Edgar Filing: DIAGEO PLC

Unassociated Document

List identifying information required to be furnished

by Diageo plc pursuant to Rule 13a-16 or 15d-16 of

The Securities Exchange Act 1934

12 February 2009

Information	Required by/when

Public Announcements/Press	The Stock Exchange, London

Announcement

Interim results for the six months ended 31 December 2008.

(12 February 2009)

FORM 6-K

SECURITIES AND EXCHANGE COMMISSION

Report of Foreign Issuer

Pursuant to Rule 13a-16 or 15d-16 of

the Securities Exchange Act of 1934

Diageo plc

(Translation of registrant's name into English)

8 Henrietta Place, London W1G 0NB

(Address of principal executive offices)

indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F

Form 20-F x

Form 40-F ¨

indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes ¨

No x

If "Yes" is marked, indicate below the file number assigned to the registrant in connection with Rule 12g3-2(b):82 .............

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorised.

Diageo plc

(Registrant)

Date 12 February 2009	By	/s/S Arsenić
	Name:	S Arsenić
	Title:	Assistant Company Secretary

Half year results, six months ended 31 December 2008

In a difficult market environment Diageo has delivered 3% organic net sales growth, 6% organic operating profit growth, 21% reported eps growth and maintained its financial strength.

Results at a glance

		First half F’09		First half F’08		Reported movement			Organic movement

Volume in millions of equivalent units			78.5		78.9		(1	)%		(2	)%
Net sales after deducting excise duties	£ million		5,068		4,287		18	%		3	%
Operating profit before exceptional items	£ million		1,649		1,414		17	%		6	%
Operating profit	£ million		1,636		1,414		16	%		6	%
Profit attributable to parent company’s equity shareholders 1	£ million		1,137		975		17	%
Basic eps 1	pence		45.6		37.6		21	%

1 For six months ended 31 December 2008 reported tax rate 15% (2007 tax rate 26%). Includes exceptional items.

Paul Walsh, Chief Executive of Diageo, commenting on the six months ended 31 December 2008 said:

“Diageo's performance in this first half again demonstrates the resilience we have from our brand range across categories, price points and geography. The global economic slowdown has affected business in the period and in November and December this impact was more pronounced. In this difficult market environment Diageo has delivered 3% organic net sales growth, 6% organic operating profit growth and 9% underlying eps growth and we have maintained our financial strength. We have delivered value in the half from the brands we have added, Ketel One, Rosenblum Cellars and Zacapa. In addition we have benefited from exchange rate movements given the scale of our business in the United States and Europe and a reduction in our tax rate. This has resulted in 21% growth in reported eps for the period.

“We have returned £0.9 billion to shareholders in the half. Our share buyback programme slowed as we maintained our conservative approach to balance sheet management.

“Current economic trends indicate that consumer confidence will reduce further and the outlook for the second half is more difficult to predict. However, across Diageo we have an experienced management team which combined with the consumer appeal of our brands, the effectiveness of our routes to market and our geographic diversity gives us confidence in our business. In the second half we will be yet more agile in our response to changing consumer demand and we will continue to invest behind our business while achieving efficiencies across the regions particularly in marketing spend where we are seeing strong media rate deflation. Given these strengths, albeit with more uncertainty about the wider economic environment, we believe we can deliver organic operating profit growth for the full year in the range of 4% to 6%. We will continue to preserve our advantaged financial position and therefore we would not envisage reopening the share buyback programme in the current calendar year.

“In the second half we will implement a restructuring programme designed to ensure that Diageo emerges from this challenging time with improved routes to market, even stronger brand positions and enhanced financial strength. Anticipated full year savings, in both cost of goods sold and overheads, of £100 million will accrue largely in fiscal 2010. Restructuring costs, amounting to approximately £200 million will be taken as an exceptional charge in the second half. Continued positive exchange rate impacts and the lower tax rate mean that growth in reported eps after the exceptional item will be double digit ”.

Highlights

New brand additions, primarily Ketel One, contributed £97 million to net sales and £46 million to operating profit

Organic marketing spend decreased 1% as cost efficiencies were delivered from media rate deflation and spend on ready to drink was reduced

Organic operating margin improved a further 0.4 percentage points

Exchange rate movements, excluding the impacts of IAS 21 and IAS 39, increased operating profit by £103 million and net finance charges by £49 million

9% underlying growth in eps before exceptional items using an underlying tax rate of 22% (2007 - 26%) and adjusted for foreign exchange and acquisitions

Free cash flow of £387 million

Interim dividend per share increased by 5.3% to 13.9 pence

£879 million returned to shareholders: £527 million in dividends and £352 million of share buybacks

Unless otherwise stated in this announcement: net sales are sales after deducting excise duties; percentage movements are organic movements; commentary refers to organic movements and share refers to value share. See page 31 for additional information for shareholders and an explanation of non-GAAP measures including the reconciliation of basic eps to underlying eps.

Regional summary

North America – Benefiting from brand range and superior route to market to deliver growth as industry slows

·	Volume up 2%

·	Net sales up 4%

·	Marketing spend down 6%

·	Operating profit up 7%

In North America the worsening economic environment has increasingly impacted consumer demand in the period. While US spirits’ industry volume growth has slowed, Diageo maintained its 30.4% share and continued to outperform major competitors. Spirits net sales grew 8% as a result of 3% volume growth and price increases. This was driven by the performance of Smirnoff, Captain Morgan, Crown Royal and Ciroc in the US and strong growth across spirits brands in Canada. Beer net sales declined 2% and ready to drink declined with net sales down 10%. Wine net sales were down 7% as the consumer slowdown has led to consumers switching to less expensive wine varieties.

The new brand additions Ketel One, Rosenblum Cellars and Zacapa have all performed well and delivered £92 million of net sales in the half.

Marketing spend was down as a result of the decision to reduce spend on ready to drink brands and as a result of the deflation in media rates. This was partially offset by increased activity on spirits brands especially Smirnoff, Jose Cuervo, Captain Morgan and Ciroc.

Europe - Economic conditions in Spain deteriorated and beer markets were weak

·	Volume down 5%

·	Net sales down 3%

·	Marketing spend down 4%

·	Operating profit down 4%

The overall performance in Europe was primarily driven by the weaker Spanish market. Net sales there declined 18% as the worsening economy led to a steep decline in consumer demand and reduced distributor and wholesaler ability to fund stock at previous levels. The weak beer market in Western Europe also impacted performance. This offset continued strong growth in Russia in the half and growth in Continental Europe. From a category perspective in Europe, spirits net sales were down 2%, beer was down 4%, ready to drink down 12% and wine down 2%. Overall net sales declined at a slower rate than volume as a result of price increases taken across the region, driving two percentage points of price/mix. Marketing spend has benefited from procurement efficiencies resulting from deflation in media rates.

International - Strong performance in Africa and price increases in Latin America drove net sales growth in the region

·	Volume down 2%

·	Net sales up 11%

·	Marketing spend up 2%

·	Operating profit up 11%

The International region is again the key contributor to Diageo’s growth. The performance in Africa remained very strong and in the half net sales grew 20% primarily driven by the continued strong performance of Guinness up 25%. In Latin America Diageo’s three largest markets, Venezuela, Brazil and Mexico each delivered double digit net sales growth. Elsewhere in Latin America and the Caribbean there has been an increasingly difficult trading environment as a result of slowing economic growth and currency devaluation, however Diageo has successfully managed these market conditions and delivered net sales growth primarily driven by price increases across the scotch brands in the region. However volume was impacted and led to the overall decline in volume in the region. The impact of the slowing global economy on travel has led to a significant slowdown in global travel retail and volume was down but net sales grew slightly. Following a number of years of building marketing spend to optimum levels in Latin America and Caribbean, spend in the half was in line with the prior period. In Africa marketing spend increased mainly behind the growth of scotch, beer and ready to drink brands.

Asia Pacific - Strong growth in spirits and beer across Asia Pacific offset by ready to drink decline in Australia post the excise duty increase

·	Volume down 8%

·	Net sales up 2%

·	Marketing spend up 12%

·	Operating profit down 5%

In Asia Pacific the decline in ready to drink in Australia, following a significant increase in duties for ready to drink at the end of the last financial year, reduced volume growth by 4 percentage points and net sales growth by 6 percentage points. The region delivered spirits net sales growth of 11% (excluding ready to drink) and 16% growth in beer. This led to further share gains across important categories such as scotch in China. The benefit of the return to in-market distribution in Korea was somewhat offset by the decline in the scotch category as a result of the marked economic slowdown there. Investment in the in-market organisation in China, India and Vietnam increased costs in the period, which contributed to the fall in operating profit.

Financial

The deficit in respect of post employment plans increased by £69 million from £408 million at 30 June 2008 to £477 million at 31 December 2008. For the full year ending 30 June 2009, finance income under IAS 19 is expected to be minimal compared with the benefit of £46 million in the year ended 30 June 2008.

·	In the six months ended 31 December 2008, exchange rate movements (excluding the exchange impact under IAS 21 and IAS 39) increased operating profit by £103 million and increased net finance charges by £49 million.

·	For the year ending 30 June 2009, at current exchange rates, foreign exchange movements (excluding the exchange impact under IAS 21 and IAS 39) are forecast to increase operating profit by approximately £210 million and increase the interest charge by approximately £80 million.

·	For the year ending 30 June 2010, at current exchange rates, foreign exchange movements (excluding the exchange impact under IAS 21 and IAS 39) are estimated to increase operating profit by £200 million and increase the interest charge by £30 million.

Brand summary

	Organic volume movement %			Organic net sales movement %			Reported volume movement %			Reported net sales movement %

Global priority brands		(3	)		3			(3	)		16
Local priority brands**		(2	)		3			6			26
Category brands**		(1	)		5			(1	)		17
Total		(2	)		3			(1	)		18

Key spirits brands*:
Smirnoff		1			8			1			22
Johnnie Walker		(6	)		5			(6	)		14
Captain Morgan		7			13			7			33
Baileys		(5	)		(2	)		(5	)		11
JεB		(13	)		(9	)		(13	)		3
Jose Cuervo		(2	)		2			(2	)		23
Tanqueray		(5	)		(4	)		(5	)		15
Crown Royal - North America		6			6			6			29
Buchanan’s – International		(9	)		6			(9	)		11
Windsor - Asia Pacific		(24	)		31			(24	)		23

Guinness		(1	)		7			(1	)		21

Ready to drink***		(15	)		(12	)		(13	)		(2	)

*	Spirits brands excluding ready to drink

**	Brand additions Ketel One vodka and Rosenblum Cellars wine are included as local priority brands in North America and are reported as category brands in other regions. Zacapa rum is reported as a category brand globally.

***	The transfer of Smirnoff ready to drink brands to the new joint venture company in South Africa has resulted in a difference between reported and organic volumes

Management reports

The interim report for the six months ended 31 December 2008 forms one of the management reports Diageo is required to publish under the EU Transparency Directive. Diageo will issue the next interim management statement on 7 May 2009. The year end preliminary results announcement will be issued on 27 August 2009.

BUSINESS REVIEW

For the six months ended 31 December 2008

OPERATING REVIEW – analysis by business area

North America

Summary:

·	Growth of standard and premium spirits brands has driven overall growth

·	Price increases across most brands drove net sales growth

·	Innovation again drove significant net sales growth

·	Marketing was refocused against changing consumer demand and media efficiencies were delivered

·	The integration of Ketel One was completed and brand performance has benefited from integration into Diageo’s distribution network

Key measures:	First half F’09		First half F’08		Reported movement		Organic movement
	£ million		£ million		%		%

Volume						6		2
Net sales		1,755		1,321		33		4
Marketing spend		237		201		18		(6	)
Operating profit		682		491		39		7

Reported performance:

Net sales were £1,755 million in the six months ended 31 December 2008 up £434 million from £1,321 million in the comparable prior period. Reported operating profit increased by £191 million from £491 million to £682 million in the six months ended 31 December 2008.

Organic performance:

The weighted average exchange rate used to translate US dollar sales and profit moved from £1 = $2.03 in the six months ended 31 December 2007 to £1 = $1.66 in the six months ended 31 December 2008. Exchange rate impacts increased net sales by £274 million and acquisitions increased net sales by £92 million; there was an organic increase in net sales of £68 million. Exchange rate impacts increased operating profit by £108 million, acquisitions increased operating profit by £44 million and there was an organic increase in operating profit of £39 million.

Brand performance:	Organic volume movement			Organic net sales movement			Reported volume movement			Reported net sales movement
	%			%			%			%

Global priority brands		1			2			1			23
Local priority brands**		2			2			25			50
Category brands**		4			15			4			39
Total		2			4			6			33

Key spirits brands*:
Smirnoff		4			13			4			36
Johnnie Walker		(1	)		(3	)		(1	)		18
Captain Morgan		7			12			7			36
Baileys		-			3			-			23
Jose Cuervo		-			2			-			25
Tanqueray		(8	)		(7	)		(8	)		13
Crown Royal		6			6			6			29

Guinness		(7	)		(3	)		(7	)		16

Ready to drink		(12	)		(10	)		(12	)		8

*	Spirits brands excluding ready to drink

**	Brand additions Ketel One vodka and Rosenblum Cellars wine, are included in local priority brands. Zacapa rum is included in category brands.

In the first half, volume growth of the beverage alcohol market in North America slowed. Growth has also shifted from the super and ultra premium segments to value and premium brands. Diageo’s strong position in the premium segment has however driven volume growth of 3% in spirits, excluding ready to drink. Spirits' stock levels (measured as future days' sales) are estimated to have risen at the period end with higher distributor stock levels partially offset by lower retail stocks. The planned stock reduction in beer and malt based ready to drink brands was the main driver of a volume decline of 5% in beer and 12% in ready to drink. The slowdown in the wine category led to an 8% decrease in volume of Diageo wines. Price increases across many brands helped drive total net sales up 4% despite negative mix as a result of stronger growth in premium brands than deluxe brands. Innovation in the half drove 30% net sales growth led by Captain Morgan 100 and Baileys Coffee.

Smirnoff delivered another strong performance in the first half growing volume 4% driven by continued effective media campaigns that reinforced the quality message first endorsed by The New York Times blind taste test. The Smirnoff James Bond Campaign has promoted responsibility in addition to building brand equity. Price increases on approximately 80% of the volume together with mix improvements drove net sales growth of 13%. Smirnoff Flavours grew volume 12% on the introduction of two new flavours, White Grape and Passion Fruit. While Smirnoff is outperforming its major competitors, it lost some share to new premium brands and some lower end brands.

The scotch category declined as consumers traded out of super premium and deluxe segments. Johnnie Walker volume declined 1% and negative mix reduced net sales by 3%. Price increases were taken on 65% of volume increasing Johnnie Walker’s price premium to competitors, however Johnnie Walker still gained 0.4 percentage points of share.

Captain Morgan volume grew 7% driven by the new launches of Captain Morgan 100 and Parrot Bay Key Lime. Price increases across over 50% of Captain Morgan Original Spiced rum volume led to net sales growth of 12% and Captain Morgan grew share 0.2 percentage points.

Baileys maintained volume in one of the most difficult segments of the spirits category gaining share of 0.4 percentage points. The introduction of Baileys Coffee with increased TV advertising and support for the launch over the holiday period offset a decline in Baileys Original and weakness in other Baileys Flavours. Price increases on Baileys Original drove net sales growth of 3%.

Jose Cuervo volume was flat despite growth in the premium segment through Jose Cuervo Classico. Price increases in most markets helped drive net sales growth of 2%. Share increased 0.4 percentage points, with Jose Cuervo Especial growing 1.8 percentage points.

Tanqueray volume declined 8% as it lapped the Rangpur launch of the previous period. Price increases only partially offset volume declines with net sales down 7%. The imported gin segment lost share to domestic gin, a reversal of last year’s trend and Tanqueray lost 1.1 percentage points of share.

Crown Royal total volume increased 6% on the strong growth of Crown Royal Canadian Whisky. Lower volume growth on the higher marques, such as Crown Royal Cask 16, which lapped a successful initial launch, led to negative mix and therefore net sales also grew by 6% despite price increases taken on 85% of volume. Crown Royal remained the best performing Canadian whisky and gained share.

Guinness volume declined by 7% as the planned stock reduction was implemented. Price increases on over half the volume of packaged Guinness and on kegs led to a net sales decline of only 3%. Guinness share was down 0.1 percentage points.

Local priority brands grew both volume and net sales 2% driven by the performance of Crown Royal and good growth in Buchanan’s, volume up 7% and net sales up 8%, and in Seagram’s 7, volume up 3% and net sales up 11%, offset by the decline of US wine brands. Wine volume was down 10% while price increases led to 9% decline in net sales. Weakness in Beaulieu Vineyard, Sterling and Chalone was slightly offset by the introduction of an organic Sterling line.

The performance of Ketel One and Rosenblum Cellars has benefited from the integration into Diageo’s superior distribution network in the US.

Category brand volume grew by 4% and net sales grew 15% driven by growth of the vodka category. In contrast to the consumer trend away from super and ultra premium brands to premium and value brands Ciroc achieved an outstanding performance as volume and net sales trebled albeit from a small base. Growth was also seen across Gordon’s vodka, volume up 3% and net sales up 8%, Popov, volume up 8% and net sales up 15% and Bushmills, volume up 2% and net sales up 4%. Growth was tempered by a decline in Godiva and in Diageo’s French Agency brands, which declined as consumers switched to domestic and less expensive varieties.

There has been an encouraging start for Zacapa with the brand seeded in high end and high volume on and off premise outlets.

Ready to drink volumes declined 12% driven mainly by the planned stock reduction in malt based ready to drink products and the overall decline in the segment. The introduction of three new Smirnoff Ice Flavours and the success of Smirnoff Cocktails led to mix improvement and net sales decreased by 10%.

The overall reduction in marketing spend reflects the decision to reduce spend on beer and ready to drink brands and marketing efficiency benefited from deflation in media rates. Spend on spirits brands increased by 1% focused on Smirnoff, Captain Morgan and Jose Cuervo. Spend was also increased on Ciroc, fuelling the strong performance of the brand. Tactical support at the local and regional level was increased on select value and popular brands to reflect changes in consumer demand.

Europe

Summary:

·	Deteriorating economic situation in Spain was the key driver of the region’s performance

·	Volume decline in beer, however Guinness gained share both in Great Britain and in the on-trade in Ireland

·	Strong performance in Russia in the half

·	Spirits brands performed well in Great Britain

Key measures:	First half F’09		First half F’08		Reported movement			Organic movement
	£ million		£ million		%			%

Volume						(5	)		(5	)
Net sales		1,560		1,433		9			(3	)
Marketing spend		248		228		9			(4	)
Operating profit		534		509		5			(4	)

Reported performance:

Net sales were £1,560 million in the six months to 31 December 2008 up by £127 million from £1,433 million in the comparable prior period. Reported operating profit increased by £25 million to £534 million in the six months to 31 December 2008. Exceptional costs of £13 million in respect of restructuring costs for the Irish brewing operations are included within operating expenses in the six months ended 31 December 2008. Reported operating profit excluding exceptional items increased by £38 million to £547 million in the six months ended 31 December 2008.

Organic performance:

The weighted average exchange rate used to translate euro sales and profit moved from £1 = €1.43 in the six months ended 31 December 2007 to £1 = €1.21 in the six months ended 31 December 2008. Exchange rate impacts increased net sales by £163 million. Acquisitions increased net sales by £4 million and there was an organic decrease of £40 million. Exchange rate impacts increased operating profit by £63 million. Exceptional costs decreased operating profit by £13 million and there was an organic decrease in operating profit of £25 million.

Brand performance:	Organic volume movement			Organic net sales movement			Reported volume movement			Reported net sales movement
	%			%			%			%

Global priority brands		(5	)		(2	)		(5	)		9
Local priority brands		(6	)		(5	)		(6	)		7
Category brands**		(4	)		(2	)		(3	)		10
Total		(5	)		(3	)		(5	)		9

Key spirits brands*:
Smirnoff		(4	)		-			(4	)		9
Johnnie Walker		2			7			2			23
Baileys		(5	)		(4	)		(5	)		7
JεB		(13	)		(12	)		(13	)		2

Guinness		(8	)		(2	)		(8	)		7

Ready to drink		(18	)		(12	)		(18	)		(4	)

*	Spirits brands excluding ready to drink

**	Brand additions Ketel One vodka, Rosenblum Cellars wine and Zacapa rum are included in category brands.

In Europe the worsening economic environment has led to a decline in beverage alcohol consumption in many markets and has led to further momentum behind the switch from on-trade to off-trade. Diageo’s performance reflects this wider trend, however it also reflects out-performance in Great Britain, continued positive performance in Continental Europe and strong growth in Russia. Price increases offset duty increases and delivered 2 percentage points of price/mix.

In Great Britain net sales were down 1% driven by the decline in the beer category and in ready to drink offset by a strong spirits performance which benefited from price increases in the second half of the year ended 30 June 2008. Advertising and promotional spend also declined by 1% primarily as a result of Guinness lapping increased spend in the prior year during the Rugby World Cup.

Performance in Ireland was impacted by the further decline in the total alcoholic drinks market where volume declined 3% and sales declined 2%. Against this, Guinness net sales have grown 2% and share has increased in both the Republic of Ireland and Northern Ireland on-trade channels. Local priority beer brands net sales were down 6%. Harp gained share in the key Northern Ireland on-trade following the successful launch of Harp Ice Cold.

In Spain a gradual deterioration in trading conditions became a steep decline during November across virtually all consumer driven categories leading to a volume decline of 20% and a net sales decline of 18%. While JεB has held share of scotch, consumers traded down particularly in the off-trade where value brands and the discount channel are gaining share.

Smirnoff volume was down 4% and net sales were flat driven by the brand’s performance in Great Britain where volume was down 5% however net sales were up 2% as a result of price rises introduced in the second half of fiscal 2008. Despite increasing competition from value brands, Smirnoff maintained its position as the number one premium spirit in Great Britain. Elsewhere, volume growth in Continental Europe offset further volume declines in Ireland and Spain while price increases were achieved across the region.

Johnnie Walker volume was up 2% with strong performances in Continental Europe and Russia partly offset by a decline in Iberia. In Russia print and digital campaigns based on Johnnie Walker Strides drove volume of the trademark up 6% with a strong performance of Johnnie Walker Red Label. Johnnie Walker Black Label performed well in the Russian domestic market though overall volume was down due to de-stocking in the duty free channel. Net sales increased 7% as a result of the continuation of our scotch pricing strategy implemented in fiscal 2008.

Baileys volume was down 5% and net sales down 4%. The overall decline is mainly due to the performance in Iberia where despite the weakness in the category Baileys has maintained share through relevant investment in key growth drivers. In Great Britain Baileys showed good volume and net sales growth in both the core brand and Baileys Flavours variants following introduction of a new bottle design and strong gifting focus.

JεB volume was down 13% and net sales were down 12%. In Iberia JεB volume declined 25% as a result of both the sharp and accelerated decline in consumption from November and the impact of Diageo’s decision not to supply to a number of customers to minimise the risk of credit defaults.

Guinness volume was down 8% and net sales were down 2%. In Great Britain, against a declining beer market and a strong prior year including the positive impact of the Rugby World Cup, Guinness has achieved 24 consecutive months of share growth achieving its highest ever share of the beer market. This growth has been driven by a shift in strategy to focus on less frequent purchasers and through driving footfall into the on-trade supported by the successful execution of the 17:59 campaigns. Guinness in Ireland has maintained the strategy to invest behind strong share of voice growth through the ‘It’s Alive Inside’ communications platform, helping to drive share gains in the key on-trade channels and overall year on year net sales growth for the brand.

Local priority brands volume was down 6% and net sales were down 5% driven by local beer brands in Ireland reflecting the decline in the category and Cacique and Cardhu in Iberia. Cacique was impacted in part by supply issues out of Venezuela whilst Cardhu performance suffered from the weak market and on-trade contraction in Spain.

Category brands have improved gearing as a result of the scotch pricing strategy and improved mix from Diageo’s range of scotch brands.

Ready to drink volume has declined 18% versus the prior period driven by further segment weakness in Great Britain where Smirnoff Ice was down 23% but the brand gained share in the segment.

Marketing spend in Spain was reduced, though marketing as a percentage of net sales has increased. Spend was reduced on beer brands in Ireland in line with the category decline while spend was increased in Russia behind Johnnie Walker.

International

Summary:

·	Strong performance in Africa and price increases across the scotch brands in International drove net sales growth of 11%

·	Continued strong performance by Guinness driving volume and net sales growth in Africa

·	Marketing effectiveness in Latin America was offset by increased spend on scotch, beer and ready to drink in Africa

Key measures:	First half F’09		First half F’08		Reported movement			Organic movement
	£ million		£ million		%			%

Volume						(1	)		(2	)
Net sales		1,237		1,050		18			11
Marketing spend		135		125		8			2
Operating profit		420		347		21			11

Reported performance:

Net sales were £1,237 million in the six months ended 31 December 2008, up £187 million from £1,050 million in the comparable prior period. Reported operating profit increased by £73 million from £347 million to £420 million in the six months ended 31 December 2008.

Organic performance:

Exchange rate impacts increased net sales by £64 million and increased operating profit by £30 million. Changes in the business model in South Africa and brand additions increased net sales by £1 million and operating profit by £2 million. There was an organic increase in net sales of £122 million and an organic increase in operating profit of £41 million.

Brand performance:	Organic volume movement**			Organic net sales movement			Reported volume movement			Reported net sales movement
	%			%			%			%

Global priority brands***		(3	)		11			(2	)		18
Local priority brands		1			12			1			19
Category brands**		(2	)		11			(1	)		17
Total		(2	)		11			(1	)		18

Key spirits brands*:
Smirnoff		1			9			1			14
Johnnie Walker		(9	)		5			(9	)		7
Baileys		(11	)		(3	)		(11	)		5
Buchanan’s		(9	)		6			(9	)		11

Guinness		6			22			6			42

Ready to drink***		1			12			8			17

*	Spirits brands excluding ready to drink

**	Brand additions Ketel One vodka, Rosenblum Cellars wine and Zacapa rum are included in category brands.

***	The transfer of Smirnoff ready to drink brands to the new joint venture company in South Africa has resulted in a difference between reported and organic volumes.

The outstanding growth of Guinness in Africa, net sales up 25%, and the growth in scotch brands in Latin America, net sales up 5%, were the key drivers of overall net sales growth of 11% in the region.

Smirnoff volume grew 1% and net sales were up 9%. Volume performance was driven by growth in Brazil and South Africa, Smirnoff’s biggest markets in the region. Net sales were driven by price increases in these two markets.

The application of Diageo’s scotch strategy to focus on net sales across all scotch brands in Latin America led to lower volumes but delivered strong price/mix improvement. This impacted Johnnie Walker’s volume performance but led to 5% net sales growth.

Baileys volume was down partly due to temporary disruption in Duty Free channels. However, price increases across Latin America and the Caribbean partially offset this volume impact and net sales decreased 3%.

Buchanan's net sales grew by 6% as price increases were taken in all markets as part of Diageo’s focus on value over volume for scotch. The brand performed strongly in Venezuela, the brand’s biggest market, and Buchanan’s remains the market leader both there and in Mexico. Price increases held back volume in the rest of Latin America.

Guinness continued to drive growth throughout Africa. Guinness grew volume 8% in Africa with strong performances in Nigeria, Cameroon and East Africa. Net sales grew 25% as a result of price increases taken across the region.

Local priority brands grew net sales 12% with consistent performance across many markets. Price increases taken across the scotch brands in Latin America and beer in Africa drove growth especially Buchanan’s in Venezuela and Tusker in East Africa. Volume grew 1% on the growth of Bell’s in South Africa, Malta in Nigeria and Pilsner and Tusker in East Africa.

Category brands net sales were up 11% primarily as a result of the performance of Cacique in Venezuela and the beer brands Harp in Nigeria, Star in Ghana and Senator in East Africa.

Ready to drink volume increased by 1% and net sales grew 12% on price increases on Smirnoff ready to drink brands in most markets and volume gains in Latin America, especially Brazil, and in Nigeria. Volume growth in Brazil, Nigeria and Duty Free offset a volume decrease in South Africa.

Africa performed strongly as volume grew 5% and net sales grew 20%. Guinness’ strong performance in Nigeria and Cameroon drove this growth, slightly offset by the impact of supply constraints in Ghana.

Nigeria had a strong performance in the first half. Volume grew 24% and net sales grew 37% driven mainly by Guinness but also with good performances by Harp and Smirnoff Ice. Price increases were taken across all brands. The re-launch of Guinness Malta with new packaging and growth in ready to drink and lager helped drive the strong performance.

Against a tough trading environment in East Africa, East African Breweries Limited grew volume 8% and net sales 11%. Tusker, Guinness and Senator were the main drivers of the growth. Price increases offset some mix deterioration as economic instability drove consumers to trade downward.

In Ghana, raw material shortages, especially water, required the production schedule to be reprioritised. Volume was down 8% affecting Guinness, Guinness Malta and Smirnoff Ice, although price increases on all brands and changes in excise duty offset the volume decrease and net sales grew 23%.

Cameroon also performed well in the first half. Volumes increased by 14% driven by Guinness and Gordon’s Spark. Net sales grew by 19% as price increases implemented on Guinness fully offset the small price decrease on Malta Quench, which brought it in line with competitor brands. Although some supply constraints delayed the launch of Smirnoff Ice, its performance has been promising to date.

South Africa continued to grow and net sales increased 10%. Volumes were down 5% as a result of the focus on driving value in scotch. Bells, JεB and Johnnie Walker all grew share. Total global priority spirits brands grew volume. This resulted in positive mix, which along with price increases across spirits, grew net sales by 10%. The transition of ready to drink and beer brands to the new joint venture company in South Africa is progressing smoothly.

In Latin America significant price increases were taken in response to the devaluation of local currencies. This slowed volumes but drove net sales growth on the scotch brands. Stock levels in trade were down due to better control processes, depletions and limit on credit to some customers.

In Mexico volume and net sales growth by Diageo’s scotch brands drove very strong performance. Diageo made share gains in the scotch category, which was the fastest growing spirit category in the half.

In Paraguay, Uruguay and Brazil falling volumes were turned into low double-digit net sales growth with price increases to reflect currency devaluations, positive brand mix and stronger growth in Brazil where growth in Smirnoff and the reserve brands helped grow the top line.

In Venezuela net sales grew by 10% with price increases on the majority of brands and mix improvement in rum and ready to drink. Strong volume performance of Cacique up 26% was offset by losses in Johnnie Walker as it lapped increased customer buy-in in the prior period ahead of a January 2008 price increase.

Global Travel and Middle East has been impacted as global economic weakness has led to a slowdown in travel retail. Scotch volume declined while non-scotch performance was flat as declining Baileys and Gordon’s volume was offset by the growth of Captain Morgan, Tanqueray and Smirnoff. Net sales increased by 1% as the result of price increases taken in the second half of the previous financial year.

Marketing spend in the region increased 2% as effectiveness in Latin America was offset by increased spend on scotch in South Africa, beer in Nigeria and ready to drink across Africa.

Asia Pacific

Summary:

The decline in the ready to drink segment in Australia significantly impacted regional volume and net sales growth

Continued top line growth in China, India and Vietnam

Continued share gains in scotch in China

Continued organisational investment in China, India and Vietnam increased overheads and reduced operating profit

Key measures:	First half F’09		First half F’08		Reported movement			Organic movement
	£ million		£ million		%			%

Volume						(8	)		(8	)
Net sales		477		438		9			2
Marketing spend		112		89		26			12
Operating profit		93		99		(6	)		(5	)

Reported performance:

Net sales were £477 million in the six months ended 31 December 2008, up £39 million from £438 million in the comparable prior period. Reported operating profit decreased by £6 million from £99 million to £93 million in the six months ended 31 December 2008.

Organic performance:

Exchange rate impacts increased net sales by £28 million. There was an organic increase in net sales of £11 million. Exchange rate impacts decreased operating profit by £1 million. There was an organic decrease in operating profit of £5 million.

Brand performance:	Organic volume movement			Organic net sales movement			Reported volume movement			Reported net sales movement
	%			%			%			%

Global priority brands		(7	)		3			(7	)		11
Local priority brands		(13	)		7			(13	)		7
Category brands**		(11	)		(5	)		(10	)		4
Total		(8	)		2			(8	)		9

Key spirits brands*:
Smirnoff		4			18			4			26
Johnnie Walker		(10	)		6			(10	)		14
Bundaberg rum		30			43			30			48
Windsor		(24	)		31			(24	)		23

Guinness		16			18			16			31

Ready to drink		(33	)		(30	)		(33	)		(26	)

*	Spirits brands excluding ready to drink

**	Brand additions Ketel One vodka, Rosenblum Cellars wine and Zacapa rum are included in category brands.

Smirnoff continues to grow with volumes up 4% driven by India and Australia. A focus on Smirnoff Flavours in these markets, the growth of Smirnoff Black in Australia combined with price increases in August and promotions focused on the mixability of Smirnoff in India have improved net sales by 18%.

Johnnie Walker volume was down as reduced trade stock levels were partially offset by continued growth in super premium in China and Thailand. Net sales grew 6% as a result of price/mix benefits including a strategy to focus on Johnnie Walker Blue Label in China through sponsorship and advertising.

In Australia Bundaberg benefited from the decline in the ready to drink segment resulting in a 30% increase in volume and 43% increase in net sales.

Windsor in Korea drove the decline in local priority brand volume reflecting the move back to in-market distribution. Despite the reduction in volume net sales increased by 31% reflecting higher net sales per case in Korea with the return to the normal route to market. In the comparable prior period sales were recognised at the time stock was transferred to the distributor while net sales per case were reduced to reflect the transfer of costs, including marketing spend to the distributor. The net impact in the prior period was to increase volume and reduce net sales per case, marketing spend and operating profit.

Guinness volume increased 16% and net sales increased 18%. This growth was achieved by a strong performance in Malaysia and Indonesia reflecting both the resilience of the beer market in the current economic climate and the growing strength of the brand in the region.

The decline in category brands was driven mainly by the decline of ready to drink in Australia due to the higher duty rate. Australia remains the key market for Diageo’s ready to drink brands in Asia Pacific. A 70% duty increase on spirit-based ready to drink brands imposed by the Australian government in April 2008 has resulted in a decrease of 34% in volume and 32% in net sales in Australia.

In India volume grew 18% as Diageo’s Bottled in Origin business grew especially in travel retail following the reopening of a number of duty free shops at airports in the second half of last year. Increased focus on deluxe and super deluxe brands has increased net sales by 42%.

In China the volume performance was impacted by the economic slowdown which reduced credit and led to lower inventories in some parts of the supply channel. This led to a decline in Johnnie Walker volume of 14%. However net sales of Johnnie Walker grew 8% mainly due to price increases across all variants in the second half of last year, coupled with a focus on super premium brands through sponsorship and advertising. Diageo China volume was up strongly, albeit from a small base, as JεB, Dimple and Smirnoff all performed well in the modern on-trade which was less affected by the decline in economic conditions.

Despite the decline in the scotch category in Taiwan, total volume grew 24% and net sales by 20% mainly driven by the performance of Johnnie Walker and Singleton. This was the result of successful advertising campaigns coupled with price increases for Johnnie Walker implemented in October 2008.

Marketing in Asia Pacific has increased behind all scotch brands in China and in India where spend increased significantly on Johnnie Walker. Elsewhere in the region spend was in line with last year, although in many markets share of voice increased.

Corporate revenue and costs

Net sales were £39 million in the six months ended 31 December 2008, down £6 million from £45 million in the comparable prior period. Net reported operating costs were £93 million in the six months ended 31 December 2008 and were £32 million in the six months ended 31 December 2007. Certain period on period translation and transaction exchange differences, arising on intra-group trading, are recorded in reported corporate costs, amounting to a £97 million adverse impact in the six months ended 31 December 2008. Corporate costs on an organic basis were down £15 million and also benefited from a £21 million foreign exchange gain on transactions in respect of the current period.

FINANCIAL REVIEW

Summary consolidated income statement

	Six months ended 31 December 2008			Six months ended 31 December 2007
	£ million			£ million

Sales		6,691			5,667
Excise duties		(1,623	)		(1,380	)
Net sales		5,068			4,287
Operating costs		(3,432	)		(2,873	)
Operating profit		1,636			1,414
Sale of businesses		-			5
Net finance charges		(344	)		(156	)
Share of associates’ profit after tax		120			105
Profit before taxation		1,412			1,368
Taxation		(211	)		(354	)
Profit for the period		1,201			1,014

Attributable to:
Equity shareholders		1,137			975
Minority interests		64			39
		1,201			1,014

Sales and net sales

On a reported basis, sales increased by £1,024 million from £5,667 million in the six months ended 31 December 2007 to £6,691 million in the six months ended 31 December 2008. On a reported basis net sales increased by £781 million from £4,287 million in the six months ended 31 December 2007 to £5,068 million in the six months ended 31 December 2008. Exchange rate movements increased reported sales by £670 million and reported net sales by £531 million. Acquisitions resulted in an increase in reported sales of £103 million and reported net sales of £97 million for the period.

Operating costs

On a reported basis, operating costs increased by £559 million in the six months ended 31 December 2008 due to an increase in cost of sales of £327 million, from £1,677 million to £2,004 million, an increase in marketing expenses of £89 million, from £643 million to £732 million, and an increase in other operating expenses of £143 million, from £553 million to £696 million. The impact of exchange rate movements increased total operating costs by £428 million. Exceptional costs of £13 million in respect of the restructuring of Irish brewing operations are included within costs for the six months ended 31 December 2008 (2007 - nil).

Post employment plans

Post employment costs for the six months ended 31 December 2008 of £50 million (2007 - £25 million) comprised charges to operating profit of £50 million (2007 - £48 million) and finance income of nil (2007 - £23 million).

At 31 December 2008, Diageo’s deficit before taxation for all post employment plans was £477 million (30 June 2008 - £408 million). The increase in the deficit is primarily a result of lower investment returns than expected, a decrease in discount rate assumptions and adverse exchange rate movements partly offset by a decrease in inflation rates.

Operating profit

Reported operating profit for the six months ended 31 December 2008 increased by £222 million to £1,636 million from £1,414 million in the comparable prior period. Exchange rate movements increased operating profit for the six months ended 31 December 2008 by £103 million.

Acquisitions

Acquisitions made in the second half of the year ended 30 June 2008, principally with respect to Ketel One vodka, Rosenblum Cellars wine and the distribution rights for Zacapa rum, contributed £97 million to net sales and £46 million to operating profit in the six months ended 31 December 2008.

Net finance charges

Net finance charges increased from £156 million in the six months ended 31 December 2007 to £344 million in the six months ended 31 December 2008.

The net interest charge increased by £140 million from £157 million in the comparable prior period to £297 million in the six months ended 31 December 2008. This increase principally resulted from the increase in net borrowings in the period, adverse exchange rate movements of £44 million and an increase in the adverse impact of the revaluation to period end market rates of interest rate swaps under IAS 39 of £27 million.

The income statement interest cover was 6 times and cash interest cover was 9 times.

Other finance charges for the six months ended 31 December 2008 were £47 million (2007 - £1 million net income). There was a reduction of £23 million in post employment credits from £23 million in the six months ended 31 December 2007 to nil in the six months ended 31 December 2008. Other finance charges also includes £15 million (2007 - £2 million) in respect of exchange rate translation differences on inter-company funding arrangements that do not meet the accounting criteria for recognition in equity, £4 million (2007 - £5 million) in respect of exchange movements on net borrowings not in a hedge relationship and therefore recognised in the income statement, £11 million (2007 - £8 million) unwinding of discounts on liabilities and £17 million (2007 – £7 million) in respect of other finance charges.

Associates

The group’s share of associates’ profits after interest and tax was £120 million for the six months ended 31 December 2008 compared to £105 million in the comparable prior period. Diageo’s 34% equity interest in Moët Hennessy contributed £112 million (2007 - £96 million) to share of associates’ profits after interest and tax.

Profit before taxation

Profit before taxation increased by £44 million from £1,368 million to £1,412 million in the six months ended 31 December 2008.

Taxation

The tax charge is based upon the estimate of the tax rate expected for the full year under current legislation.

The reported tax rate for the six months ended 31 December 2008 is 15% compared with 26% for the six months ended 31 December 2007. Factors that reduced the reported tax rate in the period included settlements agreed with tax authorities that gave rise to changes in the value of deferred tax assets and tax provisions. For the year ending 30 June 2009 the reported tax rate is expected to be 17%, taking into account draft legislation. The underlying tax rate for continuing operations for the six months ended 31 December 2008 was 22% compared with 26% for the six months ended 31 December 2007. The underlying tax rate for the year ending 30 June 2009 is expected to be 24%, taking into account draft legislation.

Exchange rate movements

Exchange rate movements are calculated by retranslating the prior period results as if they had been generated at the current period exchange rates and are excluded from organic growth. Exchange rate movements arising on transactions relating to the current period are included in organic growth.

The estimated effect of exchange rate movements on the results for the six months ended 31 December 2008 was as follows.

	Gains/(losses) £ million
Operating profit
Translation impact		154
Transaction impact		(51	)
Associates
Translation impact		20
Interest and other finance charges
Net finance charges – translation impact		(49	)
Other movements – relating to IAS 21 and IAS 39		(39	)
Total exchange effect on profit before taxation		35

	Six months ended 31 December 2008		Six months ended 31 December 2007
Exchange rates
Translation US$/£ rate		1.66		2.03
Transaction US$/£ rate		2.25		1.88
Translation €/£ rate		1.21		1.43
Transaction €/£ rate		1.40		1.41

Outlook for the impact of exchange rate movements:

For the year ending 30 June 2009, applying current exchange rates (US$/£1.49, €/£1.14) for translation exposures for the balance of the year, foreign exchange movements (excluding the exchange impacts of IAS 21 and IAS 39) are forecast to increase operating profit by approximately £210 million and increase the interest charge by approximately £80 million.

For the year ending 30 June 2010 at current exchange rates (US$/£1.49, €/£1.14) foreign exchange movements (excluding the exchange impacts of IAS 21 and IAS 39) are estimated to increase operating profit by £200 million and increase the interest charge by £30 million.

Dividend

An interim dividend of 13.9 pence per share will be paid to holders of ordinary shares and ADR’s on the register on 6 March 2009. This represents an increase of 5.3% on last year’s interim dividend. The interim dividend will be paid to shareholders on 6 April 2009. Payment to US ADR holders will be made on 14 April 2009. A dividend reinvestment plan is available in respect of the interim dividend and the plan notice date is 16 March 2009.

Cash flow	Six months ended 31 December 2008			Six months ended 31 December 2007
	£ million			£ million

Cash generated from operations		973			830
Interest paid (net)		(199	)		(140	)
Dividends paid to equity minority interests		(69	)		(37	)
Taxation paid		(137	)		(118	)
Net (purchase)/sale of other investments		(11	)		6
Net capital expenditure		(170	)		(105	)
Free cash flow		387			436

Free cash flow decreased by £49 million to £387 million in the six months ended 31 December 2008. Cash generated from operations increased from £830 million to £973 million principally as a result of increased operating profit partially offset by an increase in working capital. Inventories increased by more than in the prior period partially offset by a smaller increase in both receivables and payables than in the prior period. Net capital expenditure on property, plant and equipment increased £65 million to £170 million in the period, being increased capital expenditure of £47 million and lower disposal proceeds of £18 million.

Balance sheet

At 31 December 2008, total equity was £4,616 million compared with £4,175 million at 30 June 2008. This increase was mainly due to the profit for the period of £1,201 million partly offset by the dividend paid out of shareholders’ equity of £527 million and the shares repurchased for cancellation of £354 million.

Net borrowings were £8,416 million at 31 December 2008, an increase of £1,969 million from net borrowings at 30 June 2008 of £6,447 million. The principal components of this increase were £354 million (2007 - £492 million) including costs, to repurchase 38 million shares as part of the share buyback programme (2007 – 46.4 million shares), £46 million net repurchase of own shares for share schemes (2007 - £85 million), £64 million in respect of acquisitions (2007 – nil), mainly the purchase of the remaining minority interest in the Russian joint venture and an increase in the shareholding in Sichuan Quanxing Group, adverse exchange rate movements of £1,470 million and £527 million equity dividend paid (2007 - £523 million) partly offset by free cash flow of £387 million.

The share buyback programme has not been activated since 31 December 2008 and it is not envisaged that the buyback programme will be reopened during calendar year 2009. Diageo targets a range of ratios which are currently broadly consistent with an A band credit rating. Diageo would consider modifying these ratios in order to effect strategic initiatives within its stated goals and which could have an impact on its rating.

Economic profit

Economic profit increased by £140 million from £577 million in the six months ended 31 December 2007 to £717 million in the six months ended 31 December 2008. See page 38 for the calculation and definition of economic profit.

DIAGEO CONDENSED CONSOLIDATED INCOME STATEMENT

			Six months ended 31 December 2008			Six months ended 31 December 2007
	Notes		£ million			£ million

Sales		2		6,691			5,667
Excise duties				(1,623	)		(1,380	)
Net sales				5,068			4,287
Cost of sales				(2,004	)		(1,677	)
Gross profit				3,064			2,610
Marketing expenses				(732	)		(643	)
Other operating expenses				(696	)		(553	)
Operating profit		2		1,636			1,414
Sale of businesses		3		-			5
Net interest payable		4		(297	)		(157	)
Net other finance (charges)/income		4		(47	)		1
Share of associates' profits after tax				120			105
Profit before taxation				1,412			1,368
Taxation		5		(211	)		(354	)
Profit for the period				1,201			1,014

Attributable to:
Equity shareholders of the parent company				1,137			975
Minority interests				64			39
				1,201			1,014

Pence per share
Basic earnings				45.6	p		37.6	p
Diluted earnings				45.6	p		37.4	p
Average shares				2,492	m		2,590	m

DIAGEO CONDENSED CONSOLIDATED STATEMENT OF

RECOGNISED INCOME AND EXPENSE

	Six months ended 31 December 2008			Six months ended 31 December 2007
	£ million			£ million

Exchange differences on translation of foreign operations excluding borrowings		1,906			239
Exchange differences on borrowings and derivative net investment hedges		(1,466	)		(212	)
Effective portion of changes in fair value of cash flow hedges
- Net losses taken to equity		(92	)		(16	)
- Transferred to income statement		(158	)		(46	)
Actuarial gains on post employment plans		15			23
Fair value movements on investments available for sale		5			-
Tax on items taken directly to equity		13			2
Net income/(expense) recognised directly in equity		223			(10	)
Profit for the period		1,201			1,014
Total recognised income and expense for the period		1,424			1,004

Attributable to:
Equity shareholders of the parent company		1,158			958
Minority interests		266			46
		1,424			1,004

DIAGEO CONDENSED CONSOLIDATED BALANCE SHEET

			31 December 2008						30 June 2008						31 December 2007
	Notes		£ million			£ million			£ million			£ million			£ million			£ million

Non-current assets
Intangible assets				6,878						5,530						4,440
Property, plant and equipment				2,428						2,122						2,008
Biological assets				29						31						2
Investments in associates				2,339						1,809						1,682
Other investments				166						168						124
Other receivables				15						11						19
Other financial assets				622						111						82
Deferred tax assets				590						590						694
Post employment benefit assets				258						47						20
							13,325						10,419						9,071
Current assets
Other investments				8						-						-
Inventories		6		3,353						2,739						2,695
Trade and other receivables				2,992						2,051						2,541
Other financial assets				277						104						69
Cash and cash equivalents		7		2,088						714						811
							8,718						5,608						6,116
Total assets							22,043						16,027						15,187
Current liabilities
Borrowings and bank overdrafts		7		(1,892	)					(1,663	)					(1,372	)
Other financial liabilities				(547	)					(126	)					(99	)
Trade and other payables				(2,565	)					(2,143	)					(2,180	)
Corporate tax payable				(750	)					(685	)					(799	)
Provisions				(82	)					(72	)					(64	)
							(5,836	)					(4,689	)					(4,514	)
Non-current liabilities
Borrowings		7		(9,223	)					(5,545	)					(5,154	)
Other financial liabilities				(260	)					(124	)					(96	)
Other payables				(31	)					(34	)					(31	)
Provisions				(380	)					(329	)					(278	)
Deferred tax liabilities				(962	)					(676	)					(658	)
Post employment benefit liabilities				(735	)					(455	)					(405	)
							(11,591	)					(7,163	)					(6,622	)
Total liabilities							(17,427	)					(11,852	)					(11,136	)
Net assets							4,616						4,175						4,051

Equity
Called up share capital				797						816						832
Share premium				1,342						1,342						1,342
Other reserves				3,228						3,163						3,175
Retained deficit				(1,625	)					(1,823	)					(1,505	)
Equity attributable to equity shareholders of the parent company							3,742						3,498						3,844
Minority interests							874						677						207
Total equity		9					4,616						4,175						4,051

DIAGEO CONDENSED CONSOLIDATED CASH FLOW STATEMENT

	Six months ended 31 December 2008					Six months ended 31 December 2007
	£ million			£ million		£ million			£ million

Cash flows from operating activities
Profit for the period		1,201					1,014
Taxation		211					354
Share of associates’ profits after taxation		(120	)				(105	)
Net interest and other finance charges		344					156
Gains on sale of businesses		-					(5	)
Depreciation and amortisation		136					109
Movements in working capital		(854	)				(707	)
Dividend income		9					7
Other items		46					7
Cash generated from operations					973					830
Interest received					26					53
Interest paid