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31 MAR 2017

31 MAR 2017 Press release

Audited financial results for the quarter and year ended 31 March 2017

Net sales up 4%, PAT increased 39% in the full year

Anand Kripalu, CEO, commenting on the full year ended 31 March 2017 said:
"We have delivered a strong set of results with 4% net sales growth, despite a subdued economic environment due to de-monetization as well as the run up to the highway ban. These strong results demonstrate the continued effective execution of our strategy.

The Prestige & Above segment performance remained robust and grew net sales in the full year by 13% fuelled by our renovation and premiumisation strategy. In line with our approach to selectively participate in the popular segment, we have entered into additional agreements to franchise Popular brands in several more states. These changes will allow us to further improve our operating model and focus our business on the biggest profitable growth opportunities.

The continued focus on premiumisation, price increases in select states and productivity initiatives helped us to offset inflation and delivered 156bps higher gross margin, as well as 75bps EBITDA margin improvement. We have achieved a gross margin of 42.9% and EBITDA margin of 11.5% which is in line with our expectation.
The increase in exceptional items was partially offset by reduced interest cost and tax and resulted in a PAT growth of 39%.

We have faced challenges in the regulatory environment in certain states. Tax and excise levies in Maharashtra and West Bengal have led to sharp consumer price increases, and the route to market in Punjab continues to impact performance. While the longer term consumer opportunity remains strong for spirits, we expect that the highway ban will continue to impact performance in the short term. Additionally, our initial assesment on GST suggests that, while alcohol for human consumption has been excluded from GST, the additional tax on input materials and services will result in stranded taxes, and impact margins. We shall, of course, continue to work with the central government to minimise this impact, and approach the state governments for appropriate price increases. We also recognize that the GST rates may undergo further changes, and we await formal notification of the rates and rules.

Our efforts are driving improved performance which reinforces our belief that we have the right strategy in place. We will continue to focus on these priorities to capture the long term opportunity in this attractive market and achieve our medium term ambition to grow top line by double digit and improve margins to mid-high teens."

ENDS

About Diageo

Diageo is a global leader in beverage alcohol with an outstanding collection of brands across spirits, beer and wine categories. These brands include Johnnie Walker, Crown Royal, J&B, Buchanan's and Windsor whiskies, Smirnoff, Cîroc and Ketel One vodkas, Captain Morgan, Baileys, Don Julio, Tanqueray and Guinness.

Diageo is a global company, and our products are sold in more than 180 countries around the world. The company is listed on both the London Stock Exchange (DGE) and the New York Stock Exchange (DEO). For more information about Diageo, our people, our brands, and performance, visit us at www.diageo.com. Visit Diageo’s global responsible drinking resource, www.DRINKiQ.com, for information, initiatives, and ways to share best practice.

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