capex further as we work to complete projects underway to support long-term

growth and enhancing brand experiences and increase investment supporting our sustainability agenda.

Post employment plansTotal cash contributions by the group to all post employment plans in the year ending 30 June 2021 are estimated to be approximately £140 million.

DividendWe have announced a recommended final dividend of 42.47 pence in line with the final dividend in fiscal 19, bringing full year dividend growth to2% and dividend cover to 1.6x. While there remains significant uncertainty in the short term, we have confidence in the long-term health of ourbusiness and the industry in which we operate. We will keep future returns of capital, including dividends, under review through fiscal 21 toensure we allocate Diageo’s capital in the best way to maximise value for the business.

Capital structureWhile we remain committed to a leverage range of 2.5x to 3.0x adjusted net debt to EBITDA over the medium term we anticipate leverage to be

above this range through the coming year. We expect these levels to peak when we report fiscal 21 interims, reflecting the trailing 12 months

impact of Covid-19 at that time, and then to improve from there driven by the pace of recovery.

Return of CapitalIn July 2019, we announced a three-year return of capital programme of up to £4.5 billion, and through January 2020 we returned £1.25bn

through share buyback. In April we announced that we were not initiating the next phase of the programme during the remainder of fiscal 20.

Given our elevated leverage ratio we have paused the programme until leverage is back within our target range.

50

Cautionary statement concerning forward-looking statements

This document contains ‘forward-looking’ statements. These statements can be identified by the fact that they do not relate only to historical or current facts. In particular, forward-

looking statements include all statements that express forecasts, expectations, plans, outlook, objectives and projections with respect to future matters, including trends in results of

operations, margins, growth rates, overall market trends, the impact of changes in interest or exchange rates, the availability or cost of financing to Diageo, anticipated cost savings or

synergies, expected investments, the completion of any strategic transactions or restructuring programmes, anticipated tax rates, changes in the international tax environment,

expected cash payments, outcomes of litigation or regulatory enquiries, anticipated changes in the value of assets and liabilities related to pension schemes and general economic

conditions. By their nature, forward-looking statements involve risk and uncertainty because they relate to events and depend on circumstances that will occur in the future. There are

a number of factors that could cause actual results and developments to differ materially from those expressed or implied by these forward-looking statements, including factors that

are outside Diageo's control.

Factors that could cause actual results and developments to differ materially from those expressed or implied by forward-looking statements include, but are not limited to:

• economic, political, social or other developments in countries and markets in which Diageo operates (including as a result of the Covid-19 pandemic), which may contribute to

a reduction in demand for Diageo’s products, adverse impacts on Diageo’s customer, supplier and/or financial counterparties, or the imposition of import, investment or

currency restrictions (including the potential impact of any global, regional or local trade disputes, including but not limited to any such dispute between the United States and

the European Union and/or the United Kingdom) or any tariffs, duties or other restrictions or barriers imposed on the import or export of goods between territories;

• the impact of the Covid-19 pandemic, or other epidemics or pandemics, on Diageo’s business, financial condition, cash flows and results of operation;

• the negotiating process surrounding, as well as the final terms of, the United Kingdom’s future trading relationships with the European Union and other countries, which could

lead to a sustained period of economic and political uncertainty and complexity whilst successor trading arrangements with other countries are negotiated, finalised and

implemented, potentially adversely impacting economic conditions in the United Kingdom and Europe more generally as well as Diageo's business operations and financial

performance;

• changes in consumer preferences and tastes, including as a result of changes in demographics, evolving social trends (including any shifts in consumer tastes towards small-

batch craft alcohol, low or no alcohol, or other alternative products), changes in travel, holiday or leisure activity patterns, weather conditions, health concerns, pandemics

and/or a downturn in economic conditions;

• changes in the domestic and international tax environment, including as a result of the OECD Base Erosion and Profit Shifting Initiative and EU anti-tax abuse measures, leading

to uncertainty around the application of existing and new tax laws and unexpected tax exposures;

• the effects of climate change, or legal, regulatory or market measures intended to address climate change, on Diageo’s business or operations, including on the cost and supply

of water;

Continued on the following page

Continued from the previous page

• changes in the cost of production, including as a result of increases in the cost of commodities, labour and/or energy or as a result of inflation;

• any litigation or other similar proceedings (including with tax, customs, competition, environmental, anti-corruption or other regulatory authorities), including litigation

directed at the beverage alcohol industry generally or at Diageo in particular;

• legal and regulatory developments, including changes in regulations relating to production, distribution, importation, marketing, advertising, sales, pricing, labelling, packaging,

product liability, antitrust, labour, compliance and control systems, environmental issues and/or data privacy or protection;

• the consequences of any failure by Diageo or its associates to comply with anti-corruption, sanctions, trade restrictions or similar laws and regulations, or any failure of

Diageo’s related internal policies and procedures to comply with applicable law or regulation;

• the consequences of any failure of internal controls, including those affecting compliance with existing or new accounting and/or disclosure requirements;

• Diageo’s ability to maintain its brand image and corporate reputation or to adapt to a changing media environment;

• contamination, counterfeiting or other circumstances which could harm the level of customer support for Diageo’s brands and adversely impact its sales;

• increased competitive product and pricing pressures, including as a result of actions by increasingly consolidated competitors or increased competition from regional and local

companies, that could negatively impact Diageo’s market share, distribution network, costs and/or pricing;

• any disruption to production facilities, business service centres or information systems, including as a result of cyberattacks;

• increased costs for, or shortages of, talent, as well as labour strikes or disputes;

• Diageo’s ability to derive the expected benefits from its business strategies, including in relation to expansion in emerging markets, acquisitions and/or disposals, cost savings

and productivity initiatives or inventory forecasting;

• fluctuations in exchange rates and/or interest rates, which may impact the value of transactions and assets denominated in other currencies, increase Diageo’s cost of

financing or otherwise adversely affect Diageo’s financial results;

• movements in the value of the assets and liabilities related to Diageo’s pension plans;

• Diageo’s ability to renew supply, distribution, manufacturing or licence agreements (or related rights) and licences on favourable terms, or at all, when they expire; or

• any failure by Diageo to protect its intellectual property rights.

Continued on the following page

Other Information

All oral and written forward-looking statements made on or after the date of this document and attributable to Diageo are expressly qualified in their entirety by the above risk factors

and by the ‘Risk factors’ section contained in the annual report on Form 20-F for the year ended 30 June 2019 filed with the US Securities and Exchange Commission (SEC). Any

forward-looking statements made by or on behalf of Diageo speak only as of the date they are made. Diageo does not undertake to update forward-looking statements to reflect any

changes in Diageo's expectations with regard thereto or any changes in events, conditions or circumstances on which any such statement is based. The reader should, however,

consult any additional disclosures that Diageo may make in any documents which it publishes and/or files with the SEC. All readers, wherever located, should take note of these

disclosures.

This document includes names of Diageo's products, which constitute trademarks or trade names which Diageo owns, or which others own and license to Diageo for use. All rights

reserved. © Diageo plc 2020.

The information in this document does not constitute an offer to sell or an invitation to buy shares in Diageo plc or an invitation or inducement to engage in any other investment

activities.

This document may include information about Diageo’s target debt rating. A security rating is not a recommendation to buy, sell or hold securities and may be subject to revision or

withdrawal at any time by the assigning rating organisation. Each rating should be evaluated independently of any other rating.

Past performance cannot be relied upon as a guide to future performance.

2020 preliminary results presentation

Documents