31 OCT 2018
31 OCT 2018 Press release
Unaudited financial results for the quarter and 6 months ended 30 September 2018 Press Release
Net sales grew 14% supported by robust performance of Prestige & Above portfolio Second
Second quarter performance highlights:
• Reported net sales increased 14% delivered through the continued strong performance of the Prestige and Above segment, an improved performance in the popular segment as well as benefitting from lapping the impact of the highway ban in the same period last year. Net sales excluding the one-off impact of operating model changes increased 15%.
• Prestige & Above segment net sales grew 19%, despite growing double digits in the same period last year.
• Popular segment reported net sales grew 8% driven by the underlying momentum and benefitting from a low base last year. Net sales growth, after adjusting for the impact of operating model changes, was 10%. Net sales of Popular segment in priority states grew by 11%.
• Gross margin was 49.1%, up 147bps, largely driven by productivity gains that more than offset the adverse impact of inflation. Underlying* gross margin improvement was 120bps.
• Reported EBITDA was Rs. 432 Crores, up 36%, driven by increased gross profit and lower staff costs, which more than offset higher marketing investment. Reported EBITDA margin was 19.4%, up 313bps. Underlying* EBITDA increased 36% and underlying* EBITDA margin improved by 303bps.
• Interest costs were Rs. 42 Crores, 37% lower than prior year, driven by lower debt, improved debt-mix and lower interest rates.
• Profit after tax was Rs. 259 Crores, up 69%.
First half performance highlights:
• Reported net sales increased 14% as the business benefitted from lapping the impact of the highway ban last year and driven by strong performance of Prestige & Above segment. Underlying net sales excluding the impact of the operating model changes also grew 14%.
• Prestige & Above segment net sales grew 19% with 5ppts positive price/mix.
• Popular segment reported net sales grew 3%. Underlying net sales excluding the impact of operating model changes grew 5%. Net sales of Popular segment in priority states grew by 9%.
• Gross margin was 49.1%, up 226bps, mainly due to productivity gains and flow through effect of pricing that more than offset the adverse impact of inflation. Underlying* gross margin, improved by 190bps.
• Reported EBITDA was Rs. 625 Crores, up 31%; reported EBITDA margin was 14.7%, up 201bps primarily driven by increased gross margin and savings in staff costs and other overheads, which more than offset higher marketing investment that increased by 34%. Underlying * EBITDA increased by 33% and underlying* EBITDA margin was higher by 221bps.
• Interest costs were Rs.97 Crores, 28% lower than prior year, driven by lower debt and more favourable debt-mix.
• Profit after tax was Rs.340 Crores, up 57%.
Anand Kripalu, CEO, commenting on the quarter and six months ended 30 September 2018 said:
We continued to deliver a strong performance with a second consecutive quarter of double digit sales growth. Reported net sales growth during the quarter was 14%, driven by strong growth in both the Prestige and Above and Popular segments, while also benefitting from a relatively lower base last year.
In the second quarter, the Prestige and Above segment net sales grew 19%, despite growing by double digits in the same quarter last year. With a third consecutive quarter of double digit sales growth, the segment now represents 66% of net sales. Within the segment, our Scotch brands showed strong growth and our renovated Prestige brands, such as Royal Challenge and Signature, also grew faster than the overall segment.
On the profitability front, I am pleased that we have delivered robust gross margin improvement both in the quarter as well as the first half, driven mainly by savings from our productivity programme which more than offset the adverse impact of inflation.
Investing behind our brands continues to be an area of focus for us, with reinvestment rate increasing to 9.7% in the first half, versus 8.2% in the same period last year.
Increased gross margin coupled with organizational efficiencies has led to an underlying* EBITDA margin of 15.6% in the first half, up 221bps, despite significantly higher marketing investment.
Improved operating performance combined with lower interest costs have helped us deliver an overall PAT increase of 57% in the first half.
We continue to focus on our strategic priorities to capture the long-term opportunity in the spirits market and achieve our medium-term ambition to grow top line by double digits consistently and improve EBITDA margin to mid-high teens."
Diageo is a global leader in beverage alcohol with an outstanding collection of brands across spirits and beer 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).
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