DEO - Diageo plc

Debra Crew: Good morning, everyone. Thank you for joining our results presentation for the first half of fiscal '25. Today, I will begin by providing an update on our performance for the half. Then our new CFO, Nik Jhangiani, will share his early impressions of the business, and discuss our results, the recent tariff announcements and the near-term outlook. I will then come back and share some final reflections. Starting with performance. Despite a continued challenging macro environment and industry backdrop, in the first half of fiscal '25, our results showed positive momentum. Organic net sales returned to growth of 1% and with growth in four out of five regions, including North America. While consumers remain cautious and the macroeconomic recovery is taking longer than expected, particularly in North America and China, I am pleased with the results we have delivered in the half. At the end of the last fiscal, we shared our confidence that the actions we were taking would return us to growth as the consumer environment improves. Today, our performance demonstrates that we are making meaningful progress, even though the environment remains challenging and will likely continue to be volatile given the recent tariff announcements. Our focused strategy is delivering results. Notably, we have held or gained market share in 65% of our net sales in measured markets. We also continue to effectively leverage the strength of our diversified portfolio across price tiers and geographies to respond to emerging consumer trends. Looking ahead, we see opportunities to continue to outperform. We are focused on strategic initiatives that will enhance our financial resilience driving sustainable long-term growth and the ability to deliver positive operating leverage in the future. More on this from Nik and me later. One of Diageo's great strength is our broad and diverse presence across regions and markets. This provides resilience and the ability to participate in global growth opportunities through our globally recognized brands and our vibrant local portfolios. Some brief highlights from the regions. Return to organic net sales growth in North America, albeit slight, but a meaningful sequential improvement compared to the last fiscal year. I'll come back to this. Europe delivered resilient performance in a continued challenging environment, with Guinness again, the key driver of growth in the region. In Asia Pacific, performance was negatively impacted by a weaker macroeconomic environment in Greater China, challenging trading conditions in Southeast Asia and the region was also impacted by the lapping of Shui Jing Fang supply replenishment in the prior year. Latin America and Caribbean, our LAC region is back in growth, partly attributed to deliberate actions that we took across the region. Destocking is now complete, and we are also seeing a consumer environment that is modestly improving, notably in Brazil, and we are also seeing some stabilization in Mexico. Finally, we continue to deliver strong organic net sales growth in Africa despite ongoing macroeconomic challenges. Moving to market share. In the first half, we held or grew share in 65% of our total net sales in measured markets. We have delivered share gains in almost all of our largest markets, including the U.S., most of Europe and Greater China. I'm particularly pleased with our improved market share performance in the U.S. which has shifted into solid share gain position driven by U.S. Spirits, a testament to our strong and focused end market execution. While these results are encouraging, I continue to see opportunity for us to do more. We are firmly focused on driving further improvement. Our strategic investments in digital and route to market, which are progressing well, should underpin future outperformance. Digging in a bit deeper in the U.S. Despite a gradual improvement in consumer sentiment, the U.S. broader consumer environment continues to be under pressure with grocery baskets still at 30-year highs. In this environment, total beverage alcohol has been slightly declining with the U.S. Spirits market modestly better, but remaining flat. Premiumization in bottled spirits continues with super premium plus priced products driving growth, while premium and below core price products are declining by low-single-digit. With ongoing economic pressures, we've seen that consumers have opted for smaller pack sizes. In fact, four out of 10 of our largest share gainers have been in these smaller formats. Importantly, these formats have ensured that consumers stayed with our premium brands. Our strategy in the U.S. is delivering results, fully leveraging our innovation and targeted investment and driving stronger execution. With circa 90% of our U.S. total net sales winning or maintaining TBA market share at the end of the half. We focused our resources and investment in high-growth categories in brands like Don Julio and Crown Royal. And we're encouraged by early results from our regional investments as part of our route-to-market transformation announced in the last fiscal. In Whiskey, Crown Royal, share performance continued its momentum, gaining share of U.S. total spirits market in the half, driven by strong performance from Crown Royal BlackBerry. This initially launched as a limited time offer but has shown strong consumer demand and has been the #1 innovation in bottled spirits in Nielsen for the past seven months. Because of the success to date, we've made it a permanent addition to our flavor portfolio as it attracts a distinct audience, driving excitement and interest in the trademark and recruit new drinkers with one in five being new to Whiskey. In Tequila, our portfolio delivered strong results, led by aged variance of Don Julio, particularly Don Julio Reposado, where organic net sales growth more than doubled in the half. Don Julio maintained share leadership of the Tequila category and was the #1 gainer in total spirits as well as the #1 Tequila category share gainer. While I'm pleased with results, there is more work to do, and we are not standing still. One example of this is Casamigos. We are making progress on its turnaround. We announced at the end of the last fiscal year that we're fully integrating the brand into our dedicated transformed distribution network. The team's focus has been on commercial execution and enhancing brand awareness. And we're encouraged by some of the early signs of success, although it is still early days. Looking ahead, while we are pleased to have returned to slight organic net sales growth in such a difficult environment, we have more opportunity in front of us to emerge stronger. We are confident that the actions we are taking are working, and this will enable us to continue to win as the U.S. consumer environment improves. Moving on to our largest category's performance. In Scotch, we are proud of our advantaged position and our brands account for more than one in three bottles of Scotch sold globally and represent one-quarter of our global net sales. In the half, Scotch organic net sales declined by 5%, largely driven by softer industry performance in North America and Greater China. We saw some down trading within the category as a result of the macroeconomic environment and continued pressure on the consumer. Importantly, while maintaining price discipline, we are gaining quality market share in the Scotch category in measured markets that represent 70% of our total NSV, including the U.S. This was led by Johnnie Walker delivering strong share growth in the category. Our success has been supported by fewer but larger and more impactful collaborations, such as Johnnie Walker, Black Label and Squid Game and Johnnie Walker Blue Label and Ice Chalet. We continue to drive recruitment to the category, and we've also focused on supporting innovation that attracts younger LPA+ consumers and women. This includes the ongoing rollout of Johnnie Walker Bland and the introduction of Johnnie Walker Black Ruby. We've continued our focused strategy on single malts with our priority brands gaining share globally. In the latest data, The Singleton, our #1 priority malt brand was the fastest-growing single malt globally. Tequila organic net sales were up 21% in the half, with share gains across our business. North America was the biggest driver of the growth. Our Don Julio ultra-premium brand has been the biggest driver of this growth, specifically Don Julio Reposado, as interest has accelerated in aged Tequila. Don Julio 1942 growth was supported by strong interest in the 1942 50 ML bottles that we featured at the Oscars last year. This launch alone drove more than 50% of the total 50 ML Tequila market growth. Our global rollout has continued throughout the half, Tequila organic net sales more than doubled in Africa, and we delivered double-digit growth in Europe as well. In the more established North America and LAC regions, we also delivered double-digit growth. The Paloma cocktail continues to be our successful recruitment tool in Europe through Paloma tours, fashion weeks and major international festivals such as the British Summer Time in London and the Sziget Festival in Budapest. In the first half of the year, we served nearly 275,000 Paloma cocktails into the hands of our European consumers. I have spoken before about GenZ in the U.S. being more likely to purchase spirits than millennials were at the same age. Within this, what we also see is that Tequila is a significant driver of GenZ penetration growth for core spirits, representing an exciting and promising growth opportunity for Diageo. And Guinness continues to outperform. Guinness has now achieved its 8th consecutive half of double-digit growth, delivering 17% organic net sales growth in the half. Importantly, we held or grew share in our three largest markets. Guinness is now the #1 TBA brand in Ireland and in Great Britain, the #2 TBA brand and #1 Beer brand. Demand in Great Britain has surpassed our expectations with one in 10 pints sold now being Guinness. And while we are pleased by Guinness's success in its heartland with double-digit growth in Europe and Africa, we are encouraged by its growing global momentum in the rest of the world, cultural engagement activations like our partnership with the English Premier League, and strong social media engagement have driven impressive traction in North America, Australia and Greater China. In the U.S., Guinness was the fastest-growing major import beer in the on-premise with distribution expanding well outside of our traditional home in the Irish pubs into casual restaurants, sports bars and neighborhood bars. To meet the continued strong demand for Guinness 0.0, we are doubling our original investment to expand capacity. In the half in Europe, Guinness 0.0 continues its record almost doubling its top line growth. Guinness 0.0 now represents 12% of Guinness net sales in Great Britain. I am motivated and inspired by the passion and pride that our teams around the world are bringing to this iconic brand. We are looking forward to showcasing this at our event in May. I will now hand you over to Nik, to take you through his first impressions of the business. He will also discuss our performance, the recent tariff announcements and our near-term outlook. Nik Jhangiani: Thank you, Debra, and thank you all for joining us today. I'm very excited to be with you to discuss my first set of financial results as the company's new CFO. As Debra mentioned earlier, it's a volatile and uncertain time for the sector and the market but that uncertainty creates a lot of opportunity for us. And as such, I'm very excited to be joining at a moment in the company's history, where the opportunity has never been greater. Before I delve deeper into these results, I'd like to share a few reflections on my first few months with the business. It's truly been a world wind and I have literally traveled around the world immersing myself in Diageo and the broader spirits business. I've visited four continents on which I spent time with the local teams in New York, Miami, Amsterdam, Milan, Cape Town, Bangalore, Singapore, Nairobi, Shanghai and Chengdu and also with the teams here in London. And most importantly, I've visited with all of our executive teams in their local markets. This is clearly a company with amazing brands that are full of history and heritage and amazing people who are passionate about those brands and quite rightfully so. I'm particularly grateful for the openness with which I've been welcomed, and with the relationships I've started to build, especially with Debra, the executive team, my CFO leadership team and the Board as we work in partnership. I'm also grateful for the feedback that both investors and analysts have shared with me on this journey, and rest assured, the importance of consistency of performance through top line delivery and positive operating leverage has been heard loud and clear. Let me reinforce that we are committed to doing the right thing and are firmly focused on what we can control and manage through this more challenging industry backdrop, including the evolving situation on tariffs. While this is a business with very attractive margins and one which is highly cash generative, there is more for us to do. An immediate priority will be to strengthen the balance sheet and deleverage so that we can add more flexibility. And I'll go into these in more detail after going through the results. So let's start with the half year highlights. We are very pleased to be back in growth with an improvement in organic net sales up 1% in the half. We drove not only incremental top line improvement but also gross margin improvement and lower absolute A&P reinvestment. However, overhead costs including staff costs and incentives and strategic investments, largely one-offs negatively impacted our profitability and our organic operating profit declined 1.2%. More on this in a moment. Pre-exceptional EPS declined about 10% to $0.977 per share primarily due to the performance of Moet Hennessy in which we have a noncontrolling interest and also unfavorable foreign exchange. Free cash flow increased by $125 million to circa $1.7 billion, driven by working capital management, more on this and leverage later. Finally, as you will have seen, we have today also announced a dividend of $0.405 for the half. This is flat on last year, which we think is the prudent thing to do given the current environment. We do remain committed to growing our dividend over time, and we will also look to maximize total shareholder returns, a key priority for us. So let's get into a bit more detail. Looking at the top line, organic net sales grew 1%, a sequential improvement from the second half of fiscal '24. The primary driver of the growth in organic net sales was price mix, with four out of our five regions delivering positive price mix, which was great to see as we must look to achieve broader discipline around pricing going forward. Starting with volume, NAM, Europe and LAC also volume declines given the cautious consumer sentiment in light of ongoing macroeconomic volatility and inflationary pressures. This was only partially offset by positive volume growth in Asia-Pac, particularly in India and Africa. While we're not relying on the return to positive volume in the short term, we acknowledge its importance in driving improved net sales performance going forward. Looking ahead, as consumer confidence improves, we would also expect volumes to come back. Moving to price/mix in North America, positive price mix was driven by Tequila with consumers increasingly moving towards aged liquids. Whilst in Europe, Guinness was the main driver of the growth. We saw a good turnaround in LAC price/mix as the region recovers from a period of consumer down trading. In Asia Pacific, price/mix decline driven by consumer down trading in Southeast Asia and China, and in particular, a double-digit decline in Vietnam more than offsetting premiumization in India from Prestige and above. Now turning to operating profit. Organic operating profit in the first half of fiscal '25 declined 1.2% versus the first half of fiscal '24. As I said, the decline was primarily due to increased overheads due to staff costs, including incentives and wage cost inflation as well as strategic investments. Excluding the impact of reinstating incentives, clearly a one-off, organic operating profit would have been slightly up. This reflects our current assumption of recovery after lower bonuses for the last few years, given improving performance as well as the need to acknowledge with broader employee engagement. Going forward, we would after navigating the disruption of the evolving situation in the U.S., expect to more than offset these increases through positive operating leverage, including through productivity and efficiency savings. Gross profit increased $83 million, driven by top line performance and gross margin increased 19 bps as a result of our supply efficiency initiatives and aided by easing inflationary pressures. A&P investment declined by $37 million or 2% organically, primarily driven by lower investment in Asia-Pac, mainly in China. We do remain agile with our A&P spend, ensuring that we invest as and where appropriate. For instance, we deliberately increased investment in Don Julio in the U.S. and Guinness in Europe, and both delivered strong results in the half. Across the rest of the globe, the majority of A&P efficiencies were reinvested back into the business, but more on this approach as we look forward. So on to cash. Year-over-year, free cash flow improved by $125 million, largely driven by working capital improvements, resulting from the movement in creditors and a reduction in investment in maturing stock. The latter is not expected to be repeated in the second half. And we haven't said anything to indicate that you should expect a dramatically different increase in maturing stock for full-year fiscal '25 compared to the last year at this point. On working capital, excluding maturing stock, looking ahead to the full-year, I'm mindful of the strong working capital performance the team delivered in fiscal '24. While I do see an opportunity to deliver more from working capital over time, for fiscal '25, I expect any EMEA free cash flow benefit to be more muted. CapEx was over $600 million, a small increase from last year due to continued projects to support Tequila expansion, investments in digital capabilities, and our supply agility program particularly in North America, which was announced on Thursday last week. As a reminder, for fiscal '25, we guided to CapEx at the higher end of the guidance range, implying higher CapEx to come in the second half. I noted earlier that EPS pre-exceptionals declined almost 10% compared to the first half of fiscal '24, and this was largely driven by a non-controlling stake in Moet Hennessy. Additionally, FX resulted in a materially adverse impact on operating profit. Looking ahead on FX, we're looking at our hedging policy, and we'll revert on this for next year. The changes that we're looking to make will be focused on reducing volatility and providing more clarity on our hedging approach. The impact of lower tax was also beneficial to EPS. Moving to the balance sheet. We finished the first half with average net debt of $21.7 billion, an increase of $1.1 billion on last year, mainly due to the share buyback impact in the second half of fiscal '24. Closing net debt, however, was relatively flat. Given the lower EBITDA year-on-year, our leverage ratio increased to 3.1x ahead of where we ended in the prior fiscal year and above our target range of 2.5x to 3x. Clearly, there is a lot of work to do here, and reducing this is one of our key priorities going forward, as I said earlier. Now moving to tariffs. Unfortunately, this adds complexity to providing forward-looking guidance today. While we had hoped to share before last weekend's news of building momentum in fiscal '26 with further sequential improvement in organic net sales growth and positive operating leverage, this is now on hold, pending greater visibility on how the situation evolves. As you will know, President Trump in one of his three separate executive orders, announced the implementation of 25% tariffs on goods imported into the U.S. from Canada and Mexico. The U.S. executive orders further stated that should any reactive tariffs be imposed by such nations, this would, in turn attract further retaliatory tariffs. It is clear that the situation is still extremely fluid, particularly around the implementation and timing of any retaliatory tariffs and the impact and, of course, any potential response to that retaliation. Importantly, Diageo starts from a position of strength with a broad global portfolio across categories and geographies, and we have demonstrated agility in navigating tariffs in the past. While tariffs can be quite disruptive in the short term, we generally can mitigate long-term impact with our broad and resilient portfolio. However, in the U.S., circa 45% of our net sales of our products sold must be made in either Canada or Mexico given geographic origin requirements. The key products, which would see this impact input costs would be tequila, which must be made in Mexico, and of course Canadian Whiskey. The vast majority of our net sales impacted is from Mexico. As a reminder, tariffs will be on the input cost, not the retail price. The introduction of tariffs was an anticipated scenario, albeit the effective immediate timeline does create additional uncertainty. We have done considerable contingency planning over the last few months focused on what we can control and on the potential depth and timing of tariffs. Given our extensive supply chain and broad and advantaged portfolio, there are a number of possible actions to help mitigate the potential impact, including pricing and promotion management, inventory management, supply chain optimization, and reallocation of investments. Some of these actions can be implemented rapidly, and in fact some have, including on inventory management, but others will take time. We will continue to be agile and respond with speed as key details are confirmed as well as look to providing updated guidance as and when appropriate. Let me now talk to our reshape priorities to deliver long-term sustainable performance. We have adapted these priorities based on my prior experiences and importantly, to also reflect a slower market recovery given the current macroeconomic and geopolitical uncertainty. We expect these renewed long-term priorities to drive both increased agility and resilience across the business. While these priorities aren't entirely new to Diageo, they will have a clearer and more prominent focus across the organization going forward. First, we will be dedicated to delivering sustainable top line growth supported by continued outperformance against the market. Second, we are committed to deliver operating leverage, not just through efficiencies, but also by being more effective in how and what we do. Through increased operating leverage, we intend to maximize free cash flow, thereby deleveraging and creating more flexibility and we see a number of opportunities here, which I will discuss in a moment. Finally, through all of this, we will continue to optimize our returns, not just for the business, but also ultimately for the shareholders. Let me take you through all of this in a bit more detail. So to start, we will be focused on driving sustainable top-line growth with the right balance of volume, price and mix. We intend to drive volume growth through capturing growth from the longer-term favorable macroeconomic drivers and underlying fundamentals and leveraging the strength of our portfolio and brand building capabilities, which I believe are really best-in-class and of course, supported by world-class innovation. Also, we will be rigorous in applying disciplined pricing across our markets. And as market leader, there is more that we can and should be doing. For this, we will be using both existing digital tools and price spike architecture across our markets, and Debra has already talked to some of the benefits we're already seeing from this with the small sizes in the U.S. and a lot more growth to capture here. There's much more we can do to learn in best-in-class RGM capabilities from our consumer peers, which both Debra and I have been well exposed to. Strengthening our capabilities here will underpin and support our sustained top-line growth. Finally, we will be looking at the RTD and RTS category, an area where perhaps our strategy has been less clear to date. We believe that in selected markets, this can be a strategic advantage as a strong driver of recruitment for LPA+ adults, and ultimately by offering a great entry point into spirits. Let's now turn to operating leverage. Debra and I see great opportunity to drive sustainable, positive operating leverage. Diageo's talked about the $2 billion productivity program. The intention is to recut this and apply across the fuller business, but importantly on this, we are also committed to sharing the expected benefit that we would like to drop to the bottom line to support operating leverage growth. While I remain fully committed to investing for both the short and long-term with A&P spend, we will be adding more rigor on measuring the effectiveness of the spend. This includes fully leveraging data using our updated catalyst tool and ensuring that we're ruthless in allocating the right level of spend of non-working and working marketing dollars. With the latest technology developments, we clearly see opportunities to reduce non-working spend. Our marketing teams are now structured around conscious create and agile brand communities, teams on our global brands to help embed this focus around the globe. We will continue to be highly focused on media efficiencies, which will enable us to get a more balanced approach to reinvest savings back into the business, but also drop to the bottom line where appropriate. Internally, we're also increasing the focus on commercial excellence across the business. This is a real opportunity to do more, ensuring that our brand activation is increased at point of sale in what is typically a crowded store environment and increasing our presence in the on-premise as well with, for instance, more listings on menus with cocktail offerings with our terrific brands and greater displays on the back bar. Here, too, we will look at the spend to drive more rigor on returns and maximizing value for each dollar invested. Finally, underpinning all of these actions will be a need to ensure that Diageo has the right capabilities not just for today, but also for the future as well. Let's now move to maximizing free cash flow. There's clearly headroom to improve free cash flow, an area where I'm extremely focused on as we move forward. Consistent with ensuring our business is well placed for the long-term, the team has clearly invested quite heavily in recent years, which Diageo previously guided would normalize from 2027. We will be reviewing all CapEx commitments and future CapEx plans to assess any needs to reprioritize and/or rephase using clear and consistent IRR and payback metrics for all future CapEx. But also drive greater asset utilization and efficiencies from our existing asset base, i.e., really trying to sweat our assets a lot more. I'm also fully aware of the importance of laying down liquid and the significance of maturing stock for future business needs. This offers us a huge competitive advantage. Debra and I have initiated a deeper review with scenario planning around recovery timelines for the categories and future growth potential in the short and long term, particularly in whiskey and agave liquids to ensure that the spend here is balanced and leverages the significant step-up in investment over the past number of years. We had some of the best aged liquid inventory to the team's credit, and we will need to leverage this differentiated profile as we think about our pricing looking forward. And also, while the team has unlocked a lot of value from working capital improvements, as I said earlier, we will continue to look to deliver further sustainable improvement in working capital. Finally, we have a best-in-class supply team. And jointly, we can unlock a lot of future value. All of the work I've just talked through should ideally position us to optimize returns for our shareholders. We will be ensuring that the business has the right balance of investments for the long and short-term, but also where appropriate and consistent with our evolving strategy, we will be more rigorous in pursuing disposals where it is in the best interest of both Diageo as well as our shareholders. This will clearly support our immediate focus to deleverage our balance sheet. As you have seen more recently with the disposal of our shareholding in Guinness Nigeria and in Guinness Ghana, which was announced last week, these disposals have gone beyond the more normal active portfolio management with individual brands. And we will continue to explore further opportunities through multiple value creation lenses as we move forward. These actions will be undertaken with a view to improving flexibility whilst at the same time, maximizing shareholder returns. We also remain committed to delivering value to shareholders, and you should expect us to do this through dividends and buybacks. Where relevant, we will continue to take advantage of selective M&A, and we have built a strong track record on this in both Tequila and non-ALK, for example. But we will be both disciplined where we do this and where we see compelling strategic opportunities to support our future growth plans. We expect all of these actions that we're undertaking will drive improved returns. And importantly, we're doing this with speed. Collectively, these actions will support our deleveraging to return back to within our target leverage range. I look forward to coming back and updating you on our progress as well with more detail as we move through the year. With that, I'd like to take you through guidance for the remainder of fiscal '25. So for the full-year fiscal '25, we expect to build on the momentum in the first half. Before taking into account any impact from the tariffs in the U.S., we would expect continued strong market share performance with the sequential improvement in organic net sales growth compared with the first half of fiscal '25. However, tariffs could impact this built-in momentum. Again, ahead of the impact of tariffs, we expected a slight decline in organic operating profit in the second half, broadly in line with the decline in the first half, reflecting higher staff costs than in the prior year and continued strategic investments, including in digital and U.S. route to market. This could be further impacted by tariffs, although we will seek to mitigate where possible. The combination of our outlook and continued investment means that we expect to end fiscal '25 with our leverage ratio above our target range and ahead of leverage at the end of the first half of fiscal '25. I have already referenced our need to address this. Our focus and commitment on driving growth for the future, outperforming the market and imagine what we control remains unchanged. When we can more accurately assess the impact on future financial performance from tariffs, we will update as appropriate. As Debra has said, the long-term fundamentals of the TBA category are still very attractive and while consumer preferences always evolve, we remain confident on growth. Clearly, we have low visibility today in terms of the timing of the recovery, given the impact of the prolonged inflation and resulting affordability as well as the evolving dynamics across the Americas. Throughout this period, we are firmly focused on what we can manage and control and in building on the early first inflection we have seen in the first half. Importantly, we remain confident in our ability to outperform the market, while at the same time, in time also driving sustainable operating leverage. We have, as you have seen, removed our medium-term guidance of 5% to 7% organic net sales growth, given the current macroeconomic and geopolitical uncertainty in many of our key markets, which is impacting the pace of the recovery. We will, however, update you more regularly and provide near-term guidance in the interim and until we have more visibility on the pace of recovery. We also believe that the work that both Debra and I have talked to that we're doing at Diageo, means that we will be better placed than peers when the market recovers. We remain committed to maintaining a robust investment-grade balance sheet and returning to within our leverage target range of 2.5x to 3x net debt to EBITDA. We intend to do this through stronger profit delivery, accelerating productivity initiatives, tighter capital discipline after the recent period of increased investment and appropriate selective disposals in line with our strategy. Debra and I are clear about the importance of leveraging our strong leadership position in the market to drive consistent and sustainable improvement in our underlying performance with the right balance of a growth-oriented vision, but with appropriate financial discipline. We want to continue to use our solid free cash flow generation to deliver competitive returns to our shareholders whilst giving us the flexibility to invest in the business not just for today, but for the future as well. As I've just said, we will come back as and when appropriate to update on the expected impact on the evolving situation in the U.S. In the meantime, we very much look forward to seeing you at our Guinness Investor Event following a trading update released on the 19th of May. Let me now hand back to Debra for some closing comments. Debra Crew: Thanks, Nik. No doubt, 2024 has been a tough year for the entire sector. Industry performance in several of our key markets has been impacted by a cautious consumer environment and geopolitical uncertainty. And considerable uncertainty remains notably on tariffs. While it's challenging to predict the timing of a full recovery, we are confident in our ability as a market leader to build on the momentum of the first half to continue to outperform the TBA market, critically important in this environment. The confirmation of the weekend on the implementation of tariffs in the U.S., whilst not unanticipated, could, however, very well impact this building momentum. As Nik discussed, it unfortunately also adds further to complexity in our ability to provide updated forward-looking guidance today, given this is a new and dynamic situation. We are taking a number of actions to mitigate the immediate impact and disruption to our business that tariffs may cause and to support our distributor partners and customers in both the on and off trade who rely on our brands, while continuing to manage our business for the long-term. We will also continue to engage with the U.S. administration on the broader impact that this will have across the U.S. hospitality industry, including consumers, employees, wholesalers, restaurants, bars, and retail outlets. Nik and I have been working closely together. And as you just heard Nik to detail, we are energized and excited about the significant opportunity to strengthen and drive improved performance at Diageo, creating a more agile culture, where we drive better end-to-end accountability. We are convinced that we are taking the right actions to drive sustainable outperformance. We are firmly focused on what we can control now more than ever. We also believe that the actions we are taking will ideally position us to benefit when the market recovers and also ahead of our peers. Even against the current uncertain backdrop, this is an exciting time for Diageo, and we look forward to updating you in our more frequent communication as we move through the year. Thank you. Q - :

Debra Crew: Good morning, everyone. Thank you for joining our Results Presentation for Fiscal '24. It was a challenging year for both our industry and Diageo as we navigated a volatile operating environment across the globe. It was a year of compounding impacts with inflation and a cautious consumer environment persisting following the extraordinary growth through COVID-19 and the related waves of value chain disruption. I believe these challenges are temporary and the consumer environment will recover over time. At Diageo, we are focused on what we can control. We've navigated volatility before, and we will do it again. And we manage this business with a long-term view. We will continue to invest in our fantastic portfolio of brands and diversified footprint to maintain our position as an industry leader in total beverage alcohol, which continues to be an attractive sector with a long runway for growth. We're focused on driving operational excellence with our amazing brands to ensure Diageo is resilient and well positioned to grow when the consumer environment recovers. Today, I will share the details of our fiscal '24 performance and the deliberate actions we are taking to improve our near-term execution. There are five actions I want to highlight. First, we have met our commitment announced at our interim results to improve the inventory position in LAC by the end of this fiscal. In addition, we have validated the robustness of our systems across all markets and are confident that inventories are at appropriate levels for the current consumer environment in our other four regions. Second, we are strengthening our consumer insights. By the end of this calendar year, we will have completed the rollout of our proprietary consumer choice framework across markets covering a significant portion of our net sales, deepening our understanding of consumer motivations and occasions. We are realigning our marketing organization into agile brand communities to quickly action against these insights to drive quality growth. Third, we are redeploying our resources to the best growth opportunities through our market growth framework. Fourth, we have stepped up our route to market across several key markets, including our most significant transformation in at least a decade in our U.S. Spirits organization, and I will discuss this in detail later. Finally, we delivered a record year of productivity savings from supply chain activities and marketing with more to come as we increasingly benefit from savings from our supply agility program. We've taken these actions while continuing to invest in the business for the long term. So following my prepared remarks, Lavanya will discuss our financial results in more detail. I will then discuss our outlook for fiscal '25 and address the medium term. And we'll close by reminding you of our strategic priorities that I believe will drive sustainable quality growth. After three years of extraordinary top line growth, growing at a 14.5% CAGR from fiscal '21 to fiscal '23, group organic net sales declined 0.6% in fiscal '24. The main driver was materially weaker performance in LAC, our Latin America and Caribbean region, which makes up 8% of Diageo's organic net sales. Organic net sales in our largest region, North America or NAM, also declined, reflecting a cautious consumer environment, compounded by the impact of lapping inventory replenishment in the prior year. Group organic volume declined by 3.5%, driven by LAC destocking, Africa beer and NAM. Because many of these impacts were supply chain related, these volume results do not reflect the underlying consumer dynamics nor the runway that we see for future growth. Lavanya will discuss this further. And despite the volatile operating environment across our regions throughout the year, we focused on operational excellence and delivered $700 million in productivity savings a record year of savings that drove gross margin improvement in the second half. Additionally, I am pleased that we delivered $2.6 billion in free cash flow driven by strong working capital management, while we continue to invest in future growth. We increased our recommended full year dividend by 5%, which reflects our continued confidence in the long-term potential of our business and our commitment to a progressive dividend policy. Moving on to market share, which is a critical metric in the current operating environment. You may recall that in the first half of fiscal '24, we held or grew share in 30% of our net sales in measured markets. We drove a material improvement in market share in the second half, which demonstrates the underlying consumer strength of our brands. Much of this improvement in the second half of fiscal '24 was driven by our U.S. TBA share performance. More on this shortly. In fiscal '24, we held or grew share in over 75% of net sales value in measured markets. I'm also pleased we're holding or gaining share in almost all of our measured billion-dollar brands globally. My goal is to continue to drive towards our 2030 6% TBA value share ambition. Moving on to regional performance. I'll start with brief highlights of the three of our five regions that grew organic net sales in fiscal '24, Europe, APAC and Africa before I cover LAC and NAM in more detail. Europe delivered resilient performance growth and its share gains in a challenging environment. Strong growth in Guinness was a key driver, which I will discuss in more detail later. In APAC, growth was driven by Chinese white spirits and strong performance in India with continued premiumization. Tequila also continues to gain momentum. In Africa, beer was the key driver of performance. Despite a tough macroeconomic backdrop, we benefited from price increases and delivered double-digit growth on Guinness and Malta Guinness. I often talk about the strength of our diverse geographical footprint. These regional highlights demonstrate the advantage of a business with a broad footprint, and it provides resilience, particularly in uncertain times. In LAC, since I last updated you in January, we have worked with our wholesaler and customer partners to manage inventories and ended fiscal '24 with levels more appropriate for the current consumer environment. We've also implemented the five key action areas we identified to expand inventory visibility in LAC. Our full year organic net sales in LAC declined 21.1% year-over-year in fiscal '24. In Brazil, our largest market in the region, the category improved in the second half of the year compared to the first half, and we gained market share. Inventory levels have dramatically reduced to more appropriate levels in Mexico, our second largest LAC market. However, this market continues to face persistent challenges with highly competitive environment and consumer down trading in tequila and Scotch. Consequently, we've initiated a comprehensive review of this market to return to share growth, and I will update you in due course. Going forward, we know the importance of staying vigilant and we continue to work diligently to keep improving our visibility into the distribution channels across LAC, with the aim to deliver better insights earlier. And I believe we have the necessary processes, data, leadership, incentives and sell-out culture across the region to more closely align future performance with consumer demand. Moving on to NAM. As mentioned earlier, in fiscal '24, we held U.S. share of TBA with improving consumption momentum and share gains in the second half of the fiscal year. However, this did not translate into shipment momentum. In the last year, we've discussed the challenging environment in the U.S. as we navigated through the post-COVID-19 normalization, and we lapped supply chain restocking. At the end of fiscal '24, we will have largely completed that lap. However, consumers remain cautious, with wallets under pressure and with higher interest rates, retailers remain cautious as well. Over the past 12 months, industry trends have been quite variable month-to-month and quarter-to-quarter. So I want to spend some time unpacking that for you. So let's start with consumer data in tracked channels using Nielsen/NABCA which represents approximately 40% of purchases in the U.S. And you can see on the industry chart on the far left. As inflation has persisted throughout the year and consumers faced 30-year high food basket prices, you can see how that has impacted the industry, which continued to deteriorate in the second half of fiscal '24. On the left-hand chart, the pink Diageo bars show how we picked up momentum in the last six months despite this cautious consumer environment, leading to our share improvements. The chart on the right breaks down Diageo's full year performance across the three-tier system. And you can note several dynamics here. First, while Diageo's consumer consumption growth in Nielsen/NABCA data was soft, our depletions and shipments were lower. Second, depletions have also lagged Nielsen/NABCA consumer purchases, particularly in the second half of the fiscal year. This was largely driven by retailer stock reductions, which we saw most prominently in West Coast retail chains. This retailer inventory adjustment is likely driven by persistently higher interest rates and retailers not wanting to anticipate recovery in this cautious consumer environment. At the end of fiscal '24, the difference in shipments and depletions has narrowed compared to fiscal '23. The difference in fiscal '24 was driven primarily by the impact of lapping tequila restocking and we expect these value chain dynamics to be temporary. And while we foresee this environment persisting into fiscal '25 to the extent that interest rates decline and the consumer environment recovers, we would expect shipments to more closely align to consumption. Importantly, as we manage this business for the long term, the underlying consumer trends remain the most critical movement to watch. Going forward, our focus in NAM remains on controlling what we can control, operational excellence against our priorities and gaining quality sustainable market share. In the second half of the fiscal, we picked up momentum with the consumer. In fact, we finished the year winning or maintaining U.S. TBA market share in brands covering 90% of our U.S. net sales. A few of our consumer highlights. In whiskey, our Crown Royal share performance improved significantly in the second half of fiscal '24, finishing the year holding share not only of TBA, but also of U.S. Spirits, driven by the launch of Crown Royal Blackberry. Early reads show one in five of those purchasing Blackberry are new to whiskey, consistent with our track record of sustainable expansion and recruitment into the Crown Royal trademark. In tequila, our portfolio again gained U.S. Spirit share driven by Don Julio, which increased momentum in the second half, growing 15 times faster than the total U.S. Spirits industry. The growth was led by Don Julio Reposado. We expanded our participation in the convenience occasion this year through strong innovation with our cocktail collection, outperforming the category, gaining 32 basis points. And finally, notably, Guinness has outperformed the industry and was the fastest-growing imported beer in the U.S. on trade in the last 12 months, bolstered by the newly launched Lovely Day campaign with longtime brand fan, Jason Momoa. But look, while we made good progress in driving share improvement, we also know we have more to do and opportunity left to fully leverage the power of our amazing diversified portfolio. Casamigos is one example. After four years of extraordinary growth with a CAGR of over 70% from fiscal '19 to fiscal '23, Casamigos' organic net sales declined 22% in fiscal '24. This decline was partly caused by the impact of lapping restocking following supply shortages as depletions were down half of that at minus 9%. In fiscal '25, we are fully integrating Casamigos into our dedicated, transformed distribution network. Casamigos has now reached a scale where it will benefit from the full power of Diageo's resources and we can take our tequila portfolio category leadership to the next level. This is important as the brand remains resilient in the on-premise where brands in this industry get built. On-premise momentum continues with volume up 5%. More feet on the street will no doubt help this effort. Speaking of our U.S. distributor network and our route to market, as we see changes in growth opportunities, we are optimizing our route to market across our footprint. As we discussed briefly at our capital markets event, I'm excited to share that in the U.S., where we have a track record of pioneering and shaping the route to market, we are making significant changes. Jointly with our two largest distributors in the U.S. we are investing to better align our teams and capabilities against what we believe will be the best growth opportunities for the next decade, by category and brand down to the zip code level. Specifically, we are leveraging our proprietary outlet and zip code level data to identify the highest future growth potential communities and channels for our biggest growth categories, bringing us closer to our consumers and customers at the local level. This includes scaling our people and locations to go after categories with high growth potential, such as whiskey and tequila, while increasing focus on our core brands. We're also building a new academy of beverage leadership to cultivate the next generation of industry expertise within our and our distributor partners’ teams. Finally, we have transformed our internal commercial organization to deliver unmatched execution and activations in stores, bars, stadiums and event spaces. I am confident this transformation strengthens our position as the largest U.S. spirit supplier and leader across key categories. And we are extending this commercial focus to the rest of Diageo, too. A few highlights. Last week, we announced that we will be bringing in-house the distribution of all our brands currently distributed by the joint venture Moet Hennessy Diageo in France. This follows our previous update in March 2024, where we outlined our phased approach to transforming our distribution model in France by creating our own in-market company. We are also expanding our organizational structure in Dubai to solidify our leadership in the premium spirits market in Middle East, North Africa. We have created a new asset-light model for the Guinness route to market in Nigeria by partnering with a local distribution specialist. This model works alongside our new West Africa spirits focused organization. Moving on to our largest category's performance, starting with the largest scotch. While our scotch organic net sales performance was heavily impacted by LAC inventory reductions, momentum with consumers continued in fiscal '24. We gained category share of scotch in 9 out of 10 of our largest measured scotch markets, including the U.S.; an improvement from the 7 out of 10 in the first half of the fiscal. Within the scotch category, we are seeing consumers being somewhat more choiceful, but still staying with an international aspirational brand. For example, in China, johnnie Walker in the last six months has seen better performance in Black Label, XR15 and 21 than in Blue Label. In India, our scotch portfolio provides consumers a breadth of price ladder offerings as they continue to premiumize from a lower base. Johnnie Walker led our share growth, driving over half of our scotch organic net sales. This iconic brand has a proven growth model that brings together luxury, innovation, amazing quality liquid and a clear mantra to keep walking that is executed at scale around the world and it's working. Johnnie Walker continues to be the number one international spirits brand in value in the calendar year 2023 as measured by IWSR. It recently won a prestigious Grand Prix Award at the Cannes Lions Festival for our campaign in Brazil. And in the on-trade, it is now the top trending top-selling scotch in the world's top 100 bars. Our focus for fiscal '25 is to continue to build on Johnnie Walker's success and share gains while building on our opportunity in single malts, where we are underdeveloped led by the Singleton as our number one priority Malt-brand. In tequila, the global rollout has continued at pace through fiscal '24. We drove almost 12% organic net sales growth in markets outside NAM and LAC leading to substantial market share gains across Europe, India, Africa and Global Travel. Don Julio was the number one selling tequila at London Heathrow throughout most of the last 12 months, and it's now in nearly 60 countries. Casamigos is in 30 countries with double-digit sales growth in Europe. Increased investment to these brands to support the global rollout is amplified by our excellent marketing and brand building at scale. For example, Don Julio at the Oscar's and Super Bowl, which if you haven't already seen the videos, I highly recommend. I also continue to be excited about the ongoing potential for tequila in the U.S. and across the rest of our footprint, because tequila remains the fastest-growing scale spirits category, and Diageo continues to maintain its global tequila leadership by value. Guinness delivered another year of very strong performance in fiscal '24. Plus 15% organic net sales growth, a testament to its continuing broad appeal. We held or grew share in our top three markets for Guinness, U.S., Great Britain and Ireland, and the momentum that we have with Guinness continues to recruit and expand our consumer base. In Great Britain, consumption among women rose by 27% from fiscal '22 to fiscal '23. One significant way we recruited more Guinness consumers in Great Britain was tapping into consumer passion for the brand, inviting them to partner with us to co-create content and shape the brand through our community-first marketing model. You can see an example of this in the social media on the slide. Looking ahead, we are expanding Guinness further through our global football partnership with the Premier League. We have a proven model for activating its scale with Guinness in sports through our successful Six Nations Rugby relationship and see a tremendous opportunity worldwide. We've also recently made significant commitments to ensure future supply. Our €100 million investment to decarbonize our historic St. James' Gate site, will accelerate progress toward our Net Zero carbon goals and transform energy and water consumption with the aim of making the site one of the most efficient breweries in the world by 2030. In addition, Guinness 0.0 doubled in net sales in fiscal '24 in Europe, with GB and Ireland accounting for around 70% of Guinness 0.0 global sales. We are investing to increase our capacity to supply Guinness 0.0 in response to the consumer trends of moderation and duality. Consumers who want to drink less and consumers who want to drink alcohol in some occasions, but choose not to on others. In fiscal '24, I set up a review of our ESG strategy. And as a result, we have simplified and prioritized the goals that form our spirit of progress plan. This has allowed us to prioritize the areas that are most material to the business, including reducing the harmful use of alcohol combating water stress and the impact of climate change. This means we will be accelerating our work advocating for responsible alcohol consumption and water replenishment activities in the communities in which we operate. These are not only the right things to do for our people, consumers and communities but also critical for our business. With this simplified and prioritized focus, we are partnering with governments and institutions in key geographies on our decarbonization journey and have secured significant direct government funding to progress this. In the U.S., for example, the Department of Energy selected Diageo for a grant to support the installation of heat batteries and solar energy generation at two of our sites. The goal is to build a model that can be replicated across our supply operations in the U.S. and make our business more efficient, resilient and sustainable for the future. I'll now hand over to Lavanya, who will go over financials in more detail before I return to discuss our outlook. Lavanya Chandrashekar: Thank you, Debra, and good morning, everyone. In fiscal '24, organic net sales were down 0.6%, with positive price mix performance, mostly mitigating a decline in volume. Excluding LAC, the business grew organic net sales by 1.8%. Organic operating margin declined by 130 basis points, primarily driven by LAC. Excluding LAC, organic operating margin was down 56 basis points, driven mostly by investments in digital capabilities, and as Debra mentioned, in further strengthening our route-to-market capabilities primarily in the U.S. We generated free cash flow of $2.6 billion, which was around $400 million more than a year ago. Strong working capital management and lower tax payments more than offset the combined impact of the decline in operating profit, higher interest payments and increased investment in CapEx. Pre-exceptional earnings per share declined mainly due to a lower operating profit and higher finance charges and exceptional items. This was partially offset by lower tax and the impact of share buybacks. We believe our growth algorithm continues to support sustainable long-term growth. Our focus continues to be on driving growth through winning quality market share. We continue to premiumize our portfolio and benefit from improved price mix and drive productivity, all of which enables us to continue to invest smartly back into the business. Price mix contributed 2.9 percentage points to top line growth. Price contribution to organic net sales growth was in the low single digits. Organic volume was down 3.5%, driven primarily by more than a 15% decline of volumes in LAC. More on that shortly. We accelerated productivity initiatives across cost of goods, marketing and overheads in fiscal '24. This enabled us to unlock almost $700 million of productivity cost savings in the fiscal and comfortably exceed our three-year $1.5 billion productivity savings target. Marketing productivity and smart investment choices allowed us to invest A&P on key growth opportunities and hold our overall A&P investment levels flat for the year. In line with the market growth framework, we increased A&P investment in Guinness across all regions. Tequila as a part of our global rollout and in North America, in Chinese white spirits, in India and on Johnnie Walker in most regions. Now to look further at volume. Our volume declined by 8.3 million equivalent units in fiscal '24. The decline was driven by specific challenges in LAC, North America and in Africa with otherwise stable volume in rest of world. Almost half of the volume decrease is related to the actions taken to normalize inventory levels more appropriate for the consumer environment in LAC. In North America, volume declined by 2.3 million equivalent units. The volume decline was mainly driven by the cautious consumer environment in the U.S. with the rest from retailer destocking and lapping the supply chain normalization in the prior year. These headwinds more than offset the gains from improving market share performance over recent months. And as you can see, price mix has returned to pre-COVID-19 levels. In Africa, in light of significant devaluation we protected margins with strategic price increases. The volume decline here was a result of these pricing actions. In Europe, just over 75% of the volume decline was due to the lapping of final sale of inventories in Russia. Excluding this, Europe volume was marginally down versus last year due to softness in spirits. APAC volume grew with strong growth in India and Chinese white spirits, partially offset by Southeast Asia and Australia. All of this gives us confidence that volume will recover when the consumer environment improves. I'll go into more details on the drivers of price mix shortly. And now looking at our results at a category level. Our beer business delivered 14% organic net sales growth, with 5% volume growth. Our organic net sales growth was primarily driven by continued momentum in Guinness, which grew 15% and strong double-digit growth in Malta and Senator in Africa. Chinese white spirits organic net sales grew 27%, lapping a 14% decline due to COVID-19 restrictions in the prior year. Other whiskey delivered strong organic net sales growth, fueled by Bulleit, McDonald's No.1 Royal Challenge and the successful launch of Buchanan's Pineapple in North America. Our scotch and tequila performance was significantly impacted by the weak performance in LAC. Scotch organic net sales growth was also negatively impacted by North America and the lapping of the final sale of inventories in Russia in fiscal '23. Scotch grew 11% in India with strong growth of Black & White and Johnnie Walker. Tequila organic net sales were down 7%, driven by LAC and the lapping of inventory replenishment in North America partially offset by the benefit from the global rollout of the category. We are confident that premiumization continues to be a tailwind for the spirits category, although this may not be immediately apparent from Diageo's numbers, as our super premium plus price tiers showed weaker performance in fiscal '24. I'll touch on this shortly. The breadth of price points across our portfolio provides resilience and the ability to capture consumer demand despite these economic pressures. With the exception of Super Premium Plus, each of our price tiers grew organic net sales in fiscal '24. The value tier saw particularly high growth driven by the strong performance of beer in Africa and other whiskey in India. The premium tier growth was impacted by LAC. Excluding LAC, this tier grew 3.7%. We can see that the decline in Super Premium Plus was also driven predominantly by LAC and by North America. The NAM decline in shipments reflects the impact of lapping the replenishment of U.S. spirits inventory levels in fiscal '23. However, when we look at the consumer purchasing data, as shown on the right, we can see that consumption of super premium spirits is ahead of Diageo shipments in the U.S. Nielsen and NABCA data shows that more than 100% of core spirits category growth in the industry came from Super Premium Plus spirits in the fiscal. In Rest of World, our super premium plus organic net sales growth was 2.9%, reinforcing the continuing premiumization in other markets. We continue to strengthen our revenue growth management capabilities, which are key in driving sustainable growth across volume, price and mix. We made surgical smart price increases supported by choiceful A&P investments across brands. Let me share two examples of this. In Great Britain, we increased our marketing investment for Guinness by 14%, smartly managed pricing corridors and drove volume growth of 18%. In Southern Europe, Johnnie Walker volume increased by 5%, whilst organic net sales grew by 7%. Importantly, in each of these examples, we drove RGM while also gaining share for these brands. With our culture of everyday efficiency, we have delivered strong productivity benefits year after year. Fiscal '24 was the third consecutive year when productivity and price combined offset the absolute impact of cost of goods inflation. In fiscal '24, we delivered productivity savings of $695 million across cost of goods, marketing and overhead spend buckets. The productivity on cost of goods was across the end-to-end supply chain. We renegotiated contracts on key materials such as glass, labels and grain neutral spirits and drove savings in logistics by renegotiating key ocean freight contracts. Across our manufacturing sites, we reduced waste and drove savings via labor optimization and automation. In addition, we started to see the benefits from our five-year supply chain agility program announced at the end of fiscal '22. Marketing and overheads also drove a material contribution to productivity. Over the three-year period of fiscal '22 to fiscal '24, we delivered $1.7 billion of productivity savings, exceeding our target of $1.5 billion. Looking ahead, we have committed to significantly step up our productivity target to $2 billion over the next three years, fiscal '25 through fiscal '27. This will be enabled by the acceleration in annual savings across COGS, marketing and overheads and from our supply chain agility program. Organic operating margin declined year-on-year by 130 basis points, predominantly driven by LAC. LAC operating margin declined significantly, driven by negative mix, increased trade investment and lower operating leverage. Excluding LAC, operating margin was down by 56 basis points, reflecting continued investment in the business through overheads and A&P partially offset by positive gross margin. Gross margin was up 17 basis points with benefits from productivity and price offsetting the impact of cost of goods inflation. Cost of goods inflation moderated from the double-digit inflation we saw in fiscal '23, but persisted in the high single digits for fiscal '24. Price was a positive contributor to margins but significantly less than in prior years. Recollect, we drove high single-digit price increases in fiscal '23. In fiscal '24, prior contribution to net sales was in the low single digits. Our robust gross margin performance was mostly driven by supply productivity. As I indicated in our interim results, our A&P reinvestment rate moderated as we lapped the prior year's increase, and delivered marketing spend efficiencies, especially in the U.S. through the second half. We use a disciplined approach to deploy A&P investment to target opportunities for long-term sustainable growth and strong ROI. Through fiscal '24, we focused investments on tequila, both in the U.S. and globally and on Guinness, Chinese white spirits and India. We continue to be disciplined in our approach to managing overheads. Even in a tough year, we are committed to invest for long-term sustainable growth. In fiscal '24, our investments have included investing in our strategic capabilities, including digital and strengthening our route to market primarily in the U.S. Basic earnings per share before exceptional items declined 8.6% from $1.965 to $1.796 primarily driven by weaker operating profit performance compared to fiscal '23, partially offset by a lower tax charge. Higher interest charges also negatively impacted EPS. Current higher interest rates impact our overall effective interest rate in two ways. First, they directly impact our floating debt portfolio. Second, interest rates on new debt issuances are higher relative to the maturing debt they replaced, which was issued at lower historical rates. Free cash flow increased despite lower operating profits and higher interest payments. This growth was primarily driven by our strong working capital management, almost entirely driven by inventory reductions. In recent years, we increased inventory by over 20% to navigate COVID-19-related supply disruptions. Through fiscal '24, we actively reduced this back to fiscal '19 levels. The improvement was enabled by recently implemented data analytics solutions and improved stock management processes. We also benefited from lapping one-off tax payments made in fiscal '23. And remember, we continue to invest in maturing stock and CapEx to support future business growth. CapEx spend increased in line with our long-term reinvestment strategy and in line with guidance for the year. Moving on to foreign exchange. The impact of foreign exchange movements was slightly negative on operating profit and significantly more adverse on net sales. Translation exchange negatively impacted both net sales and operating profit. The exchange loss was driven by emerging market currencies, mainly the Nigerian naira, the Turkish lira and the Kenyan shilling, partially offset by gains on the British pound and the euro. The transaction benefit was mostly due to favorable hedged rates on the British pound and the Mexican peso, mostly offset by the Nigerian naira. We hedge our transactional foreign exchange on a rolling basis for our major currency exposures. This strategy results in foreign exchange rates that reflect the average of our hedging positions built over time. In our interim results, we shared a view on the potential full year foreign exchange impact for fiscal '24 based on hedged rates and other exposures. Assuming the spot rates on December 31, 2023, exchange rate changes of the Nigerian naira, the Turkish lira and the Ghanaian cedi drove the difference from our expectations in our interim results to the fiscal year close. We completed the fiscal year with our leverage ratio at 3 times, in line with our target range of 2.5 to 3 times, reflecting higher debt, lower year-on-year profit and strong working capital management. Our net finance charges increased by $173 million year-on-year, reflecting the higher interest rate environment. Our effective interest rate at 4.3% is in line with the guidance we shared in January. Looking ahead to fiscal '25, I expect our effective interest rate to be broadly flat year-on-year, given current market conditions. We remain committed to our target leverage range. And I am conscious that we have reported our leverage ratio at the top of the range. We will make the right decisions to support the long-term growth of the business aligned to our long-standing track record of maintaining our disciplined approach to capital allocation and our target leverage range. So our consistent and disciplined approach to capital allocation is unchanged. I just talked about how we manage our balance sheet, guided by our leverage ratio policy. And we will always make decisions to support the long-term growth of the business. Our first priority is to invest in sustainable organic growth through CapEx, marketing spend, overhead, supporting strategic initiatives and investment in maturing stock. Next, we have a progressive dividend policy, and we have increased our dividend for 25 years. Today, we announced a recommended final dividend of $0.6298 cents per share. This is a 5% increase on our final dividend in fiscal '23 recast to U.S. dollars. Our dividend cover at 1.7 times is slightly below the lower end of our target range of 1.8 to 2.2 times, but our dividend payment reflects the confidence we have in our business. Finally, when we have excess cash, and the main metric that guides us here is the leverage ratio. We will return it to shareholders as you have seen us do consistently over the past years. Our disciplined and strategic portfolio management will continue to be an integral part of our capital allocation strategy. In the past two years, we have acquired fast-growing brands such as Don Papa Rum, Balcones Distilling and Mr. Black and acquired the full ownership interest in DeLeon, and the repatriation of Gordon's license in South Africa. Importantly, we have been disciplined and moved at pace to dispose off brands that did not fit within our portfolio, and we have restructured our presence in Cameroon and announced a similar transaction in Nigeria, to move to a flexible asset-light beer operating model. We expect this will improve the profitability of our business while accelerating the growth of Guinness in these markets. Additionally, we have recently announced the disposal of Pampero and Safari, which we expect to complete early in fiscal '25. We believe this disciplined portfolio management will help us to accelerate growth and increased focus to drive operational excellence. Before I hand back over to Debra, I would like to thank all my colleagues for making Diageo the best place to work and celebrate life every day. I have every confidence that Debra and the team will achieve our ambition of Diageo being the most respected and best-performing consumer products company in the world. Debra Crew : Thank you, Lavanya, for your kind words. Before I conclude, I will discuss our outlook. The consumer environment continues to be challenging with conditions we saw towards the end of fiscal '24 persisting into fiscal '25. Consumers remain cautious and interest rates are high. Therefore, retailers are likely to remain cautious, too. We expect the negative pressure on organic operating margin that we saw in the second half of fiscal '24 to persist into fiscal '25. That said, we will focus on strengthening the resilience of our business and winning with the consumer. We are focused on driving productivity and mitigating cost inflation while investing smartly in strategic initiatives that drive long-term sustainable growth. And we are confident that when the consumer environment improves, the actions we are taking will return us to growth. As for medium-term expectations, recall that after three years of extraordinary top line growth with 14.5% CAGR from fiscal '21 to fiscal '23, Diageo and our industry are experiencing a period of normalization following the COVID-19 super cycle. And we also continue to feel the impact of macroeconomic challenges, geopolitical uncertainty and a cautious consumer environment, the consumer-facing companies are navigating. But we remain confident in the long-term fundamentals of TBA and our position within it. We believe demographic trends, rising incomes in the developing world, spirits gaining share from beer and wine and long-term premiumization will drive attractive underlying growth in our industry. Diageo has an advantaged portfolio across categories, price points and regions, and we continue to be confident in our ability to grow ahead of TBA and gain quality market share, enabled by superior operating excellence and disciplined investment. We are confident that when the consumer environment improves, the actions we are taking will return us to growth. And we are focused on getting back into our medium-term guidance range for organic net sales growth. And we expect organic operating profit growth broadly in line with organic net sales growth as we continue to invest in the business. Longer term, we expect to deliver organic operating profit growth ahead of organic net sales growth. Finally, I will end by summarizing our growth ambition that we previewed at our capital markets event in November. Our growth ambition is to build towards the next decade of sustainable growth by achieving quality TBA share of 6% by 2030. Our strategy to unleash the power of our brands and portfolio includes: Sustaining the momentum in our global brands of Guinness, Johnnie Walker and Don Julio while driving regional growth opportunities like Crown Royal and NAM and accelerating malts in APAC. Leading and shaping key consumer trends including tapping into the convenience moderation and with food occasions with pipeline of innovation launches planned across multiple markets to recruit new consumers into new occasions at scale. And finally, continuing to focus on operational excellence. In addition to the route-to-market improvements I discussed earlier, we are evolving our approach to A&P efficiency to maximize consumer-facing dollars, while driving accelerated productivity and allocating resources with discipline. I remain excited about our opportunities for fiscal '25 and beyond because I believe at Diageo we have the best portfolio in our industry, the most diverse geographic footprint and the insights and tools we need and the very best team set up to outperform over the next decade. I would like to take this opportunity to thank my 30,000 Diageo colleagues for their hard work and dedication. Thank you. I also want to say a few words as this will be Lavanya's last results presentation. I am grateful to Lavanya for her leadership over the last six years and her contribution as Diageo successfully expanded our business through a global pandemic and delivered major productivity savings. I want to thank her for being a trusted colleague and partner to me, both when we work together in North America and more recently as I took on the role of CEO. Lavanya's seen us through fiscal year in '24, while ensuring a seamless transition to our incoming CFO, Nick Jhangiani on the September 1. On behalf of all Diageo colleagues, I wish her much future success as she returns to the U.S. I also want to take this opportunity to welcome Nick into the Diageo family. Thank you. Q - :

Debra Crew: Good morning, everyone. Thank you for joining our results presentation for the first half of fiscal '24. As we shared in November, we expected that the first half of fiscal '24 was going to see slower growth than the second half of fiscal '23, due to materially weaker performance in LAC, our Latin American Region, which is nearly 10% of Diageo's net sales value. We ended the half in line with our November trading update. But let me be clear, we are not satisfied with these results. Today, I will share my reflections on our performance for the half, including an update on LAC. Lavanya will then discuss our results in more detail before I return to discuss our near-term outlook. The group's organic net sales declined 0.6% in the first half of fiscal '24, and organic operating margin declined by 167 basis points. Excluding LAC, organic net sales grew 2.5%, driven by good growth in Europe, Asia Pacific and Africa. And while North America declined versus the prior year, we did deliver sequential improvement period-on-period, as our actions in the region began to show an early impact. Organic operating margin declined 53 basis points, excluding LAC, driven entirely by increased marketing investment. We generated strong free cash flow of $1.5 billion, up $0.5 billion while continuing to invest in the future growth potential of our brands. This was driven by strong working capital improvement and Lavanya will discuss this further. Once again, we increased our dividend, up 5%, maintaining our track record of increases, since Diageo's formation over 25 years ago. Usually, our performance discussion begins with the 2 around the world, starting with NAM because it is our largest region. But as I promised in November, I first want to give you an update on the inventory issue in LAC, the actions we have taken and our expectations for fiscal '24. Lavanya and I have spent a lot of time with our LAC team, since November to understand exactly what happened. And with the local teams, we have formulated action plans towards reducing inventory to more appropriate levels for the current consumer environment by the end of the fiscal, and most importantly, to be confident that this does not happen again. During the COVID super cycle, LAC experienced an extraordinary period of growth organic NSV increased by 50% on a constant currency basis over the 3 years from fiscal '19 through fiscal '22. The spirits category showed significant volume growth and significant premiumization and according to IWSR, we gained around 130 basis points between calendar years 2020 and 2022. The strong category growth started to turn rapidly in the second half of fiscal '23 and continued into this fiscal with elections and macroeconomic slowdowns in key markets that followed higher inflation and U.S. interest rate hikes. We saw a shift in where and how consumers were spending in the spirits category. As an example, in Brazil, we saw down trading primarily into beer. And we saw large channels like Cash and Carry declined by double digits. This meant that some quantities of inventory shipped in the first half of fiscal '23 was not the right product and ultimately did not pull through to the consumer. The net result was a buildup in inventory levels at our direct customers, which we flagged at the end of fiscal '23. While the team expected to work through this by the end of the first quarter of fiscal '24, persistent category decline and a weak consumer environment impacted their ability to reduce inventories in certain channels, including in the second tier of customers below our direct customers to which we had limited visibility. LAC ended the half with 23.5% decline in organic net sales value. And while direct customer inventories came down, there is still inventory at elevated levels in the channel. But as you've seen in our announcement this morning, we are taking actions towards reducing inventories to a more appropriate level for the current consumer environment by the end of our fiscal. And therefore, in the second half of the fiscal, we expect a 10% to 20% organic net sales decline in LAC versus the prior year. Lastly, in terms of inventory in other regions, we have conducted a global review to validate with our other regions, the robustness of their processes and mechanisms. Post this review, I am confident that we have the necessary processes, data, incentives and sell-out culture across all our regions. So what are we doing in response? Well, we are working to expand the coverage of sell-out data by formalizing data collection from our largest customers where possible. For example, in Brazil, two of our largest Cash & Carry customers will give us around 10% better sell-out coverage in this market alone. In several of our top distributors in our largest markets we will also be incentivizing them to report sell-out information and to allow independent stock counts at their top customers. This would provide insights into approximately 200 to 300 major customers at the second tier within the trade's inventory channel and will allow for better insight and forecasting on our direct customer order patterns. We also will be increasing investment to improve our sales and operations planning, commercial planning and monitoring processes in the region to be more forward-looking and agile. Finally, in addition, our global team is looking at potential tech solutions to increase visibility. And in the second half, we will test technology that we already use in our China business. With the use of RFID labels, we will be able to track cases as they move through the distribution network. We're exploring this with one of our largest customers in Mexico on key SKUs across scotch and tequila. The technology also has future potential for enhanced consumer engagement. This is a great example of how we can leverage existing know-how across the breadth of our regions. And I'm very excited about the possibilities for our wider business in terms of speed, efficiency and using digital solutions to drive better insights all the way through our supply chain and route to consumer. Turning back to our business as a whole. The first half of fiscal '24 was challenging for Diageo in our sector as we lapped high single-digit growth in the prior year and faced an uneven global consumer environment. Against this backdrop, the strength and power of our diversified footprint remains more important than ever. Across the board, our regional performance for the first half was in line with the expectations we shared in November. And as I mentioned earlier, excluding LAC, organic net sales growth was up 2.5%. I will cover the performance of each of these regions in a few minutes, but first, let's review our share results. In the first half, we held or grew share in 30% of our net sales value in measured markets. Markets holding or gaining share include several large markets, including most of Europe and in China, Brazil, CCA in Canada. After three consecutive years of gaining or holding share in the U.S., our share of TBA declined by 17 basis points in the first half. I know the move in our global market share position looks quite stark. So for context, I will explain how we calculate this metric. It is binary. So if the U.S. as a market is in a net share loss position, our overall group metric is, therefore, lowered by the full impact of the organic net sales value of our U.S. business, even if we are gaining share in key categories. So for this period, this represents the 39% loss. Overall price competition has intensified in the U.S., particularly impacting whiskey and tequila, I'll discuss more about the U.S. consumer environment in a few minutes. We are not satisfied with where our share is at in the U.S. Then the team is focusing on key interventions to turn this around as consumer behavior is normalizing in our largest market. But to be clear, we are focused on doing this the right way, winning high-quality market share. We're not interested in gaining short-term share, if it comes at the cost of brand equity driven by significant price promotions. We manage our business for the long term. And long term, I am confident that our advantaged portfolio of brands and focus on operational excellence provides us with an industry-leading high-quality growth opportunity. So what are we doing to work towards regaining TBA share in the U.S.? At our Capital Markets event in November, we shared our priority areas, which are winning in whiskey, expanding our tequila portfolio, recruiting with innovation and raising the bar on execution. These have not changed. And as I mentioned earlier, our actions are beginning to show an early impact. In the broader world of whiskey, which is one of the fastest-growing and most dynamic areas of spirits in the U.S., we are currently leading the category in market share, but we know we have the opportunity to do more. We are focusing on Crown Royal, Bulleit and our scotch portfolio, particularly Johnnie Walker and Buchanan's. On Crown Royal, it is still early days, but recently, our share losses have moderated and net sales improved sequentially in the first half of fiscal '24. This reflects our ongoing investment in the brand and the positive impact of our actions. This includes maximizing distribution in both the on and off trade, so Crown is now available to more consumers in more places than ever. And also our new advertising campaign, highlighting the quality of our liquid, which you might have seen on TV during the key Thanksgiving holiday period. For the second half, we have a robust innovation pipeline, the launch of Crown Royal, Canadian single malt, capitalizing on the popularity of single malts and Crown Royal Blackberry, delicious and a cocktail with Lemonade. Our other whiskey brands are gaining share. Over the last 12 months, Bulleit is gaining 25 basis points of category share and maintaining its position as the number one Rye. Johnnie Walker gained 56 basis points of scotch in the half and the Buchanan's trademark gained 11 basis points of share in U.S. spirits. In tequila, our broad portfolio is gaining share of spirits overall. Our depletions performance, which was significantly better than our shipments remains positive, led by Don Julio. The Don Julio portfolio was leading the path, leading in culture from the Oscars to Cinco de Mayo. It is growing 7 times faster than the total U.S. spirits industry and continued to gain category share of tequila and spirits in the half. While Casamigos lost share in the half, it has more than doubled its share of the tequila category over the last four years and depletions volume is growing. We have robust intervention plans for Casamigos in the second half, including expanding distribution of smaller pack sizes. But our participation in tequila is more than Don Julio and Casamigos through DeLeon, which we now fully own, along with Astral and 21 Seeds, our tequila portfolio extends into the super premium price tier enabling us to participate in that booming segment of the category. On to innovation. As we discussed at our Capital Markets event, we are focused on consumer-backed innovation that allows us to capture new occasions and the LDA+ consumers. Innovation contributed to the sequential improvement in organic NSV in the first half, and we currently have 7 out of the top 10 core spirits innovations in Nielsen. In November, we introduced our ready-to-serve cocktail collection, including the Kettle 1 Cosmo and Espresso Martini to participate in the convenience occasion. While it's still early days, these are outperforming expectations and have gained 34 basis points of category share. Since our Capital Markets event, I have spent a lot of time in the U.S., been on the ground in 5 states in the on-trade and off-trade. And I've spent time with the team talking to several customers. A couple of things are apparent to me. The U.S. consumer environment is still normalizing from the COVID super cycle. While consumer sentiment across both our internal sources and external sources, is improving versus the prior year. Consumers are still facing multiple headwinds, including higher interest rates and higher priced food baskets. So while consumers are resilient, they are still cautious and thoughtful. And premiumization continues, but there are some pockets of down trading. Fiscal year-to-date, we are seeing the spirits industry grow in the low single digits. We believe the path back to industry normalization in the U.S. will not necessarily be linear and industry recovery will be more gradual over the next several months. Therefore, as we look ahead to the second half of fiscal '24, we expect to drive gradual improvement in organic net sales performance. We are confident we have the right actions across our portfolio to navigate the challenges we face through a combination of improved brand building and local execution plans that we are putting into place. Moving on to Europe, where as expected, organic net sales growth was slower in the half than the second half of fiscal '23. Excluding the impact of lapping the final sales of inventories in Russia, the region grew 6%. The region's 3% organic net sales growth in the half was mainly driven by Guinness, which grew 24% in the period. Nearly all of this growth was in Great Britain and Ireland. Guinness 0.0 also continued to perform strongly, more than doubling in the period. In Ireland, there are now around 1,000 trade outlets with a Guinness 0.0 keg. Tequila also contributed to Europe's growth more on that later. Scotch performance, excluding the impact of cycling final sales in Russia grew 5%, driven by Johnnie Walker, which grew 15%. Johnnie Walker Red Label drove most of this growth with Johnnie Walker Black Label also contributing. Looking ahead to the remainder of fiscal '24, we expect resilient growth across markets despite lapping strong double-digit growth in the second half of fiscal '23. In Asia Pacific, we maintained good momentum with super premium plus price tiers driving most of the region's organic net sales growth led by Greater China, which grew 18%. Our participation in Chinese white spirits through Shui Jing Fang puts us in a unique position amongst global spirits players operating in Greater China. With the lifting of on-trade restrictions, which were in place in the prior year, Chinese white spirits proved to be more resilient in the half, driving our growth, while momentum decelerated in our international spirits business. In India, momentum continued with 9% organic net sales growth, lapping double-digit growth in the prior year. India continues to drive strong demand for scotch with organic net sales up 16% in the half, including a 21% increase in Johnnie Walker. In the second half of fiscal '24, we expect growth in APAC to continue from the first half, supported by lapping of subdued Chinese New Year in the prior year, balanced by the weaker consumer confidence we see across the region. Finally, in Africa, beer performed strongly, benefiting from price increases, while also driving volume growth driven by Malta Guinness, Senator and Guinness, each delivering double-digit growth. The macroeconomic outlook remains challenging. However, given current market conditions, we expect to see continued growth through the second half of fiscal '24. I will now share some performance highlights about our three largest categories in the first half of fiscal '24, starting with scotch. As we've mentioned before, while LAC is nearly 10% of Diageo's overall organic net sales value or NSV, it drives almost 25% of Diageo's scotch organic NSV. So unsurprisingly, LAC's underperformance impacted our scotch sales in the half. About two-thirds of the 10% decline in our Scotch organic NSV in the half was attributable to LAC and a third to the combination of lapping stock increases in the previous year in NAM and disposal of inventories in Russia. Importantly, we are winning market share in the scotch category in measured markets that represent 77% of our total NSV, including in North America, led by Johnnie Walker. This iconic brand is gaining share in 8 out of the 10 of our largest measured scotch markets. We believe the consumer fundamentals of the business are strong, and we expect our organic net sales to improve as we normalize inventory levels in LAC and LAP on more normalized growth period. Moving on to tequila. Our global rollout beyond LAC and NAM continued in the half. In markets outside NAM and LAC, net sales more than doubled in the half, albeit off a small base, led almost equally by very strong growth in Europe and APAC followed by Africa. I'm pleased to say that in Europe, we continue to drive tequila using the Paloma cocktail. Organic net sales grew just over 80% in the period, driving 19% of the growth in the region. 13% of APAC NSV growth was driven by our tequila expansion, this is being fueled by Don Julio 1942. While still early, we are encouraged by the global rollout of our tequila. And as we get local market learnings, we can lean into the versatility of the category and the strength of our tequila brands. We are confident that there is so much more to go after. Guinness continued its strong growth momentum, once again achieving double-digit organic NSV growth, up 14%. The majority of the growth was in Europe, followed by Africa and the U.S. Guinness 0.0 continues to gain strong momentum, more than doubling in the period and driving 14% of the uplift in NSV growth of Guinness. Over 4% of Guinness brewed at St. James Gate in Dublin, is now Guinness 0.0. Guinness continues to gain broad appeal in the U.S. It was recently named the most popular beer. And last month, our Guinness Storehouse in Dublin was named the world's leading tourist attraction at the 2023 World Travel Awards. Moving on to ESG. I announced back at our Capital Markets event that I had launched a review into our 2030 spirit of progress plan. We now have more visibility into what it will take to deliver our goals. We will continue to simplify our spirit of progress plan so that we can focus on the real priorities for our business. For example, we will accelerate our positive drinking and water ambitions, the two most material areas for us. This simplification and enhanced focus will allow us to drive efficiencies, whilst being responsive to forthcoming regulations. On the pillar of accelerating to a more low carbon world we have pivoted to a more focused approach. This pillar requires action by us and significant contribution from outside of Diageo, but we cannot do this alone. We will need others, including governments, regulators and commercial partners outside Diageo to go further and move faster together to enable us to achieve our goals. Therefore, we are prioritizing and focusing on targeting the triple wins, where not only we can reduce carbon, but also, where we can improve cost and cash. I'll now hand over to Lavanya, who will take you through our financials in more detail before I return to discuss our outlook for the remainder of fiscal '24 and '25. Lavanya Chandrashekar: Thank you, Debra, and good morning, everyone. As Debra mentioned, we are disappointed with our fiscal '24 first half results. Organic net sales were down 0.6%, with positive price mix performance, mostly mitigating a decline in volume. Excluding LAC, the business grew organic net sales by 2.5% despite the slightly negative impact from North America, where we did see sequential improvement to the second half of fiscal '23. Organic operating margin declined by 167 basis points primarily driven by LAC. Excluding LAC, organic operating margin was down 53 basis points driven entirely by increased investment in A&P. We generated free cash flow of $1.5 million. Strong working capital management and lower tax payments more than offset the combined impact of the decline in operating profit, higher interest payments and increased investment in CapEx. Pre-exceptional earnings per share declined mainly due to lower operating profit and higher finance charges. We increased our interim dividend by 5%, reflecting our continued confidence in the business and commitment to a progressive dividend policy. We believe our profitable growth algorithm continues to support sustainable long-term growth. Our focus continues to be on driving growth through winning quality market share. We continue to premiumize our portfolio, benefit from increased prices and drive productivity, all of which enables us to continue to invest smartly back into the business. Price/mix contributed 4.6 percentage points to top line growth, reflecting price increases in all regions except for LAC. Price contribution to organic net sales growth was in the low- to mid-single digits. Organic volume was down 5.2% with the biggest driver by far being the decline of spirits volume in LAC. I will cover this in further detail shortly. We unlocked a further $335 million of productivity cost savings across cost of goods, marketing and overheads during the half and are on track to exceed our three-year $1.5 billion productivity savings target by the end of fiscal '24. We drove productivity in our A&P spend and increased marketing investment by 3.8%. We deploy marketing investment in a considered and disciplined way and target increases, where we believe we will drive long-term sustainable growth and strong returns. On 10th of November, we updated you on our organic net sales growth expectations for the first half of fiscal '24. All five regions delivered the half in line with these expectations. In North America, organic net sales growth was down 2%. However, within this, U.S. spirits depletion growth rate was nearly 1 percentage point ahead of shipments. And again, we ended the period with overall U.S. spirits distributor inventory in line with historical levels. In LAC, in the first half, organic net sales declined 23.5%. Depletions declined less than shipments. And as Debra said, we are taking actions with the aim of returning to inventory levels appropriate for the current consumer environment. Therefore, in the second half of the fiscal, we expect organic net sales to decline 10% to 20% in the region compared to the prior year. On inventories, more broadly, I want to take this opportunity to reiterate the review we conducted with all our regions. In addition to reviews by the markets and regional teams, the global controllers team and the global audit team have conducted a review of compliance to our stock and trade standard and have reconfirmed the effectiveness of our controls. I am confident that we have the necessary controls, policies, procedures and sell-out culture in place to monitor and manage stock and trade levels across all of our markets. And now to look at our results at a category level. In the first half of fiscal '24, our beer business delivered 14% organic net sales growth, primarily driven by continued momentum in Guinness, which also grew 14% and strong double-digit growth in Malta and Senator in Africa. Chinese white spirits grew 32% as we lap the first half of fiscal '23, when COVID-19 restrictions were still in place. We also delivered strong growth in other whiskeys, fueled by the successful launch of Buchanan's Pineapple in North America, and double-digit growth of IMFL whiskey in India. However, this growth was offset by the weak performance in LAC, which impacted the scotch and tequila results. Scotch was also negatively impacted by lapping inventory replenishment in North America and the final sale of inventories in Russia in fiscal '23. Tequila organic net sales were down 6%, driven by LAC and lapping inventory replenishments in North America, partially offset by the benefit from the global rollout of the category. Recollect in North America Tequila, we only got to supply sufficiency in fiscal '23, and we will continue to lap this inventory replenishment in the second half of fiscal '24 as well. Our portfolio provides resilience and captures consumer demand during uncertain economic times. More recently, the shape of premiumization has been uneven across the market and we are seeing pockets of down trading. That said, excluding LAC, the standard and premium price points continue to outperform the value price point. And while organic net sales of super premium plus price points declined 2%, this was primarily in our U.S. spirits business. Here, organic net sales shipment growth lag depletions growth as the business lapped the replenishment of inventory levels in the first half of fiscal '23. Adjusting for this, our group super premium plus portfolio, excluding LAC, would be in good growth. Over the recent years, we have significantly premiumized our business and have seen consistent premiumization trends across total beverage alcohol categories. We believe this long-term trend will resume as we complete the lapping of the unevenness of the COVID-19 inventory replenishment cycle. In the half, organic net sales decline was driven by volume partially offset by positive price mix. We took strong price increases on Guinness in Europe and on Guinness and Malta in Africa with consistent investment and strong brand equity volume grew in the half. Spirits volume decline was mainly driven by LAC. Excluding LAC, targeted pricing actions across our premium, standard and value price points have led to a volume decline. However, the price mix impact is positive. In fact, excluding LAC across these price tiers, price mix more than offset the negative volume impact on organic net sales growth. These price increases have been essential to help mitigate the impact of cost inflation and protect margins. And the organic net sales decline in super premium plus spirits price points was, as I discussed, driven by U.S. spirits lapping prior-year inventory replenishment. In the second half, I expect overall volume growth to improve slightly as the impact from strategic pricing actions moderates. Looking ahead, we will continue to leverage our RGM capabilities to balance top-line growth more evenly between volume, price and mix. With our culture of everyday efficiency, we have delivered strong productivity benefits year-after-year. In fiscal '23, we stepped up the delivery of productivity, which reduced the impact of cost inflation and enabled us to invest in our business. In the first half of fiscal '24, we delivered productivity savings of $335 million, up versus previous years. The majority of savings come from cost of goods through procurement benefits on ocean freight, packaging, other transport costs, as well as, from manufacturing and logistics efficiencies. Marketing and overheads also drove a material contribution. As I mentioned earlier, we are on track to exceed the fiscal '22 to fiscal '24 productivity target of $1.5 billion. Looking ahead, and as I shared at our recent Capital Markets event, we have committed to significantly step up our productivity commitment to $2 billion over the next three years, fiscal '25 through fiscal '27. An enabler is the five-year supply agility program, which we announced at the end of fiscal '22. Savings from this program are expected to step up from fiscal '25 and accelerate in the following years. Organic operating margin declined year-on-year by 167 basis points predominantly driven by LAC. LAC operating margin significantly declined, driven by lower operating leverage, increased trade spend investment and cost inflation. Excluding LAC, operating margin was down by 53 basis points, and this was entirely driven by an increase of 70 basis points in our marketing reinvestment rate. At the group level, the positive impact from pricing and supply productivity initiatives more than offset the absolute dollar impact of cost of goods inflation. Our disciplined approach to managing overheads allowed us to achieve year-on-year cost reduction. We continue to invest in our brands with marketing investment growth in the first half ahead of net sales. We use a disciplined approach to the deployment of A&P investment and target opportunities for long-term sustainable growth and strong returns. This half, the increase in marketing investment has been deployed to the global rollout of tequila, especially in Europe and Asia Pacific. We also increased investments in Johnnie Walker in Europe, in Chinese white spirits, which recovered from COVID-19 restrictions and in India, which grew 9%. Looking ahead to the second half, I would expect the increase in our marketing reinvestment rate to moderate as we benefit from marketing efficiencies in North America and lap the prior-year increase in reinvestment rate across regions. Free cash flow increased primarily driven by our strong working capital management interventions, which was partially offset by lower operating profit and an increase in interest payments. Over the past years, we had increased inventory to navigate COVID-19-related supply disruptions, and we have been actively reducing these levels over the half. To enable this, we recently implemented new data analytics solutions and improved stock management processes. We also benefited from a onetime phasing benefit relating to the late receipt of certain raw and packaging materials. We renegotiated payment terms with some of our key suppliers and standardize and streamline work processes. We also benefited from lapping one-off tax payments made in the first half of fiscal '23. We continue to invest in maturing stock to support future business growth. CapEx spend increased in line with our long-term reinvestment strategy and prior guidance. Moving on to foreign exchange. Foreign exchange movements positively impacted operating profit, but adversely impacted net sales. Translation exchange had a negative impact on both net sales and operating profit. The exchange loss was driven by emerging market currencies, mainly the Nigerian naira, the Turkish lira and the Kenyan shilling, partially offset by gains on the British pound and Mexican peso. The transaction benefit was mostly due to favorable hedge rates on the British pound and Mexican peso, partially offset by the Nigerian naira. We hedge our transactional foreign exchange on a rolling basis for our major currency exposures. This strategy results in foreign exchange rates that reflect the average of our hedging positions built over time. We completed the half with our leverage ratio at 2.9 times towards the upper end of our target range of 2.5 to 3 times, reflecting higher debt and lower year-on-year profit. In the first half of fiscal '24, our net finance charges increased by $86 million year-on-year, reflecting the higher interest rate environment. Our effective interest rate at 4.4% is broadly in line with our guidance. Looking ahead to the full year, I expect our effective interest rate to be marginally lower than the first half given current market conditions. I want to emphasize that we remain committed to our target leverage range. And I'm conscious that we are at the upper end of the range. We will make the right decisions to support the long-term growth of the business. Should our leverage ratio fall outside of the range, we will take steps to return to the range as soon as practical. Our consistent and disciplined approach to capital allocation is unchanged. Our priority is to invest in sustainable organic growth and to acquire strategic brands that strengthen our exposure to fast-growing categories. Today, we announced an interim dividend of $0.405 per share. This is a 5% increase on our interim dividend in fiscal '23 recast to U.S. dollars. Our dividend cover at 1.9 times is within our target range of 1.8 to 2.2 times. When we have excess cash, we will return it to shareholders. At the beginning of fiscal '24, we announced a new share buyback program for up to $1 billion. As of 31st December 2023, we have returned to shareholders $0.5 billion and expect to return the remaining amount in the second half of the year. Basic earnings per share before exceptional items decreased 7% from $1.164 to $1.081. This reduction was primarily driven by weaker operating profit performance compared to the first half of fiscal '23 and an increase in interest charges, as a result of operating in a higher interest rate environment. And now back to you, Debra. Debra Crew: Thank you, Lavanya. In this uneven global economic environment for the second half, we expect our organic net sales growth rate to gradually improve compared to the growth rate for the group in the first half. And we expect an organic operating profit decline in the second half compared to the prior year, but we expect the rate of decline to improve compared to the first half of fiscal '24. While we expect headwinds to persist from continued inflation and relatively low operating leverage as we reduce inventory and LAC, we will continue to focus on delivering strong productivity and benefit from revenue growth management. We will continue to invest in marketing and brand building for the future. As we move into fiscal '25, and the consumer environment improves, we expect to progress towards the delivery of our medium-term guidance, with our organic net sales growth trajectory improving compared to fiscal '24. And we expect organic operating profit growth in fiscal '25 to be broadly in line with organic net sales growth. The first half of fiscal '24 was no doubt challenging for Diageo and our sector. But I am pleased with how we are responding as a team, and I would like to thank all my Diageo colleagues for their hard work, dedication and resilience, especially in the last 6 months. I am 8 months into my tenure as CEO of this wonderful business. And despite the uneven global pattern of economic recovery, we can and, I believe, will do much better. We are focused on accelerating the business, winning share raising the bar on operational execution and building the foundations for our next successful decade of growth. My confidence in our ability to drive sustainable growth and returns for shareholders over the long term is as unchanged as when I originally joined the Board of Diageo nearly five years ago, back in 2019. Yes, we face an uneven global consumer environment. But this is a resilient company, staffed by resilient and talented people, who do business the right way. Remember, Diageo has a track record of navigating volatility. We've done it before, and we will do it again. We are diversified by category, price point and region, and we'll continue to invest behind our iconic brands and actively manage the portfolio to maintain our position as an industry leader in total beverage alcohol, an attractive sector with a long runway for growth. My focus is to generate long-term sustainable value for shareholders by driving performance of our brands, especially in scotch, tequila and Guinness, meeting global consumers evolving taste and stepping up our operational excellence to win quality market share. The job to be done is clear, and we have both the long-term strategy and have put in shorter-term interventions to do it. Thank you for watching, and I look forward to meeting many of our shareholders in the weeks ahead. Q - :

Operator: Good morning, and welcome to Diageo's 2023 Interim Results Q&A Call. Your call today will be hosted by Ivan, Diageo's CEO; and Lavanya, Diageo's CFO. This conference is being recorded [Operator Instructions]. We are now ready to start the call. Ivan, please go ahead. Ivan Menezes: Thank you. Hi, everyone, and thank you for joining our interim results call. I hope you've had a chance to read our press release and watch the presentation webcast on diageo.com. I'm pleased with our results for the first half of fiscal '23. We delivered organic top line and operating profit growth above our medium-term guidance. Net sales up 9% with growth across all regions. Volume grew 2% even as we implemented strategic price increases, operating profit up 10%. Organic margin expanded 9 basis points. We generated GBP800 million of free cash flow, fueling continued investment in long-term growth. We expect to deliver stronger free cash flow in the second half as we lap more normalized working capital movements. We continue to gain or hold share in the majority of our markets, 75%. Our Super Premium Plus brands grew organic net sales by 12%. I'm particularly pleased with the strong growth in scotch, up 19%; tequila up 28%; and Guinness up 17%. On a constant basis, Diageo is 36% bigger than before pre-COVID and with a 4-year CAGR for organic net sales of 8%. In North America, organic net sales grew 3%, lapping strong double-digit growth in the first half of fiscal '22. U.S. Spirits net sales grew 2% on top of strong double-digit growth for 4 consecutive halves and we had depletions ahead of shipments. Our U.S. spirits business is 44% larger than fiscal '19, with net sales growing at a 4-year CAGR of 9.4%. We took price and held share of TBA. As expected, growth in the U.S. spirits category is normalizing, trending towards a historical mid-single-digit range. Consumer demand remains resilient and the market continues to premiumize. 33% of American drinkers surveyed said they had spent $50 or more in a bottle of alcohol in 2022, and that was up from just 24% in 2021. In Europe, organic net sales grew 10%, and we maintained volume despite the challenging economic environment. Asia Pac grew 17%, despite Greater China, which only grew 2%. Latin America grew sales by 20% and delivered the highest margin across all our regions in the half. This business is 64% larger versus fiscal '19 with net sales growing at a 4-year CAGR of 15%. I'm very proud of our performance in Latin America. In Africa, net sales grew by 6% with growth across all markets. And we're delivering consistent returns for shareholders, increasing our interim dividend by 5%. And today, I'm pleased to announce an additional return of capital to shareholders up to GBP500 million in fiscal '23. As I look ahead to the second half of fiscal '23, I am pleased with our start in January and the resilience of our business. I'm confident in our strategy and ability to deliver our medium-term guidance. And with that, I'll turn it to the operator, let's take our first question. Operator: [Operator Instructions]. Our first question comes from Sanjeet Aujla of Credit Suisse. Sanjeet Aujla: Ivan, Lavanya, a couple from me, please. Firstly, could you just give us a sense of where you see U.S. spirits sellout trends at the moment? And how that contrasts with inventory levels and the numbers you've given us on the shipments and depletions so far in the first half. And secondly, would just love some early thoughts on how Chinese New Year has gone? Ivan Menezes: Sure, Sanjeet. So the U.S. consumer is robust. If you look at the industry, we see it growing at about 4%, 5%. And I've said this for a long time, a couple of years or more, that post-COVID, we expect the industry to come back to that mid-single-digit growth range. And what I'm really pleased about is the consumer through the last 6 months has come to that rate. So we're feeling very good about it. Within that, premiumization remains strong. You see in our numbers, our Super Premium Plus business grew 10% in the U.S. So feeling really good about the health of the U.S. consumer. The spirits industry has 20 years of volume growth, taking share of TBA, outperforming beer and wine, premiumization is strong. And I quoted those numbers of the robustness of above $50 a bottle. So overall, strong, robust and pretty much where we expected it to be. If I turn to Chinese New Year, clearly, the -- I mean there's three pieces to Chinese 2 years. The sell-in before what happens in a couple of weeks and what happens after. The sell-in before we were cautious obviously, with the lockdowns and the COVID conditions in China. Actual Chinese New Year itself is subdued in terms of socializing and consumption. And certainly, the large events is more subdued, but we remain optimistic about China recovering fast, both for our scotch business and for a Byju. And as we go into Q3 and Q4, we're very much playing and into assuming a strong recovery. Obviously, we have to watch it week by week, but I'm feeling positive about the China consumer environment going forward. Sanjeet Aujla: Got it. And just a quick follow-up there on the U.S. If you think the industry is growing 4% to 5% in sellout terms, do you think Diageo is outperforming that? And just a quick word on where you think inventory levels are and how comfortable you are with that in the U.S? Ivan Menezes: Yes. I'll turn it to Lavanya. Lavanya Chandrashekar: I'll answer your question on inventory in a bit. But in terms of our performance in the U.S. itself, I mean we are holding share of TBA in the U.S. And so that's -- we're feeling good about that. Obviously, not we were growing share, and we plan to go back to that. And I will have a very strong point of view about that I know. But coming back to inventory levels, fiscal '22. We ended fiscal '22 with healthy inventory levels. We talked about this in July when we announced our results and inventory levels were to back to close to where it was pre-COVID, right? A little bit higher on imports just because the supply chain was longer, but broadly back to pre-COVID levels on inventory levels. Where we ended the half, we ended with inventory levels that distributed slightly below where we ended last fiscal year, not because we wanted to destock or we needed to do stuff, but just because December was with a really good month. And so a lot of depletions happened towards the end of December, especially which just led to inventory levels being a little lower. We feel good about where inventory levels are. And the -- we're lapping the [indiscernible] of inventory last year because if you go back to the start of fiscal '21 -- fiscal '22, sorry. We were coming off of a very, very, very high growth rate in fiscal '21. Fiscal '21, we grew 24% on U.S. bills so when we started fiscal '22, it was very low levels of inventory across the entire supply chain, which we recognized through the year. Some brands came in faster, some brands came in a little later in terms of when supply was available. And so that's what we are lapping here on ships versus depletes. Ivan Menezes: I'd just add, we've helped TBA share. I think if you look below that, what I'm really pleased with is we're gaining substantial share in the on-trade. So the on-trade in the U.S. -- and NAPCA has the most reliable data here. So if you look at NAPCA on trade, it's about 20% bigger than pre-COVID. And we've gained outsized share. So -- and to me, that's a huge measure of the health of our brands and the portfolio. And even in the last 6 months, we gained over 100 basis points of on trade share in NABCA. Operator: Our next question comes from Oliver Nicolai. Unidentified Analyst: Just a couple of questions, please. First, on the U.S., just following up there. As comps normalize, should we assume a stronger sales performance in H2 in North America in terms of organic sales growth? And then if we think about the margins, obviously, your margins was done in H1 in North America. Should we -- when could we expect a stabilization in margins in the U.S., what least kind of gross margin inflection to start with? And then just on FX, a quick question for you, Lavanya. You [indiscernible] that you were expecting GBP300 million positive impact on FX for this year. How much transactional FX impact do you expect this year? And is it fair to assume further transactional FX impact in fiscal '24? Ivan Menezes: Yes. So maybe I'll take the first part on U.S. top line and Lavanya margins [indiscernible]. So yes, we do anticipate, as I talked about earlier, the U.S. industry should be in solid mid-single-digit growth in the second half. We expect to perform in line ideally better, but that's going in [indiscernible]. So focusing on the consumer, I think we feel positive about our ability of consumer offtake to be in the mid-single-digit range. Now we have an intense sell-out culture, right? So as we look at managing the depletions and shipments, you will recall from last year's results because we were in the restocking phase. We had shipments ahead of depletions three points when we closed out the year. So we will lap through all that stuff, but to me, that's just supply chain. The main thing -- most important thing is ensuring we're well positioned to win with the consumer. And we've got phenomenal marketing plans, great innovation. We've got Super Bowl coming up and Crown Royal is going to be on the Super Bowl for the first time. Really excited about that. So the team has a significant ammunition behind our brands going into H2. So I'm feeling good about our ability to win with the consumer. Lavanya Chandrashekar: Olivier, to your question on margins in North America. I mean, look, I'll just start off by reminding us that North America is -- has very, very strong margins, 41% operating margin. It was the highest margin region for this business just got coupled by Latin America who surpassed them by 30 basis points. But it is -- one of our strategies has been to invest in North America for growth because every point of growth in North America comes with really, really strong margins. And so what you're seeing in the margin story is a bit of that. And we have invested strongly in A&P, also in digital and capabilities to enable continued strong growth of the business in North America. The gross margin -- some of it is inflation and the impact of that is what we're seeing there. But again, we have many levers to offset inflation, premiumization, volume growth, pricing and the work that we do on revenue growth management, all of that helps us to offset inflation. So I'm not concerned about where the margins are in North America. I think it's a very healthy P&L and business in the U.S. On FX, that was your second question. In terms of transactional FX, in fact, not really expecting much in terms of transactional FX impact, our major currency pairs are hedged. And as you saw in the first half, we really did not have any impact from a transactional perspective on FX. Operator: Our next question comes from Pinar Ergun of Morgan Stanley. Pinar Ergun: I have one on marketing. Byju invested very significantly into marketing in recent years, and you're indicating that the investment will rise faster than sales in H2. How do we reconcile that with your expectation of moderating sales growth across all regions? And specifically in the U.S., are your market shares evolving in line with your expectations given the investment that's gone into this region? And then two quick clarifications, I guess. One is on free cash flow. Can you please take us through the different moving parts here? Why have the creditor balance has shifted so large and so on? And then on capital allocation, has your thinking evolved at all now that the cost of borrowing has gone up substantially. Does that change how you approach buybacks, M&A and so on? Ivan Menezes: I'll take the first two on marketing and share. So marketing, we -- as you know, we built a lot of sophistication in the data and analytics and tools we now have to assess marketing effectiveness. And as we look to the second half, we see very good opportunities to step up the investment behind our brands, and that's why we indicated in the second half we intend to increase our reinvestment rate. This is built up by market, by brand and very much with the degree of confidence on returns. Now our marketing is not just to make the second half sales number, it is about the next 3 years, right? So everything in our business, upweights and marketing are not for short-term return alone. You do get some short-term impact, but the bulk of the impact really comes down the road and in line with our goal to be a very reliable top-tier compounder. This flywheel of Diageo of upweight investment, drive efficiency and get quality top line growth. So it's really in that context because we really want to ensure we're setting ourselves up well for the quality of growth through the medium term, but it's going against very specific brand opportunities where we have a high degree of confidence in the return that we will get for this investment. And I have to say the quality of our marketing continues to step up significantly, and I feel really good about that. On market share, I mean, we are especially at a global level where 75% of the world is in green. That's a high benchmark, and I'm pleased with that. In the U.S. context, we're holding share at BA we're coming off a period where we've grown significant share. And we've also taken price ahead of the industry, if you look at the last 3 years. And so flat share in the first half, but fully expect and want to do better Lavanya alluded to earlier. So we want to get back into the share growth mode in the U.S. And I expect in the medium term, we will do that. And that also takes me to the point when you look at our portfolio in the U.S. We've got a phenomenal tequila portfolio, which has still a long way to run. We're the leader in whiskey and whiskey is a hot category. Innovation, we've got a lot of exciting things in the pipeline that are going to be coming in to second half and into And our execution and investment levels in the U.S. So I do feel good about our -- the ability of our U.S. business to outperform the industry going forward. Lavanya Chandrashekar: So Pinar, on your question on -- you had two other questions, one on free cash flow and capital allocation. I'll take the free cash flow question first. So what we are seeing on free cash flow is working capital specifically, is the lapping of what happened last year. So again, I go back to reminding us of what happened in fiscal '22. We were coming off a very low inventory levels in the entire supply chain. We had a phenomenal growth year in fiscal '22. We grew 20% with 10 points of that coming from volume. We were buying a lot of stuff, like bottles, grains, marketing spend. Our total spend increased dramatically. And with that, our creditors increased tremendously in fiscal '22. Our creditors have increased in fiscal '23 in half 1 as well, but not -- just not to the same extent that it increased in fiscal '22. So what we're lapping is that huge increase in creditors that happened in fiscal '22 and that's about GBP500 million of lower creditor increase this year than the increase of last year. In addition to that, we have invested more -- a little bit more on inventory, mainly to ensure our ability to support continued growth of the business across as APAC has grown tremendously. Latin America has grown tremendously. So there's been about GBP150 million of increase in inventory. And the third piece is investing in maturing stock. And this is something that I had spoken about as we announced results last year. It is a part of our capital allocation strategy is to continue to invest in maturing stock to support the growth of our business, almost -- around half of our business today is in aged inventories. I mean with the growth of tequila, et cetera, and the growth of scotch, the 19% growth of scotch that we've seen this half is a good example of that. And so we are investing behind that. So that explains the three moving -- the three pieces to the moving parts of free cash flow. As we've indicated in the press release, I do expect that working capital will increase in the second half, simply because what we are comping in the second half of last year is a little easier. This business remains a very strong cash-generating machine, so no change to that. In terms of capital allocation and has our thinking evolved? The short answer is no. We have a very consistent and disciplined approach to capital allocation, and we will invest, first, in the business. Lots of room to grow. We still have our ambition of going to some 4% market share to 6% market share. And so we will continue to invest in CapEx, maturing stock, A&P, as Ivan discussed. And then M&A, we will be looking for interesting bolt-on acquisitions as we have done in the first half, where we just announced [indiscernible] we're very excited about that, and we will continue to look for opportunities there. We'll also be disciplined on the other side from a divestiture portfolio as we have been dividend, we will continue to be a progressive dividend payer, and we've announced a 5% dividend increase in this first half of this year. And then return of capital, we've announced an additional GBP500 million of return of capital for this year, and we will come back at year-end results with a further update for next fiscal if the Board decides to do so. Operator: Our next question comes from Nik Oliver of UBS. Nik Oliver: Just one on the U.S. and just to make sure that I'm clear. When we think about U.S. underlying trends, we're thinking kind of 4% to 5% right now with Diageo outperforming, given the [indiscernible] portfolio. Is that the best way to think about growth for the U.S. market? And then I'll come back with other questions afterwards, if that makes sense. Ivan Menezes: The U.S. market at mid-single digits, yes, that's what we've always said the market will return to, and that's what we're seeing, and that's what we feel confident about going forward. And it's driven very much by demographic state preferences. It's a long-term secular trend, which -- that is right, that level of growth for the industry. Nik Oliver: Great. And then when we think about marketing investment in the U.S., I guess, because there's been unprecedented pressing levels coming through, is the best way to think about marketing investments still market as a percent of NSV? Or should we think about it more in absolute terms when you are modeling? Any thoughts there would be helpful. Ivan Menezes: I mean if you look at the last 3, 4 years, we've massively upgraded investment in the U.S. market. We don't target a percent of reinvestment we actually build our plans, bottom up, right? So you take a brand like Crown Royal, I mean, we put in place a very rigorous process of what is the right level of spend behind Crown Royal and what mix of activities we put it behind. And so we built our marketing budgets bottom-up, but what you see in the trend is -- our orientation is to lean in and spend more because we do believe there's plenty of attractive growth to be had. And we're very focused on the sustainability of the growth. As I talked about earlier, this is not just about delivering a return in the next 6 months. So that's the approach we take. And the U.S. market, I've always said it, if there's any opportunity to spend more we will. Nik Oliver: Final question. I think back in last August, you were talking about share gains for Diageo on-premise one of the reasons why, obviously, maybe there's a disparity between the Nielsen and NABCA data and what Diageo was reporting. Is on-premise share gains still continuing? Ivan Menezes: Yes, very much so. I said we had over 100 basis points of share gains in the last 6 months. So we're feeling really good about our on-premise momentum Claudia and the team made some really big changes in our approach to the on-premise about 3 years ago. And you just see the consistency of performance coming through now. And that's a phenomenal indicator of the health of the business. So I'm really happy to see the growth in the on-premise, the share growth in on-premise. Operator: Our next question comes from Simon Hales of Citi. Simon Hales: Van. I have three, please. Firstly, sorry to labor the point, but can I just come back on the U.S. depletion trends first item. Obviously, you said that you held TBA share in the first half, am I right to read that a share loss in spirits and a share gain in beer from a depletion standpoint? And if that's true, what's really been driving that relative depletion share loss in spirit in the first half? And what gives you the confidence that we'll see the pickup so you'll be growing spirits depletions at least in line with the wider market in the second half of the year? That's the first one. Secondly, at the group level, I think price/mix is running 7.5%, 7.6% in the first half. You indicated that pricing was up high single digits. So perhaps the implication of that is that mix, overall, was a bit negative globally. Is that correct? Is it geographic mix that's driven that some channel shift? Just some color there would be handy. And then just finally, for Lavanya with regards to share buyback outlook for the year. Obviously, you said that given the macro uncertainty, we might be at the lower end of the 2.5x to 3x leverage range sort of for now. How do we think about sort of how you'll think about buybacks when we get to the full year and beyond? Does it make it more difficult in the current environment to perhaps commit to a multiyear share buyback program? And perhaps therefore, we should more think about rolling 6 months or 12 months forward commitment to capital return from here? Ivan Menezes: Okay. I'll deal with the share question and then turn it to Lavanya. So firstly, the share is consumer offtake, right? It's not depletion. So depletions is wholesaler -- distributor sales to retailers. So when you look at us holding share of TBA that comes in part from spirits doing better than beer and wine, right? So we are benefiting from the 20-year trend of spirit steadily gaining share of total TBA. And we've held share there. Now when you -- to your question on channels, we did gain share in the on-trade, as I talked about earlier. We are marginally down in spirits in the off-trade. But you have to remember, we're stronger in NABCA, which is a very stable channel to measure. Nielsen tends to be more promotional. And we've taken, as I mentioned earlier, we've taken -- if you look at the last 3 years, we've taken more price. We've led the industry on price on spirits. So net-net-net, we're about flat. And our intention is -- as we go forward, is very much to look at getting back to sustainable share growth. So that's how I would characterize the share performance. Lavanya? Lavanya Chandrashekar: Thanks, Ivan. So on price, Simon, what we said was that price contributed to high single-digit growth of [indiscernible] right? So I think that's the clarification to your question on price. On share buybacks, I mean, look, if I just point to the fact that prior to fiscal '19, Diageo did not have a multiyear share buyback program for well over a decade, but we have been very consistent in returning value to shareholders. And our TSR is on a 5-year and a 10-year basis is extremely strong. So we will come back as results with further guidance on share buybacks, but our approach to capital allocation continues to be very consistent. Operator: Our next question comes from Celine Pannuti of JPMorgan. Celine Pannuti: My first question is on your margin bridge. So we've seen gross margin under pressure in the first half. Can you help us how we should look at your cost setup in the second half? And maybe as well in terms of the pricing cycle, are we expecting further price increases? And I was looking at that bridge, I think marketing, you said will be up. So how should we think about the SG&A bucket in the second half? My second question is on trying to come back on Chinese growth, you said that you expect a very strong Q3, Q4. I think compared to the growth rate of the market for international spirits in your [indiscernible] what do you think the growth rate could be in China? And what are you planning for not only for fiscal year '23 than H2, but as well for the fiscal year -- the first half of fiscal year '24. And can I also ask on another number if you said a normalization of growth in Europe in the second half what is the normalization of the market growth you are looking for? Ivan Menezes: Okay. Celine, let me deal with China and Europe and then Lavanya cover margins. So in China, just to be clear, I'm not saying we're going to have a massive acceleration in Q3, Q4. I'm saying -- I said earlier, we are ready for the recovery of the Chinese consumer. I don't have a crystal ball on the pace at which that will happen. We're confident it's going to happen. Whether it takes 1 or 2 or 3 quarters, we'll need to see. So -- but we're certainly our approach to the marketplace in terms of marketing support, distribution is very much counting on a recovery of the Chinese consumer. And so the phasing of it, I think we'll obviously need to watch in the next 3 months. I think longer term, we remain confident about double-digit growth in China for our business, both in international spirit, which is primarily top end scotch and in Byju. And so we feel confident about China being accretive growth engine for Diageo. And as you know, it's at very high margins. We have very good margins in China. So we're encouraged with the reopening of China that we shall see good momentum. And the phasing and timing of it, obviously, we will watch very closely and stay very agile to respond to. On Europe, I mean, I'm delighted with our performance in Europe. I mean, 10% growth in the first half, strong market share gains in spirits and phenomenal performance on Guinness. And I know it was in the presentation, but I have to say it again. Guinness is now the #1 beer in the British on-trade. I never believed I'd see this day. It's fantastic. The brand is really healthy. So we're gaining share. We're going to watch the European consumer, obviously, is something that we put a lot of scrutiny behind, but we're confident we will continue to maintain the share momentum, what the external world does we will deal with. But we've been pleased with the resilience of the sector as we've gone through the first half with all the negative news flow on consumers in Europe, our category and our sector has held up very well. And we hope to see that continued resilience going into the second half. Lavanya Chandrashekar: Celine, your question on cost in the second half price increases and operating margin in genral. On cost -- look, we've seen higher inflation in the first half of this year than we did through last year. A lot of it was driven by energy costs. And -- but then on the other hand, we've -- we also have a lot going for us in terms of the levers that we have that helps us deal with inflation, volume growth point of our growth this half has come from volume. And that gives us operating leverage all the way through the P&L, premiumization, revenue growth management. We have taken more pricing and smartly while holding market share at -- in 75% of our measured markets holding or growing market share in 75% of our measured market aged liquid is definitely gives us some hedge as well in the sense that any inflation that is -- that happens on our aged liquid gets deferred to the P&L. Productivity, I do want to remind [indiscernible] we've delivered GBP220 million of productivity in this half. And that's a great way for us to offset inflation as well. Cost -- in terms of what I see coming forward in the second half, I mean inflation, it's persistent. It's not increasing, but it's not going away either. We are hedged from a commodity exposure perspective, so for the second half and beyond. Price increases, we take price increases across markets at various points in time. And so especially when you think about the emerging markets that are -- there will be pricing actions that will be -- that will continue to happen through the second half of the year. Overall, from an operating margin perspective, what I say that, look, we have a medium-term guidance out there to consistently grow operating profit ahead of net sales. And that is what we're reaffirming our medium-term guidance. Operator: Our next question comes from Edward Mundy of Jefferies. Edward Mundy: Two questions from me. The first is just a really sort of big picture question. You set out medium-term guidance range to grow sort of 5% to 7%. And I know that's a medium-term range, but you've clearly delivered growth in excess of that after a couple of really big years, you're aging about 8% since pre-pandemic levels. How confident are you that you can grow off this higher base? Or do we need to go through a period of digestion given these significant gains and the very, very strong momentum after the last couple of years? And then the second question is sort of what evidence are you seeing of weakening consumer spending power so far some of the volumes amongst certain consumers? Is it certain countries? Are you seeing the down trading? And how are you really adapting your business and getting ready for a potential weakening environment? Ivan Menezes: Sure. So I'd say -- to the first part of your question, we are confident in the 5% to 7% top line growth. And I think the way to think about it, Ed, is TBA worldwide has very positive trends, right? You've got premiumization that's strong. You look at the emerging markets and penetration is still low. You've got 600 million new consumers coming into the market, you take places like Latin America and India, Southeast Asia. In the developed world, we feel really good about the continued gains of spirits from TBA are performing beer and wine. So we pressure test this all the time, right? We're not just sitting here. So we do -- our strategy teams kind of run through a very rigorous kind of modeling of world economies, consumer behavior, sensitivities to shifts. And putting that all together, we do feel confident in the . On the big -- so we've got market dynamics. I mean we've got tough markets, right? Nigeria is a tough market. Africa, as you can see, is a bit slower in growth at 6%. We put the focus there on margin improvement and not chasing the lower end of the portfolio. So we've got different dynamics at different places. But by and large, the trend of premiumization is strong and intact. Our Super Premium Plus business, I think it was in my presentation, every region grew double digits in the first half. So we're not seeing a weakening of the premiumization trend. I mean, really anywhere, Latin America, Asia, India and certainly in the developed world. But we have the portfolio. I mean, I think what you see in these numbers is Diageo's footprint is a real advantage, the brands, the categories, the price points and the geographies. And at any point in time, when certain parts of the world are going through corrections or markets have slowed down, et cetera, we've got the ability to deliver this resilient performance and consistent performance. And that's very much. So of course, we've got challenges and in certain geographies, but we can offset it with outperformance in others. And that's where I believe the culture of our whole approach to this is being very agile operating as one Diageo. Debra and in her role, overseeing the markets, the supply chain and marketing. We're making very quick decisions as we see shifts in end markets. that enabled us to sustain this quality growth. Operator: Our next question comes from Mitch Collett of Deutsche Bank. Mitchell Collett: Going back to the U.S., you said you're holding share of TBA in the U.S. and that Spirit is gaining, which, I guess, implies that you're currently losing share of spirits despite the strength of tequila. And if I look at NABCO/Nielsen, the big difference appears to be prepared cocktails, which, as a category, is growing something like 50%. And I think you're ready to drink in the U.S., which I appreciate may not be all prepared cocktails is about plus 18%. Can you maybe comment on what you're doing to close that gap and whether that's going to be a strong driver of growth for you in the U.S. going forward? And then just to come back on margins for the group. Obviously, you've got marketing to sales being a drag in the second half having been a tailwind in the first half. Lavanya, I think you said input cost pressures are likely to persist. Can you therefore comment on where you think margins in the second half are likely to be up or down year-on-year? Ivan Menezes: Sure. So I'll take the first part of the question, Mitch. Firstly, you are right. The acceleration in RTD spirits has been the important piece of the spirits market growth. Our strategy there is, we're not chasing RTD growth. We want to be in the premium end of premium convenience is the way we look at the opportunity. So we're very focused on building a sustainable quality premium business in this space. And there's a lot of growth right now happening in RTDs, which is we're not interested in. The second thing I would say is actually, if you look at our share performance within bottle spirits, it is strong. We're gaining share. So -- and we absolutely believe having a healthy core spirits business is fundamental to our long-term health and outperformance in the U.S. So I'm really pleased with that. So that's to your question, and I'll turn it to Lavanya. Lavanya Chandrashekar: Yes, on -- so, Mitch, on your question on margins in the second half. I mean we're not giving guidance here for the short term at reiterate our medium-term guidance of growing operating profit ahead of net sales on a consistent basis. But as I said, I mean, like there's many leverage that we have in the portfolio. that helped us to grow margins. Yes, input cost inflation is -- we're not seeing it coming off. But as I also said, we are hedged -- and that does protect us. We have taken pricing in. We will continue to do so in the second half. Some of the work that the teams have been doing on revenue growth management, which is really helping to move the mix to more premium end to Johnnie Walker Black Label and above, it's a strong driver of margin improvement for us. And we're seeing this happen across all regions. You see our scotch growth in -- even in Africa, in Latin America and APAC Scotch in total has grown 19% and contributed to 50% of the growth of Diageo. Scotch is a highly profitable category. So there are many levers to get to -- that we are working on all simultaneously, including productivity. And so I feel confident about our ability to deliver a consistent, healthy shape of the P&L. Operator: Our next question comes from Lawrence Whyatt of Barclays. Laurence Whyatt: A couple for me, please. Firstly, on the U.S. business, you've -- your tequila performance continues to be very strong, but perhaps there was quite significant weakness across Crown Royal, Vodka and the Scotch portfolio, with the expectation of getting back to that sort of mid-single-digit level if tequila -- I think it's reasonable to assume that Secular performance still outperforms the wider spirits category, but that then assumes that you're comfortable with slightly lower growth, particularly in those three major categories for you. Is that the case? And is there anything you can do about those three categories, in particular, to accelerate the growth and get them back into positive territory? And then secondly, on LAC, the Slide 15 shows your CAGRs over the past few years. And generally speaking, most geographies were around sort of 7% to 8%. And lack was the standout at around 15%, and you've highlighted the improved margin performance in that market as well. Over the past few years, that market has had a bit of benefit from government stimulus checks. And is there any other reason why you expect the LAC market to continue at these sort of levels? Is it reasonable to continue to see LAC drive double-digit growth on accelerated margins? Or is that something we should expect to slow down over the next few years? Ivan Menezes: Sure. So why don't I take the U.S. and Lavanya, you can [indiscernible]. The U.S., we're playing a total portfolio game, right? We are very happy with the quality of our portfolio. When you look at the disposals of the brands we made a few years ago, -- and then obviously, the additions of tequila and aviation in and some of the smaller whiskeys we're adding now. So tequila still has a long runway, as we've talked many times before, whiskey we're very excited about. And bullet in these numbers, you can see bullet has performed strongly, growing double digit. [indiscernible], our depletions growth is positive. What you're seeing in the sales numbers is what Lavanya talked about earlier, just the lapping effects and our sell-out orientation on keeping the shipment to depletion profile right. But we're growing share. Scotch, actually, both Johnnie Walker and Buchanan's are growing share of the scotch category in consumer offtake terms. So whiskey for us remains very attractive. We're investing strongly behind it. Crown Royal, Bulleit, Johnnie Walker, Buchanan's, malls -- where if you remember, we've always underperformed in malls. I'm really happy to see mall performance now come come through strongly. I think in the U.S., we were up 60% in our single mall business. So whiskey will be an engine. On vodka, I think if you -- there's one factor which is consumer-led, Ciroc has clearly has more pressure with the urban multicultural consumer. But Ketel One is solid. I mean, if you -- we were -- and Smirnoff is solid. So -- and Ciroc, I believe, will come back. So we do see the Ciroc business stabilizing over time. And then we've got other brands like Baileys and captain and our new additions to the portfolio, gins with aviation. So when you plot the entire North American portfolio, we play a portfolio game to deliver the total outcome. It's not counting on tequila. Lavanya Chandrashekar: So Laurence, I'll take your question on Latin America. Indeed, a standout performance in Latin America, 3-year compounded annual average growth rate of 15%. And in fact, if you even go back before this, you look at fiscal '17, fiscal '18, fiscal '19, high single-digit growth in the Latin American business. And what we're seeing happen in Latin America is we've been growing the business the right way with strong A&P investment driving taking price driving premiumization, it's really the flywheel in action. I mean, I think this is one of our -- it's a great example of where that -- how that flywheel works in pretty much every geography around the world. And if you -- our business in Latin America is predominantly scotch. We are growing the premium end of in Latin America strongly. The work that the team has been doing in Latin America in terms of on digital on consumer-centric advertising, bringing our brands to be front and center of a very dynamic, young consumer base who is really interested in brands that are part of culture has been really fantastic. And really, the single biggest thing that I would say has driven this great performance, consistent great performance over several years has been our approach to looking at the market from a lens of total beverage alcohol. And we are a very small player and last from a total beverage alcohol perspective. And what the team has been extremely successful in doing is recruiting out of premium beer into premium spirits. And that's what has driven the growth in margins, the growth in share and the consistent growth of our top line. And you mentioned stimulus checks. I mean, look, this is growth that the business has delivered over the last 3-plus years and 3-plus years before that. So it's anchored in fundamentally good business delivery versus any short-term tailwinds that may have existed. Operator: Our final question of today comes from Andrea Pistacchi of Bank of America. Andrea Pistacchi: Two, please. earlier, you were talking about the good momentum you're seeing across the business exiting the half year period and the trends in January were also looking encouraging. You referred to December having been good, I think, in the U.S., more broadly in other regions? What sort of momentum are you seeing as go into the second half. Everybody thinks about the inflection point, which doesn't seem to have happened yet in Europe. So in particular, on Europe where you had another strong half year. How do you see those markets like Ireland Southern Europe, which continue to be good, but there's a -- you have a large on-trade exposure there. And then if I may, my second question is just on Ciroc, which you mentioned that earlier, Ciroc was down substantially in the half because you said distributors were were destocking the brand. I think it knocked about points of your total U.S. growth. Has this destock been completed? Should we see an improvement already in the second half? Ivan Menezes: Sure. I'll deal with the first one and ask Lavanya to comment on the Ciroc. The -- we have seen as we said in my statement. I mean, January has started well pretty much around the world, including Europe, Andrea. So I'm really pleased to see the consistency of consumer momentum for our brands and our category continue in Europe. And we -- obviously, we track it very closely. One of the things we've learned through the COVID years is you've got to be extremely agile, and we have also the consumer to really see if any shifts happen, we will adjust. But what has been really encouraging, I would say, through the last 6 months of, as I mentioned earlier, in Europe, is we've seen the cocktail culture really thrived and premium brands within that do really well. And so we expect the momentum to that underlying consumer case preferences as well as orientation to socialize and celebrate coming out of probed is solid across Europe. So I'm feeling good about our ability to deliver a solid second half. Obviously, there's uncertainty out there, but we focus on just making sure we emerge stronger and continue to keep the share momentum there. And as I talked about earlier, Guinness is in really healthy shape. So feeling good about the Guinness business in Europe too. Lavanya Chandrashekar: On Ciroc specifically, Andrea, yes, we have seen a slowdown in consumption on Ciroc and shipments were lower than depletions on Ciroc as the slowdown has resulted in distributed. And with our allowed culture, wanting to make sure that we have the right levels of inventory, healthy levels of inventory in trade. In terms of -- and if I kind of look back at the brand itself, I mean the brand has performed really well over the last 3 years. I mean what you're seeing over here is a bit of an impact on what's happening with multicultural consumers in urban imports, but it's also the growth of tequila, the growth of U.S. whiskey, I mean, these categories don't -- it's not like people are drinking so much more, but you're getting that growth of tequila is the shift happening from one part of spirits to another. I mean that is a large part of what's contributing to that. And so Ciroc is impacted by that to a resin extent, but we -- our focus would be to be where the consumer is with the interest -- with whatever the consumer is most interested in. We have a very broad portfolio across price points, and we moved back quickly to win with the consumer. . Ivan Menezes: Is that the last question? Operator: Yes. Ivan Menezes: Okay. Well, thank you, everyone. Really appreciate you taking the time. And the questions, Lavanya and I will be out on the road show next week, so look forward to meeting with many of you. Thanks very much for your interest in the company and belated, but happy new year to all. Operator: Ladies and gentlemen, this concludes today's call. Thank you for attending. You may now disconnect your lines.

Operator: Good morning and welcome to Diageo's 2022 Interim Results Q&A call. Your call today will be hosted by Ivan, Diageo's CEO and Lavanya, Diageo's CFO. This conference is being recorded. [Operator Instructions]. We are now ready to start the call. Ivan, please go ahead. Ivan Menezes: Hello, everyone. And thank you for joining our interim results call for fiscal '22. I hope you've had a chance to read our press release, and watch our presentation webcast on diageo.com. I'm very pleased with our results for the first half of fiscal '22, it builds on our strong momentum in fiscal '21 and demonstrates our world-class brand building supply chain excellence and agile culture. Organic net sales were up 20%. All five regions delivered double digit growth and exceeded net sales in the first half of fiscal '19. Growth was broad based across categories and I was particularly pleased with the strong growth in scotch up 27%. The continued outperformance in tequila up 56% and the recovery in beer up 22%. We also delivered a significant improvement in operating margin up 131 basis points, while increasing our marketing spend ahead of net sales growth. And we achieve this while managing higher cost inflation and ongoing disruption from global supply chain constraints. Our advantage portfolio combined with effective marketing excellent commercial execution and successful innovation enabled us to gain or hold off-trade share in the majority of our markets. And we also gain share in the on-trade as it continued to recover. We are investing in long-term growth including production capacity, digital capabilities and our society 2030 goals and we're delivering consistent returns for shareholders increasing our interim dividend by 5% and accelerating the timeline for completion of our return of capital program to 2023. While we expect continued volatility in the near term, I'm optimistic about the growth prospects for our industry and for Diageo. We believe we are well positioned for resilience in the off-trade and further recovery in the on-trade. We expect to continue benefiting from the rapid premiumization of the spirits category, and its share gains within total beverage alcohol. And our premium differentiated brand Guinness is well positioned for key growth trends in bear. I am confident in our strategy and our ability to execute strongly through the remainder of fiscal '22 and beyond. I'll now hand the call back to the operator to open the phone line for your questions. Lavanya and I are both in our London Park Royal Head Office as we take this call. Operator: [Operator Instructions] We will now take our first question from Pinar Ergun from Morgan Stanley. Please go ahead. Pinar Ergun: Hi, good morning. I have two questions, please. The first one is to what extent have supply constraints impacted volumes, especially in North America? And do you see any signs of improvement in the supply chain situation? And the second one is, do you see any possibility that consumers might spend less on premium spirits as the cost of living goes up? And I guess in that context, can Diageo continue to raise prices with a limited impact on volumes? Thank you. Ivan Menezes: Hi, Pinar. I'll take the second on premiumization trends and ask Lavanya to address your first question on supply constraints. So I would say the premiumization trends, as you know, have been very long dated and steady, in the US and in other parts of the world. People drinking better, has been a trend that has really sustained through lots of cycles, economic cycles and disruptions. The second point I'd make is, if you look at the US market, the average American household spends, that buy spirits. This is about half the household. They spend about $1 a day on spirits purchase at home. So when you're faced with an economic crunch, our product is an infrequent purchase. People typically buy spirits six, seven times a year, they buy a few bottles of a category. So if you're if you're drinking Ketel One vodka, you're buying a few bottles a year, and it's only a few dollars, of a premium to low price vodka. And so we do believe actually, the sustainability is good. The other thing I would say is if you look at the demographics, young adults, America again 21 to 31, 35, over index in buying premium spirits, the multicultural population over indexes and buying premium spirits. And you see these demographic trends also very positive for the premiumization in spirits. So, I mean, we're not immune from overall consumer confidence and spending power. But I would say within those shifts, we still see higher price brands growing faster. And that tailwind should continue for Diageo. Lavanya Chandrasekhar: I’ll take the first part of your question Pinar. On supply constraints impacting volumes in North America. Yes, we are seeing issues that are impacting our business in North America. But having said that, our U.S. business in North America grew 3% volume in half one, by kind of look back at pre COVID levels, volume growth on this business was somewhere between 1% and 2% at the top end. And so, yes, we are seeing issues there spotty, but having said that, I think the organization is doing a fantastic job of navigating them and being able to grow volume faster than we have historically grown on the business. Let me talk a little bit about where we're seeing constraints. Two areas one is on certain parts of our portfolio, we're seeing constraints in terms of aged liquid. That's true on Crown Royal and that's true on tequila liquid constraints. And then on Bulleit we have a very specific issue around glass. And that’s really is impacting just the Bulleit fall through, which is the very bespoke bottles. And we're working with our strategic bottle supplier on that brand to resolve those issues. Pinar Ergun: Great, thank you. Operator: We're going to take our next question from Sanjeet Aujla from Credit Suisse. Please go ahead. Sanjeet Aujla: Morning, Ivan and Lavanya. Couple of questions for me, please, just following up again, on the supply chain dynamics in North America. Can you give us a bit of a timeframe as to when you expect those constraints to be to be resolved? Or certainly moderating from what we've seen in H1? And then secondly, as you think about the pricing outlook, particularly in Europe, can you give us a sense of what sort of magnitude of pricing you feel you're in a position to take in the region? I think we've seen a lot come through in emerging markets already, but I'd be interested in how you think about Europe. And then my final question on China, if there's any color you can give us on the current sellout trends through Chinese New Year or into Chinese New Year particularly against the heightened lockdowns that we've seen in recent weeks? Thank you. Ivan Menezes: Yes. Why don't I take China in pricing and ask Lavanya to cover supply chain. On China, we see the environment is solid. I mean you see in our numbers both Baidu and Scotch whiskey continues good momentum. We're feeling -- I mean, you do have the impact of COVID lockdowns in various parts of the country that does impact business. I'd say going into Chinese New Year, it's solid, but not exuberant. And in particular, I'd say for our Baidu business, the large-scale banqueting occasions are going to be less, and large-scale gifting is going to be a bit less. But we remain confident on continued strong growth in China on both Scotch whisky and Baidu. And we're gaining share and we're feeling very good about the momentum there. And certainly for the longer term, we feel very positive about the growth prospects of China. On pricing in Europe, I'd say if you look at what we've been doing in Europe, we've been investing behind the brand strongly. We're gaining market share. Actually, we've gained in 5 out of 6 markets, we're gaining significant share. And our spirits business is performing very well. As we've talked before, we've got multiple levers to manage the inflationary impacts. Volume growth helps us, and there's very good volume growth in Europe. Mix is positive, and we will be taking some price. So the combination of productivity and pricing will offset inflation, but we're very surgical in how we apply our price increases and -- but you will see more pricing coming into Europe because of the inflationary pressures. Lavanya Chandrasekhar: Yes, Sanjeet, I'll take your question on supply constraints in North America. As I said mentioned to Pinar, I mean, we got to look at this in the context of the overall performance of the business, which has been absolutely fantastic in delivering volume growth in North America as well. And really, our organization has been able to achieved very strong results because of the proactive approach that we have taken to this area. And because of the strategic relationships that we have with key suppliers, in North America, as an example, the procurement organization has been able to bring in new suppliers to the market, and this has allowed us to increase our glass capacity by almost 25%. Now on Bulleit specifically, we think the teams are actively working on it, and we think it's going to be a matter of months before -- to be able to resolve it. It's not going to be a long-term issue by any means. On the aged liquid constraints that we have, look, we have a number of tools in our arsenal that help us take to work around that. The first thing is demand shipping, we are able to move our A&P spend to part the portfolio where we have -- where we do not have similar constraints. Kind of look at our results on scotch in North America as an example and Johnnie Walker in North America performed strong double-digit growth on the scotch category. And so we are able to, through a combination of revenue growth management and pricing on the constrained areas as well as the demand shaping, be able to tackle these constraints in these situations. Sanjeet Aujla: Great, thank you. Operator: We will now take our next question from Simon Hales from Citi. Please go ahead. Simon Hales: Thank you. Morning, Lavanya, morning Ivan. Three for me as well, please. Can I just follow-up on those pricing comments? Are you seeing competitors really following or matching the price move that you've been making in the U.S. and Europe? That's my first question. Secondly and more specific to your business in the U.S., there was some mixed brand performances in the first half from the volume and sales momentum point of view. Clearly, your premium brands have done very well. Tequila, scotch, et cetera, showing strong growth, but some of the more mainstream ends of the portfolio, Smirnoff and Captain Morgan, look like they're struggling a little bit, while Baileys and Bulleit admittedly given some of the supply constraints on Bulleit under a bit of pressure. Can you give us a little bit more color of the drivers there and, perhaps more importantly, how we should think about how those trends will evolve in the second half? And then just finally, a quick on CapEx. Clearly, you up weighting CapEx this year, I appreciate the some catch-up in that sort of CapEx expectation. But how should we think about CapEx really beyond 2022? Ivan Menezes: Okay. So I can do the first two and Lavanya cover CapEx. I'd say pricing, Simon, we -- the revenue growth management capabilities, we now have really embedded the analytics and data is very good. As I talked about earlier, we're investing behind the brand. Brand equity is going up. And we feel reasonably confident about our ability to take measured price increases and sustain the market share momentum we're looking at. You have different competitive dynamics in different parts of the world, but it's clear the inflationary pressures are high for everyone right now. And I'd say our customers are also understanding because everything they're buying right across the spectrum is facing more inflationary pressures. So I do believe we will be able to sustain kind of disciplined and pricing as we -- and as I said, surgically applied, and we really want to keep the momentum of growth and make sure we're recruiting more consumers to our brands and investment levels in the brands and equity is very high. On the U.S. brands, I would just say, as we come through the bounce-back of COVID and some of the supply chain issues there are, you're seeing some little differences in the portfolio on shipments versus depletion. So I'll just answer your question directly on the three brands you mentioned. On Captain Morgan, actually, our depletion momentum is positive. So it's low single digits, but it's in growth. And if you look at market share momentum where we've been losing share, as you look at 12 months, 6 months, 3 months, it's improving. So Captain should stabilize and be better. We've got a big program with the NFL, which we're excited about and we're in season right now. So you should see some improvement there. Smirnoff depletions is about flat. I'm talking the U.S. And again, we've got good marketing and innovation coming behind Smirnoff. So these two big brands will be below the North American growth rates, but we just need them to be stable to slight growth, and we do see that happening. Baileys actually is positive, and what you're just seeing there is the lapping effect of some of the shipments and coming off tariffs and all those things that happened on Baileys. But we're very positive on Baileys in the U.S. And again, it's in high single-digit type depletion growth as we looked at the last 6 months. Lavanya Chandrasekhar: Simon, I'll take the second part of your question on the up weighting of CapEx in fiscal '22. We have guided to -- we will -- we expect to spend between GBP 950 million and GBP 1 billion of CapEx in fiscal '22. This is higher than our previous guidance and really comes from the catch-up of projects that were paused or put on hold due to COVID and now coming back online and in fact the need to continue to invest in the business. From a capital allocation strategy perspective, our strategy remains unchanged. Our #1 focus will be to continue to invest in the business, and this includes capital investment as well as spend. From a CapEx perspective, ensuring that we have sufficient capacity to meet the growth ambition of the business and the growth trajectory that we're seeing on the business today is critically important. We also continue to invest behind strong consumer experiences. This is a large part of how we support our brands. We opened Johnnie Walker Princes Street back in September, and that has been a real boost to what consumers -- when consumers visit Princes Street, they come away with the love for the brand that's remarkable and unmatchable. And in terms of digital capabilities, that's been a key focus area as well. We continue to invest behind digital capabilities to support our commercial growth of our business, our marketing effectiveness, understanding as well as improving our marketing effectiveness as well as in building capabilities, even in terms of the supply chain. So that will remain our key focus area to continue to invest behind -- in our business. Simon Hales: Brilliant. That’s very clear. Thank you. Operator: We will now take our next question from Mitch Collett from Deutsche Bank. Please go ahead. Mitch Collett: Morning Ivan, morning Lavanya. I've got two questions. First, can you comment on inventory levels at the end of the half, ideally by region, particularly given the gap between depletions and shipments that you may have on brands that you've just mentioned? And then secondly, I think COGS per liter in the first half was up 1.6 year-on-year. I appreciate you say in the statement that COGS have benefited from some of your productivity efforts, but can you perhaps comment on how you've kept COGS per liter at that level given the premiumization you're seeing and then what you would expect is a reasonable level of COGS inflation for the second half? Lavanya Chandrashekar: Sure. I can take both of the questions, Mitch. So on stock in-trade inventory levels, I assume you're talking about trade stock. With essentially what we have seen across the business at a group level and within North America, what we're seeing is our stock in-trade is relatively flat year-on-year, with shipments in line with depletion. There have been some differences across different parts of different brands within North America, and that comes from we were -- we had increased stock levels to support the opening up of the on-trade in certain brands and in other places because of just managing the timing by when product gets to the market due to various supply chain issues. We've just seen some differences between shipment and depletion at a brand level. But at the total North America level as well as at the total group level, our shipments have been in line with depletions. On your second question on COGS and how are we able to manage cost inflation and what do we see happening on inflation, back in -- at the end of our year-end, last fiscal '21 year-end result, we had said with you that we are seeing a higher level of inflation. And we're seeing that come through in terms of both commodity costs as well as synergy costs. We're also seeing the impact of higher logistics costs due to just shortages of drivers and containers, et cetera, that's impacting everybody, not just Diageo. Where we are seeing the leverage that we have to offset inflation, first of all, I'll remind you that because of the nature of our business and the percentage of our business that have aged product, we have a natural buffer against inflation just because the whole -- a large percentage of what we are selling today we actually laid down the liquid several years ago, more than a decade ago in many cases. Other than that, we have -- we're seeing the benefits of volume growth. We grew volume 9% in the half, and that contributed significantly to margin benefit. Premiumization clearly contributes to our gross margin. From a cost perspective, we are -- productivity has been a big part of what has enabled us to keep growth muted despite inflation. And that's really embedded into our every day. And we're seeing cost productivity come through on -- from a procurement perspective, from a manufacturing perspective, also from a logistics perspective. So we're seeing it really play out across the board. And then from a margin -- going back to looking at margin, I mean revenue growth management has enabled us to take smart pricing, manage trade spend, manage mix in a way that allows us to grow our margins. Mitch Collett: Thank you Lavanya. That’s very helpful. Operator: We will now take our next question from Celine Pannuti from JPMorgan. Please go ahead. Celine Pannuti: Good morning everyone. Thank you. My two questions, number one, I would like to understand what do you -- what is your best guess of what the market growth is in the U.S.? You said that 3% volume, it seems to be slightly ahead of the market. Could you say whether the market growth rate overall is? And then my second question, I mean you have made at this point about virtuous circle of reinvestment. And clearly, 85% of your business gaining or holding share is very impressive. That said, I was looking at the U.S. and how much your A&P has been increasing and I look at 3% volume, which may be a bit ahead of market but doesn't seem to be that much ahead. So is that an observation? Or should I look at it on a total basis including the price mix benefit and it is the cost of moving consumer towards premium products? And what does that mean? What do you think that the support level maybe has been a bit oversized in the first half? Thank you. Ivan Menezes: Yes, I can start and let Lavanya jump in. I'd say now when you look at market growth rates with all this COVID kind of comps and what was happening last year and this year, you just have to be a bit careful. So what I would say in value terms in the past 6 months or the first half of this fiscal, we estimate the U.S. market in value terms growing at about 9%, 10%. But you have to remember, it's what it was lapping. The long-term growth in the U.S., let me just address that now, I mean what we see is, I mean, pre-COVID, you had the U.S. market industry growing at about 4%, 5%. We believe as things return to normal, it will grow at that or a little bit faster as the steady-state return of -- because the U.S. underlying demographic and taste trends are still very positive. The investment in marketing is very targeted, and we've got really good confidence on how we spend it by brand and get the returns. We -- and you've seen us do this in the past few years. The U.S. is a top priority to invest behind because our goal here is to have a sustainable growth engine in North America and one that will grow share outperform the TBA market. And as you know, our margins are incredibly high. There is nothing structurally changing in the economics of our U.S. business, right? It's not like the cost to compete has gone up or our margins are under pressure. These are very deliberate choices we are making to sustain not just this quarter and this half performance, it is really about the next few years. A lot of the A&P investments will pay back year two, year three, year four. We're building a number of smaller brands that will get bigger five years from now. So that's how I would address your point on the marketing reinvestment going up in the U.S. We're very -- what the capabilities Diageo has built in the last few years now gives us a lot more confidence in really smartly investing and being very clear on the returns we want and the returns over time. Lavanya Chandrashekar: Yes. I'll just build on that, Ivan. Celine, the way we look at marketing investment is really from a return on investment perspective. So it's not linked to volume growth alone but really looking at it from a perspective of what is being -- what's the overall financial return that we get on investment. And as Ivan said, we've built -- over time, we've built several tools and a lot of capability in this area. In the past, I've talked about -- we've talked about tools such as catalysts which allows us to forecast what a return on investment of individual marketing spend would look like as well as then on the back end of the program, measure and track whether we actually cast the benefit that we were expecting. Our North American business is a high-margin business. What we are -- all of our investments that we are making in this market has allowed us to grow the business ahead of market to grow share in a sustainable manner. And frankly, this growth is very accretive to the group P&L. And so it is -- as Ivan said, it's a deliberate part of our strategy to build a sustainable growth engine for us within North America. Celine Pannuti: Thank you very much. Operator: We will now take our next question from Olivier Nicolai from Goldman Sachs. Please go ahead. Olivier Nicolai: Hi, good morning Ivan, good morning Lavanya. Just two quick questions, actually following up on the U.S. First of all, you mentioned in the press release that the price mix in the U.S. was plus 12%, and you obviously mentioned channel mix premiumization and pricing. Would you be able to quantify the pricing element per se? And then if we look at -- well, this year into 2022, can you give us an idea of the magnitude of the price increase you've been taking so far in your U.S. portfolio? Thank you very much. Lavanya Chandrashekar: Sure. Olivier, we don't break down the pricing that we have taken in our disclosures. But what I will say is that we have -- we look at pricing as a very -- as a surgical part of tools within our overall revenue growth management suite of tools that we have. We've taken pricing on tequila in the first half of the year. We have taken about 4.5% pricing on tequila. And we've been able to execute it while continuing to grow the business, strong -- very strong double digit, 60% growth on that business and growing share of spirits as well as growing our share of tequilas. We've taken some pricing actions on Crown, where we have been liquid constrained. We've also taken some pricing action on Guinness. And so again, these decisions are made individual brand by brand based on the strength of the brand, equity based on the strength of the marketing programs that we have. And as we take these pricing actions, we are doing so in a database manner and balancing our growth -- top line growth with margin growth. In terms of what we should expect to see as pricing in the second half of the year, I'm not going to give you a clean enough answer that you would expect on this, but I will say that we will continue to evaluate pricing opportunities on a case-by-case basis, both in the U.S. as well as in other parts of the world. Olivier Nicolai: Thank you very much. Operator: We will now take our next question from Andrea Pistacchi from Bank of America. Please go ahead. Andrea Pistacchi: Yes. Good morning Ivan, and Lavanya. Three, please, if that's possible. First, I just wanted to follow-up again on pricing in the U.S. you said where you've taken pricing. And clearly, the pricing environment seems more favorable than it has been in a long time. So the question really is, is it possible to start thinking or are we far away from the point where you can really take pricing on some of the brands where there hasn't been pricing in years like the vodka portfolio or brands like Captain Morgan? Second question, please, on emerging markets where you've got very strong momentum. How do you feel about this momentum continuing as you'll be up against tougher comps and with inflationary pressures building on the consumer? And do you expect much divergence in performance among the regions in the next 6, 12 months? And then please, the last one on SG&A. It seems to me, I mean, given the organic basis points impact on SG&A, it would suggest, I think, that our SG&A organically was up quite strongly, probably low double digit. So I was wondering whether you could give a bit more color on that, what drove this significant increase in SG&A. Thank you. Ivan Menezes: Okay. Andrea, I take the first two and Lavanya the third. On pricing in the U.S., again, I'm not going to get into specifics of the pricing by brand. What I would say is we are and do intend to be able to take more pricing than historically. The brands have been well invested in, and the capabilities we have on revenue growth management are really embedded and delivering. So you should see better price realization coming through on our U.S. business. And we manage the portfolio. And so as Lavanya talked about, I mean, yes, tequila and Crown and a few places, we've taken more significant price increases. Over time, we will look at it across the whole portfolio and ensure we can deliver the right balance of volume, price and mix going forward. On emerging markets, I would say, I would just guide you to our medium-term guidance for Diageo that we laid out a few weeks ago. In the total growth for Diageo of 5% to 7%, we expect emerging markets to grow a bit faster than that. All the fundamentals actually are intact. The demographics, the penetration of spirits being low and increasing the risk. Scotch is very vibrant. You see it in our Johnnie Walker and Scotch numbers came through really, really strongly, and I'm really pleased about that. Most of the growth in Scotch, the growth rates in the emerging markets were much faster. There is some bounce-back effect, but what happened through COVID is we did see in-home penetration increase for deluxe scotch. And we see the recovery of the on-trade opens also strong. So we're feeling positive about the emerging market momentum. I mean you see there is very strong momentum in Latin America. Africa has come back nicely. Guinness and beer is doing really well. Our beer business in our Guinness business is up 19% in Africa, but Johnnie Walker is up 19%. Smirnoff is up 15%. And then in Asia, India had a very solid performance, including Scotch, which did really well. So we do see good -- emerging markets always have a level of volatility, but the long-term prospects where we feel very good about, this being an accretive growth business for Diageo in the years ahead. Lavanya Chandrashekar: Yes, I'll take the question, Andrea, on overhead on SG&A. Yes, on a dollar basis, our SG&A has increased, although it has increased far slower than our overall growth rate. Our overhead, we are seeing significant operating leverage come through driven by the growth of the business. And really the reason behind it is just that we're lapping a period where we had pulled back on spend -- on discretionary spend in a significant way at the start of COVID which has continued through to the first half of fiscal '21. So -- and as things have started to revert back to normal, I mean, we are back in the office, as Ivan said, the Investor Relations team, Ivan and myself, we are all back in the office again. We have had some modest recovery of travel, thanks God. And so it's just a reversal -- we're just trying to think about getting back closer to normal. Andrea Pistacchi: Okay. Thanks very much. Operator: We will now take our next question from Edward Mundy from Jefferies. Please go ahead. Edward Mundy: Morning Ivan, morning Lavanya. Three questions from me, please. As a comment, I think, in your previous presentation around share of TBA in the on-trade, presuming this is partly a Diageo comment given that half of your brands and strong execution. But is there any early evidence that consumers are drinking more spirits and cocktails than in the on-trade as the recovery comes through? The second question is really around tequila that continues to be a good part of your growth engine, and we're about 5 years into the cycle. What gives you confidence there's still plenty of runway left for the category? And how do you think about the risk of new entrants, some of these other celebrity-endorsed brands, how do you ensure that your brands stay relevant and don't lose the momentum? And then the third question, Lavanya, on the buyback, could you just run through the reasons for the acceleration and bring it forward by year? Ivan Menezes: I'll take the first two. We are seeing spirits momentum in the on-trade a little stronger. I'll take the UK as an example. So the recovery across spirits, beer, wine, cider has been strongest in spirits and premium spirits. So -- and in other parts of the world, we see the on-trade coming back with -- there was a concern, right, as to where people down-trade when they go back to the on-trade. And that hasn't happened. So we see continued -- so as a broad statement, in most markets, we are seeing positive trends for spirits in the on-trade as it reopens. The tequila growth, I'd say when you cut the consumer understanding on tequila, and I'll focus on the U.S. before the rest of the world, we still see a lot of runway. The category's appeal across demographics is significant. It has crossed over. The multicultural growth is very strong. It cuts across age segments. It cuts across gender. It cuts across dayparts, the occasions and the nature of drinks. It's not just shots and margaritas as it used to be many years ago. So we see tequila being growing faster than the spirits industry. It's obviously not going to grow at the kind of rates we're seeing right now forever, but we don't -- we do see it for the next 5 to 10 years growing faster than the spirits industry, so taking a bigger share of total spirits. The international growth in tequila is just starting. It's very small. But we do see at the high-end bars around the world, I mean the mixology community is very connected, and tequila is making its way onto drinks and cocktail menus. And bartenders are excited about it. I expect that to be a slow build. It's not going to explode. So in total, we do feel positive about the long-term growth trends for tequila. And that, in part, is also guiding the investments we're making in Mexico around agave and distilling capacity. Lavanya Chandrashekar: I'll take your question on the acceleration of the buyback, but maybe I'll just remind that when we announced the share buyback program back in July 2019, we announced a $4.5 billion program to be completed in three years. And we passed the -- we completed $1.25 billion by January 2020, but then we paused the program in April due to COVID, and we started it in May 2021. We have announced that we plan to complete GBP 1 billion of buyback by March this year. The reason for accelerating the program, the completion of the program to fiscal '23, it's simply because our leverage ratio is back to the bottom end of our target leverage ratio range. So we target a range of 2.5x to 3x net debt to EBITDA. We ended the half at 2.5x. And in line with our capital allocation strategy, where possible, we return money to shareholders in the best method possible. And so we had -- when we restarted the program in May 2021, we had extended the completion date from what was originally end of '22 to end of '24. Given that we are back at within our range on leverage, we pulled it forward to fiscal '23. Edward Mundy: Okay. And Ivan, just coming back to tequila, clearly some of the other celebrity endorsed brands are getting traction. The rock tequilas are now at 600,000 cases. I mean how do you ensure that both Casamigos and Don Julio stay relevant and don't lose momentum? Ivan Menezes: Yes, I'm sorry, I didn't address that. I mean the key is keeping these two brands incredibly vibrant aspiration of recruiting. I mean we've gained outsized share in tequila with Don Julio and Casamigos, right? And so that share momentum within the category we've got to keep doing. I would say we feel good. These brands are incredibly healthy. They're on trend. We have premiumization within Don Julio happening at a terrific pace. And as we may have mentioned before, we're constrained on liquids, on 1942 and Altima, some of the higher price points. So I would say keeping these brands really healthy. It is a brand business, a premium brands business. So it's not like the wine business. You absolutely have the pair of the brand playing a very important role in this category. And this is what Diageo needs to keep doing is ensuring we're at the top of our game on keeping these two brands and their market share momentum within tequila. And I feel good about the ability of the team to keep doing that, and we start from a very strong base of brand equity momentum. Edward Mundy: Thank you. Operator: Will now take our next question from Trevor Stirling from Bernstein. Please go ahead. Trevor Stirling: Good morning Lavanya and Ivan. Three questions from my side. First one, Ivan, looking at the 8% CAGR over the last three years, which is incredibly impressive performance, but then looking at a regional level, I'd say probably the one region probably underperforms compared to potential is Asia Pacific. I wonder if you could talk a little bit about that, about the reasons behind that. But Latin America, incredibly strong performance, and that seems to be pretty broad-based but primarily scotch. Is that fair? So maybe a little bit of color on those two regions. And then finally, I noticed that you're investing as well behind the Diageo ONE B2B platform. Is that something that's oriented more towards distributors or where you have direct-to-retail relationships or a bit of both? Ivan Menezes: Yes. So I'll take the first two, and Lavanya can cover the B2B platform. The 8% growth, as you say, is over three years now, this business has gone through the COVID disruption and we're at that level. The Asia Pacific numbers, there's a few things going on. You've had less of a bounce-back in growth yet. I mean we still even through this half the parts of Asia that have been more challenged. So you see in this half, Asia Pac only grew 13%, whereas Latin America grew really strongly at 45% and Africa grew at 23%. Within Asia Pacific, China we feel really good about, and it will come back. I mean Australia has been a bit tough part of Southeast Asia. So I think that impacts the CAGR. But I remain very positive about looking forward that India and China should be very accretive growth engines for Diageo, growing faster than our average. And Southeast Asia, Scotch is coming back nicely, will be positive. And then we have some drags. I mean Australia will be low growth. Korea is low growth. Japan is lower growth. So developed Asia will be lower growth. Your second question on Latin America, the momentum is in the Scotch recovery, and we're feeling -- I mean, I think our scotch volumes were up 20-plus percent in the half. Deluxe scotch, Johnnie Walker was up 40-plus percent in volumes. And what was interesting to see is the at home consumption through COVID, the penetration of high-priced whiskey increased at a faster rate. And as conditions have improved and the on-trades come back, we're seeing really strong growth, and we're gaining market share right across other than Mexico, where we're slightly behind. Everywhere else, we're gaining very strong market share in Latin America. And I'm very positive about the outlook for what we can do with -- we brought this lens of TBA share, and that's driving us over the last couple of years. I mean the way we activate the occasions we're going after looking at the bigger pool has just opened up more opportunity. And it's not just scotch. I mean Tanqueray has done -- is doing really well. Our Jim Beam business is also performing nicely. Baileys is good. Smirnoff is coming through as well. So feeling good about Latin America. Lavanya Chandrashekar: Sure. Trevor, I can take your question on Diageo ONE. It is a B2B platform. And it's basically a single point -- it allows us a single point of engagement with our customers. They're able to access their account. They're able to access any other Diageo content. And they're able to do so from any device anywhere at any point in time. It's something that we have in place now in six markets, and it enables us to be able to provide better customer service to our customers, more digitally enabled service to our customers. Trevor Stirling: Thank you very much, Lavanya and Ivan. Operator: Will now take our next question from Nik Oliver from UBS. Please go ahead. Nik Oliver: Two from my side, please. First 1 on the emerging markets at this time and on the margins, I mean, I guess, operational leverage particularly in Africa and Lat Am has surprised to the upside in the good years like now and the downside in the past. Is there anything you can share with us in terms of cost structure, fixed versus variable or anything else, to maybe help us model these better going forward? And then the second one and back to the U.S., you called out very good growth in the spirits RTDs. And where the sourcing from, I mean, I guess some of it is cannibalizing spirits but is a bigger part coming from outside the spirits market, beer, et cetera? Thank you very much. Ivan Menezes: Yes, why don't I get started? On the margins on Africa and lag, so in Africa, when we went through the lockdowns, I mean, the beer business is a fixed cost business, right? So you take a big hit on the downside as volumes drop. But if they recover really fast as the volumes come back, so while we were going through that correction, I mean, I wasn't particularly worried. We knew we would get the economics back on the business. And you take a market like Nigeria, we've had significant margin expansion come through as that business has come back. And so what you look at going forward, to your question, is, I mean, if you've got big volatility, we want that the swing of the COVID volatility that -- but when you have volatility in volume due to external factors, it does impact your margins. And what we stayed true to is kind of staying invested and not kind of trying to manage this business for short-term margin when we went through those cycles. On Latin America, as the deluxe similar dynamic and small, the mix when we were at the height of COVID, Scotch whisky business, deluxe volumes dropped, that had -- it's a very high-margin businesses, and now they're coming back very strongly. So you take the long view on both Africa and Latin America, and we do see margin expansion in both markets driven by volume growth, premiumization, pricing and productivity. And so we would expect steady margin expansion going forward. But as we know, it's never a straight line. And I think what you see in Diageo's approach is we are steering the company through volatility in a way where we're really focused on getting quality sustainable growth and the economics to the right place and not having knee-jerk reactions to short-term disruptions in the external environment. Lavanya Chandrashekar: I take your question, Nik, on U.S. spirits ready to drink. First of all, to say that it's a very small percentage of the business right now. And so 50% growth on a small number while really good, it's a small number. But the second thing that I'd say is one of the dynamics that we're seeing playing out in the on ready-to-drink which really caters to a convenience benefit for our consumers, it's the same thing that we're seeing in the rest of the U.S. market, where consumers are choosing to drink better. They're looking for more flavorful liquids and, frankly, more premium offerings. And so one of the dynamics we're seeing play out in the U.S. category is that consumers are willing to pay a significant premium to have fantastic products such as Crown Royal cocktails in a can. And so that's one of the drivers that we're seeing to the growth of our spirits RTD business is coming from people who may have been drinking other products in a can now moving up to really a much better experience with Crown Royal in a can or Tanqueray, soda Tanqueray in a can or Ketel Botanical or spirits in a can. Nik Oliver: Great. Thank you very much. Operator: We will now take our last question from Jeff Stent from BNP Paribas. Please goa head. Jeffrey Stent: Good morning. Two questions, if I may. The first one, just on India, historically, Ivan, I think you said it could be a big bonanza and needs trade discussions. And so share of… Ivan Menezes: So we're having a hard time hearing you. There's a bit of background noise. Jeffrey Stent: Can you hear me better now? Ivan Menezes: Sorry, we can't hear you. Operator: It appears the caller may have stepped away. We will now take our last question from Chris Pitcher from Redburn. Please go ahead. Chris Pitcher: Thanks very much. A couple of questions for me. In terms of the recovery in Guinness and Travel Retail, it was striking that the Travel Retail Lat Am is back to pre-COVID levels, obviously, mindful of travel restrictions. But do you expect -- when do you expect actually the other markets to get back to pre-COVID levels? Or do you think reduced business travel might make those structurally lower? And then could you give us a sense of how many of the Guinness outlets in Europe and Africa that you were trading with pre-COVID back trading to give an idea of the reduction there? And then lastly, on -- you mentioned raising CapEx. But in terms of maturing inventories, those stepped up in the first half. Could you be on track for GBP 5 billion this year? Can you give us a sense of how much you're investing behind the strong recovery in scotch particularly in, obviously, Latin America? Thanks. Ivan Menezes: Okay. I'll take Travel Retail and Guinness recovery. Travel Retail, I mean, we're nowhere back. There's a long way ahead to recover to pre-COVID levels on Travel Retail. I would say we remain confident about the channels that it will recover. You got to remember, a lot of our growth is consumer traveling, the personal traveler. So we're not relying on business travel as much to drive the recovery. And if you look at what the aerospace industry, the airlines all predict, it's a little hard to call, but we do expect that to be a significant interest in consumer travel returning. And we are seeing -- I mean, we've had fast growth in the recovery as you see travel pick up, so I would say, to get back to where we were, it's probably another two years, maybe a bit longer, but we will just focus on gaining market share through that recovery because it's very much going to depend on passenger numbers. The Guinness, I don't -- was the question how many on-trade outlets are closed? Chris Pitcher: In terms of the addressable market, as the market recovers in terms of number of outlets you're trading with, has there been a structural reduction in the number of accounts you've got? Or... Ivan Menezes: Yes, there is a level of shakeout because -- which there's been historically as well. As you know, the on-trade business has a degree of churn. The weaker outlets do drop out and then you have new entry coming in. I'd say the consumer dollars, though we feel good will come back, even though the fleet of outlet composition will change a bit particularly for the weaker, unfortunately, for the weaker -- financially weaker outlets that just haven't been able to make it through. I mean generally, and this is more a global number, we expect 10%, 15% of outlets that would be unable to recover through the shock of what COVID has represented to them. But then you're also seeing new capital come back into the sector to expand and create new outlets or invest behind the existing fleet. So overall, I mean, Guinness recovery is happening fast as conditions improve. And the brand is in healthy shape in Europe. And we are seeing very good momentum actually not just in the on-trade but also in the off-trade. And some of the innovation and brand building is now kicking in. And I'm very positive on the future for Guinness in Europe, and it was really strong in Africa, and it's strongly growing in the U.S. So the brand is in very good shape. Lavanya Chandrashekar: Yes, I'll take the second part of your question on maturing stock. And I think that if you were referring to the fact that our maturing stock eventually has increased at the end of fiscal -- at the end of the half of fiscal '21 now close to think 4.8 billion. Look, we look at our investment in maturing stock, it's really an investment in the future sustainable growth of Diageo. And we continuously evaluate what level of liquid to be laying down across the portfolio on Scotch, on Canadian whisky, on American whisky and now on the edge where tequila is an example, on an ongoing basis. And the way we look at this is critically important for us to be investing in the future growth potential for Diageo. Chris Pitcher: I can title that quote [p] on Guinness 0.0 in terms of the draft launch in the UK, is that pulling ahead? I know in a short bit of dry January left, but how is that all going? Ivan Menezes: I mean we've got production constraints. The demand is way beyond what we expected on Guinness 0.0. So over the course of the next year, we hope to get back into a position of supply. So that's what we're dealing with right now. The demand is far outstripping supply. Chris Pitcher: Thank you. Ivan Menezes: Okay. Well, we'll draw to a close. Thanks, everyone, for joining the call. I appreciate your interest and support for the company and look forward to catching up with many of you. Lavanya and I will be doing the road shows virtually and look forward to catching up with many of you in the next few days. Operator: This concludes today's call. Thank you for your participation. You may now disconnect.

Ivan Menezes: Good morning, everyone. I'm pleased to announce our financial results for the first half of fiscal '21. We have returned to top line growth, driven by strong sequential improvement across our regions compared to the second half of fiscal '20. This is ahead of our expectations at the start of the fiscal year. Our people and our business have shown incredible resilience and agility in this challenging operating environment created by COVID-19. Using insights and data, we've quickly pivoted to changes in consumer occasions and behaviors, and we've responded at pace to increase demand in the off-trade channel. Excellent commercial execution, effective marketing and accelerated innovation have driven strong performance and market share gains. The on-trade e channel continues to be very disrupted with bars and restaurants around the world being impacted by government restrictions. We are well positioned for the reopening of these outlets, but we expect the recovery of this channel to be volatile. Travel Retail continues to be severely impacted by lower passenger numbers. Despite the current challenges, I am cautiously optimistic about the outlook for our business. The fundamental growth drivers for Diageo remain intact, and the actions we've taken and will continue to take will ensure we emerge stronger. I am proud of the support we've given to our customers and communities in response to COVID-19. Last June, we launched Raising the Bar, our $100 million commitment to support the recovery of the hospitality sector around the world. The fund has already benefited over 30,000 outlets in 7 countries with ongoing rollout into additional outlets and countries over the course of the 2-year program. This support includes hygiene and sanitation kits, furniture for outdoor spaces and solutions for table reservations and contactless ordering. Over 70% of the procurement spend funded by Raising the Bar has been locally sourced in the countries where the funding was received. Across our brands from Crown Royal to Guinness, we've continued to raise awareness and provide support for bartenders. And most recently, Guinness launched a #KeepTheLights On campaign in Ireland, which invited consumers to embrace their local pubs and pay a visit when they reopen. Through our platforms such as Diageo Bar Academy, we're providing training and guidance on safe reopenings, including online menus and takeaway cocktails. We will continue to support the on-trade through the recovery whenever and however outlets reopen. It is fundamental to our performance ambition that we do business in the right way, and it is embedded in our strategy. I'm immensely proud of Diageo's sustainability and responsibility achievements to date and aware that we have more to do. We are building on our track record with the launch of Society 2030: Spirit of Progress. This is our 10-year sustainability action plan with 25 bold and ambitious goals to help create a more inclusive and sustainable world. It will challenge us even further to make a positive impact over the critical decade to 2030. I will talk about this in more detail shortly. Our business delivered a strong performance in the first half of fiscal '21. The group returned to top line organic growth, driven by sequential improvement across all regions compared to the second half of fiscal '20. North America, our largest and most profitable market, grew 12% compared to the first half of fiscal '20. This strong growth was underpinned by a favorable market structure, which is weighted to the off-trade, as well as the continued long-term trend of spirits taking share from beer and wine. Consumer demand in the off-trade has remained extremely resilient even as the on-trade has partially reopened. In Europe and Turkey, the off-trade channel, especially in Great Britain and Northern Europe has been robust. However, the on-trade channel has been severely disrupted, particularly in Ireland and Southern Europe. In Africa, all of our markets delivered an improved performance from the second half of fiscal '20. The pace of recovery varied with South Africa and Kenya being the most impacted by government restrictions. Our business in Latin America and the Caribbean delivered good sequential improvement, although the challenging economic environment drove down-trading to lower price products. The improved performance in Asia Pacific during this half reflects a strong recovery in Greater China and resilient consumer demand in Australia. In India, our business achieved net sales slightly ahead of the first half of fiscal '20. Travel Retail remained severely impacted across regions. Overall, I am very encouraged by the trends that we've seen during the first half of fiscal '21. Although the pace of recovery remains uncertain, our business has pivoted to where the consumer demand has been resilient and we are benefiting from our broad geographic footprint. Across markets, our focus is on winning quality market share. While we have more to do, I'm pleased with what we have already achieved. In the first half of fiscal '21, we held or grew our off-trade share for over 70% of net sales in measured markets. This strong performance is a significant improvement from fiscal '20 when we held or grew off-trade market share for around 55% of net sales in measured markets. I am very encouraged by the strong results we've delivered this half. Today, we have announced our interim dividend for fiscal '21, which is an increase of 2% on the interim dividend for fiscal '20. We are confident that Diageo will continue to navigate strongly through a challenging operating environment and that the long-term growth drivers for our business remain intact. Our robust financial performance during COVID-19 and agile responses to the challenges and opportunities reflect the fundamental strength of our business. Our diverse geographic footprint and well-balanced position across developed and emerging markets creates resilience. We have a strong position in markets where there's been good consumer demand, particularly in the U.S., Great Britain and Greater China. We are benefiting from the breadth of our global portfolio across categories and price tiers. We're strongly positioned for the premiumization trends that have continued in many markets. However, we also have lower-priced alternatives that consumers have sought in some emerging markets. We've used our insights and tools to rapidly understand shifts in consumer needs, behaviors and occasions. We've up-weighted investment in marketing, innovation and acquisitions in a targeted and effective way. Our embedded culture of everyday efficiency has enabled us to tightly control discretionary expenditure and drive continued productivity. In a dynamic environment, we have a clear focus. We are using our insights and tools to: build a deeper understanding of consumer behavior, invest effectively in marketing using our data-led and targeted approach and adapt and prioritize our innovation pipeline. We are building capabilities to capture new opportunities, including e-commerce, and we're strengthening our portfolio through strategic brand acquisitions. We are investing to add capacity, support brand equity and deliver our sustainability agenda. The long-term trends for the spirits industry remain intact and create a natural runway for growth. Spirits has been consistently taking share from beer and wine globally. Despite this, spirits penetration remains low compared to other alcoholic categories, especially in emerging markets. Diageo has only 2% share of the global total beverage alcohol market volume and 5% of the global TBA market value. This creates an excellent growth opportunity for our business. Looking specifically at the U.S. spirits market. The graph on the right of the slide shows the resilience of the market during COVID-19. This partly reflects the favorable market structure. Even prior to COVID-19, around 4 out of every 5 drinks were being purchased in the off-trade channel. Following a dip in the initial months of COVID-19, the U.S. spirits market has grown strongly in the first half of fiscal '21. We take an active and disciplined approach to portfolio management. Since 2015, we have strengthened our portfolio through a focus on premium-plus brands in fast-growing categories including U.S. whiskey, Canadian whisky, tequila and gin. We've done this partly through strong organic growth of brands such as Crown Royal and Gordon's, driven by effective marketing and insights-driven innovation. For tequila, we developed our portfolio through the successful acquisitions of Don Julio and Casamigos. The subsequent growth of those brands has been exceptional. Tequila now accounts for 7% of Diageo's net sales, up from 1% 5 years ago. In fiscal '21, we acquired Aviation American Gin and we've agreed, subject to regulatory clearance, to acquire Chase Distillery. These are fast-growing premium-plus brands with exciting growth potential. We have built a well-balanced footprint between developed and emerging markets, which provides resilience, as well as exposure to long-term growth opportunities. We continue to benefit from our market-leading position in the growing North American market. We expect future growth to be underpinned by favorable demographics, strong premiumization and spirits consistently taking share from beer and wine. Our business in Greater China has increased from 2% to 5% of Diageo's net sales over the last 5 years, and we expect our increasing exposure to this fast-growing market to be a key driver of our long-term growth. While COVID-19 is having a significant impact on many of our emerging market businesses, the long-term fundamentals remain intact and we are well positioned for when these economies recover. Premiumization is a long-term global trend, and we're consistently premiumizing our portfolio. Over 50% of our net sales are now generated from premium-plus products, an increase of 8 percentage points since fiscal '15. Our Reserve portfolio grew 15% in the first half of fiscal '21. Alongside our spirits portfolio, we have a premium beer business with Guinness at its core. While our beer business has been disproportionately impacted by the on-trade channel restrictions during COVID-19, we expect a strong recovery as these restrictions ease. I expect spirits to continue to premiumize. Looking specifically at the U.S. spirits market on the right-hand side of the slide, you can see that the price/mix did dip in the initial months of COVID-19. This was due to the on-trade closures and some pantry-loading of larger bottle sizes in the early weeks of lockdown. Price/mix has since accelerated in fiscal '21 to above pre-COVID levels. In Latin America, we've seen consumers switching to lower price points during COVID-19. However, we expect premiumization trends to return as these economies recover. I am confident that our actions through COVID-19 will ensure Diageo emerges stronger. We have rapidly responded to shifts in channels and occasions to gain quality market share. We are leveraging our deep understanding of consumer behavior to invest effectively in marketing and innovation. We are investing with confidence in fast-growing markets like the U.S. and China and strengthening our portfolio in key categories. And we are driving continued productivity gains from our embedded culture of everyday efficiency. I will talk in more detail on these areas shortly. However, first, I will hand over to Kathy to go through the details of our financial results for the half. Kathryn Mikells: Thank you, Ivan, and good morning, everyone. As Ivan mentioned, our financial results for the first half of the fiscal are ahead of expectations with strong sequential improvement in performance across all regions. Diageo has shown incredible resilience adapting quickly to this new and changing environment, leveraging the enhanced data and tools we've developed over the past few years. I'll recap on some of the highlights from the first half that Ivan has just taken you through. In the first half of fiscal '21, we delivered organic net sales growth of 1%, reflecting the underlying strength of our business and the fast recovery we have seen, especially in North America and Greater China. Our organic volume growth was down 0.2%, and we delivered 1.2% positive price/mix. Organic operating margin decreased 153 basis points. Cash performance was strong in the half and continues to demonstrate how we have embedded rock-solid day-to-day cash management. We delivered GBP 1.75 billion of free cash flow in the half, which was GBP 787 million higher than last year, driven mainly by working capital benefits. Pre-exceptional earnings per share declined 12.8%, reflecting the lower operating profit with basic EPS down to 67.6p, mainly reflecting the additional impact of unfavorable exchange rates. The interim dividend increase of 2% over the fiscal '20 interim dividend reflects our strong liquidity position and confidence in the long-term health of our business, which enables us to fully invest behind sustainable quality growth initiatives while consistently delivering returns to shareholders. Return on invested capital is at 15.8%, down 175 basis points as a result of unfavorable exchange and the decline in organic operating profit. Total shareholder return was up 9%, driven by an increase in share price over the last 6 months and also supported by our fiscal '20 final dividend. As you can see, after 3 years of consistent delivery of mid-single-digit top line growth and strong margin accretion, our business was significantly impacted by COVID-19 in the second half of fiscal '20. In this first half of fiscal '21, the group returned to top line growth with organic net sales growing at 1%. Organic operating profit was down 3.4%, driven by gross margin dilution from adverse channel and product mix, especially in our Guinness beer business, as well as the significant decline in the high-margin Travel Retail business. Quickly shifting investment from on-trade to off-trade and e-commerce was key to our recovery over the first half. Armed with better data and information, we were able to identify the consumer shopping and occasion opportunities that had momentum, and we quickly moved resources and adjusted our marketing spend and our programs to ensure that our brands intersected these opportunities. The sequential improvement from fiscal '20 second half to the first half of fiscal '21 was broad based, and overall, you can see it was well balanced at both the top and the bottom line. Organic net sales grew 1% in the half, driven by North America, offsetting declines in other regions except for Africa, which was roughly flat. Positive price/mix was 1.2% with year-on-year improvement in North America and Africa. Organic volume was down 0.2%. Volume gains in North America and Latin America and Caribbean were more than offset by volume declines in other regions. The performance in the U.S. was driven by market growth, improved share, positive category mix and the replenishment of stock levels by distributors and retailers. The scaled-back trade activity in the last quarter of fiscal '20 resulted in a decrease in absolute levels of stock-in-trade in many of our markets at the close of the year. As consumer confidence and demand recovered in the first half of this fiscal, distributors and end outlets sought to replenish their stocks. In the U.S., where this impact was the greatest, our shipments to distributors were about 3 percentage points ahead of depletions. The heightened impact of COVID-19 on our on-trade keg beer business and the duty-free Travel Retail channel had a significant impact on our revenue. The impact of the depressed Travel Retail channel was most pronounced in Asia and Europe, and the impact on the keg beer business was most pronounced in Europe and Africa. As you can see on the chart, excluding the kegs of our large strategic on-trade beer brands and the Travel Retail business, our organic net sales growth would have been 6.2%, with 3.3% positive price/mix. As Ivan has already taken you through, we delivered strong sequential improvement across all regions in the first half of the fiscal. COVID-19 had a significant impact on our second half of fiscal '20. That impact was more subdued in the first half of this fiscal as the on-trade began to reopen and our investments behind areas of momentum took hold. We really see this coming through in our North America results where we returned to top line growth, supported by strong off-trade demand and improved share performance. When our markets have a larger on-trade keg beer or duty-free Travel Retail business, the impact of COVID-19 has been more significant. Europe and Turkey net sales declined 10% as continued momentum in the off-trade wasn't able to offset declines in the markets that are highly exposed to the on-trade channel and duty-free Travel Retail. Reduced levels of international travel continued to severely impact Travel Retail in Europe, which declined 72%. Beer net sales in Europe and Turkey declined 34%, driven primarily by the Guinness on-trade keg business, which was impacted by on-trade restrictions and closures, particularly in Ireland and Great Britain. Our Latin American and Caribbean region was also impacted by COVID-19, in particular, the Travel Retail channel and Caribbean and Central American market, which both suffered from depressed international travel. The region was in low single-digit growth, excluding the impact of Travel Retail. Asia Pacific net sales decreased 3%, but was in growth, excluding the impact from Travel Retail. Our teams are working hard to ensure that we emerge stronger from the crisis and are well placed to win in both the on-trade and Travel Retail channels as they recover. Later in this presentation, Ivan will take you through the various ways in which we're pivoting our business and our resources to take advantage of the opportunities in the off-trade and e-commerce channels, while continuing to support the on-trade as and when it reopens. Our key categories are also showing strong sequential improvement. In the first half, scotch was down 8%, reflecting the greater exposure of the category to on-trade and Travel Retail channels. The impact was particularly significant in emerging markets, which, together with Travel Retail, contributed to over 2/3 of our scotch sales pre COVID-19. Excluding the impact of Travel Retail alone, scotch sales were flat in the first half. The growth rate in tequila was particularly strong at 61% and ahead of pre-COVID-19 first half fiscal '20 growth. Vodka performance also beat the pre-COVID-19 period, broadly flat in half. Gin grew strongly at 6%, just a bit behind our first half fiscal '20 growth. The sequential improvement of vodka was driven by growth in North America, where Cîroc grew 16%, driven mainly by U.S. spirits on the back of refreshed activations to engage with Cîroc's consumer base. Growth was both in the core variant as well as key flavor variants. Tequila is one of the fastest-growing categories in the U.S. And as Ivan mentioned, our acquisitions in the tequila category have been a key enabler for growth. We continue to invest behind Don Julio and Casamigos in the U.S. with activations targeting the in-home occasion that have enabled us to gain significant category share. Beer is down 11% due to the high exposure in the on-trade. Excluding the kegs of our large strategic on-trade beer brands, beer was up 1%. In Africa, where we had focused on premiumizing our beer participation, Guinness was up 9%, supported by the rollout of Guinness Smooth. In Latin American and Caribbean, where we have recently expanded our distribution footprint, Guinness was up 11%. Guinness is a key brand for us within our portfolio and we look forward to the recovery of the on-trade across Europe, where before the pandemic, Guinness was growing well as consumers were gravitating toward more flavorful beer, including the perfect pints served at the GUINNESS STOREHOUSE in Ireland and in the U.S. at the Guinness Brewery & Barrel House in Baltimore. Excluding on-trade kegs and visitor center business, Guinness would have been up 7%. Net sales of local stars grew 1%, driven by growth in Chinese white spirits, Crown Royal in North America and Black & White in Colombia and Mexico. These gains were partially offset by declines in Old Parr in the Caribbean and Central America market, as well as in Colombia; Windsor in South Korea; J&B in Southern Europe; and McDowell's No. 1 in India. In Reserve, net sales were up 15%, reflecting a resilient performance from our most premium brands. This included the strong growth of Casamigos and Don Julio. Casamigos grew well over 100% and Don Julio was up about 40%, driven by U.S. spirits. SJF, our Chinese white spirits business, was up 18%. These strong gains were offset by declines in scotch malts in U.S. spirits and Johnnie Walker Reserve variants mainly in Travel Retail. Excluding Travel Retail, Johnnie Walker Reserve variants were up 17%. In the first half, global giants declined by 7%, caused primarily by COVID-19-related lockdowns and restrictions. Within global giants, Johnnie Walker was down 12%, mainly due to the impact of COVID-19 on our Travel Retail business and domestic markets more dependent on international tourism such as our Caribbean and Central American market. Guinness declined due to the impact on the keg business from restrictions to the on-trade channel, particularly in Great Britain and Ireland. As the COVID-19 pandemic developed, we moved with pace to engage consumers in new ways to enjoy Guinness in the at-home occasion. And this agility has driven growth in the Guinness off-trade market share in GB, the U.S. and in Ireland. Globally, net sales of Guinness Draught in cans was up 24%. Smirnoff was down 3% and Tanqueray up 1%. Both spirits brands grew in U.S. Spirits, but were in decline in our Europe and Turkey region, mainly driven by Southern Europe and Travel Retail. These declines were partially offset by growth in Baileys and Captain Morgan with both brands growing strongly in North America and Europe and Turkey. As Ivan has mentioned, premiumization is one of the key pillars supporting both our recovery and sustainable long-term growth. The first half of fiscal '21 delivered momentum in our super premium-plus brands, with 14% growth ahead of pre-COVID-19 trends. Our U.S. spirits business continues to build momentum with continued premiumization and strong price/mix improvements supported by our tequila brands as well as Cîroc, which was up double digits in the half. Our acquisitions clearly target this premiumization opportunity. The acquisition of Aviation American Gin in the U.S. and Chase Distillery in GB, which is subject to regulatory approval, will be our newest additions to the premium-plus price tier. Both play a complementary role alongside our other gin brands. We also previously increased our ownership position in SJF in fiscal '19, which is benefiting from the premiumization of the baijiu category. As already mentioned, the impact of COVID-19 was significant for some of our premium brands, including Guinness and Johnnie Walker. As the on-trade further reopens and international travel begins to recover, we are confident that these brands will bounce back. At the other end of the spectrum in emerging markets, where per capita income is lower, we have seen some short-term down-trading as poor economic conditions squeeze the consumers' discretionary income. This has fueled the recovery in our value brands. In Latin American and Caribbean, net sales of value brands are up 14%, primarily due to the Smirnoff X1 Spicy Tamarind innovation, which continued to perform strongly. Our standard brands have recovered to pre-COVID growth rates, driven by growth in our primary scotch brands as consumers in some region shave sought more affordable alternatives. For example, White Horse and Black & White grew strongly in Latin American and Caribbean in the half, up 113% and 40%, respectively. With our portfolio approach, we feel well positioned to catch consumers as and when they trade down to lower price points as well as taking advantage of the global premiumization trend and improved growth in higher-priced tiers. Reported operating profit declined 8.3%, driven mainly by unfavorable exchange impact and the decline in organic operating profit. Organic operating profit decreased 3.4%, driven by unfavorable channel and product mix with productivity benefits from everyday cost efficiencies largely offsetting commodities inflation. Reported operating margin, excluding exceptional items, declined 192 basis points, mainly driven by the decline in organic operating margin and unfavorable exchange. Organic operating margin contracted 153 basis points, driven by pressure on gross margin and one-off costs only partially offset by overhead efficiencies. Gross margin dilution of 174 basis points was driven by adverse channel and product mix, especially in our Guinness beer business as well as the significant declines in the high-margin Travel Retail business. Supply productivity broadly offset commodity inflation. Margin compression was especially pronounced in Europe and Turkey and in Africa. In Europe and Turkey, operating margins declined 539 basis points, primarily driven by unfavorable channel mix from the on-trade closures and lower Travel Retail sales, both of which are more profitable channels in that region. In Africa, operating margins declined 434 basis points, driven by unfavorable market mix, a one-off tax charge in Kenya and increased cost inflation due to higher duties on imported materials. Conversely, in North America, our margins expanded 80 basis points, driven by strong operating leverage and lower discretionary expenditure primarily driven by overhead savings. We significantly reduced marketing spend in the fourth quarter of fiscal '20 during the lockdowns. In the first half of fiscal '21, we've returned to prior year investment rate levels, up-weighting investment in the markets and categories with positive growth momentum and quickly responding to channel shifts and the increase in at-home occasions. Other operating items contributed 17 basis points to operating margin expansion, driven by overhead efficiencies, partially offset by one-off costs. As Ivan mentioned, embedding everyday efficiency is one of our strategic priorities. I feel really good about the progress that we've made on productivity and how we have embedded an everyday efficiency mentality across the business. This is one of the flywheels that will enable us to emerge stronger. This half, we have delivered savings and added value back to the business across 4 key focus areas. In manufacturing and production, we are continuously challenging ourselves to automate more of our processes and systems at the back end, enabling us to make faster and better decisions further up the value chain. At our Cameronbridge site, we built a machine learning algorithm that analyzes real-time weather data and allows us to model different scenarios. We're able to use these insights to inform raw material input plans, reducing waste and improving yields. We also automated multiple processes across functions such as inventory procurement and logistics, resulting in faster processing times and significant efficiencies and savings due to the reduction of errors and manual work. Automation has also been deployed in our back-office processes, contributing directly to overhead savings, and through better user experience and faster throughput, enable the organization to focus on our core business. Using intelligent automation and robotics, we introduced new tools for managing purchase orders and international payments, automated several steps of the source-to-pay process, eliminating significant manual work and implemented a global tool to automate overhead reporting. We also continued to centralize and standardize our financial controls, reporting and analysis activities. In our core record-to-report process, we achieved 95% standardization and 96% automation eliminating manual work, reducing time to report and improving quality and controls. Across our media investment, commercial negotiations have realized significant A&P savings in the first half of this fiscal. We have also collaborated with one of our global media partners to develop a bespoke media planning platform. The platform seamlessly and digitally brings together creative and media planning which further increases A&P efficiency and complements our Catalyst marketing effectiveness tool. We continue to invest in building world-class data analytics, such as Catalyst and EDGE, that give us a competitive advantage in the marketplace by digitally enabling our sales and our marketing teams. The role of Catalyst is well documented. As Ivan highlighted at our prelims results in August, Radar is the next evolution of Catalyst that further refines our understanding of profit pools and A&P return on investment. It was implemented over 2 months during the summer of 2020 in 13 countries, which made up roughly 70% of our total A&P investment. Radar has enabled us to plan and invest more effectively by helping us to anticipate how COVID-19 will impact our markets differently over time. This has allowed us to invest smartly with more confidence to build effective country-specific marketing plans for the short term and the longer term to ensure that we emerge stronger. In addition, we're now investing further in our insights tools, initially in North America, to develop more granular hyper-local analytics using localized data, which we aggregate to provide consumer insights that we can then apply at scale. Our efforts on Catalyst and data analytics are being recognized with us gaining 7 2020 awards from the Institute of Practitioners in Advertising. We're also investing in brand-specific direct-to-consumer platforms like Haig Club and Malts.com, and we will continue to invest in this space, allowing us to better connect and gain insights from our consumers while also giving them a direct path to purchase. We delivered GBP 1.75 billion in free cash flow in the half with the strong performance driven primarily by working capital gains and lower cash tax payments. The reduction in net working capital is mainly due to an exceptionally large increase in creditors relative to the end of June 2020 compared to the prior year. Towards the end of fiscal '20, we experienced particularly low creditor balances arising from reduced sales demand and cost control measures. Over the first half of fiscal '21, creditors have risen sharply to more normal levels reflecting improved business performance and accelerated A&P investment. While debtors and inventory also expanded as the business picked up, it was not to the same degree. We have clearly benefited from a laser focus on debtor risk management and collections. Our days sales outstanding in debtors dropped by over 10 days since year-end, and our overdue balances are at their lowest level in years. As I look to the second half, I am mindful that we've closed our first half with a negative net working capital position more similar to what we typically would see at the end of the year. This is in sharp contrast to the normal cycle, where our overall net working capital position increases in the first half and then reverses back in the second half. So looking at seasonality and the sequential improvement we saw in net working capital in this first half of fiscal '21, it's reasonable to expect some net working capital build in the second half as we move back to a more normalized profile. We also saw tax cash benefits this half as we lapped a relatively higher level of tax payments in the first half of fiscal '20. And in October 2020, we received a payment of GBP 82 million from Moët Hennessy in respect of dividends relating to the financial year ended December 2019, which is shown in the other items on this chart. Lower levels of CapEx in the first half of fiscal '21 compared to the prior year also increased free cash flow as some construction projects have been delayed by COVID-19. We are investing consistently in the long-term growth and sustainability of the business. As I look ahead towards the second half of fiscal '21, I expect CapEx to increase as projects restart and the delays are mitigated. As a result, I continue to expect fiscal '21 CapEx to be in line with fiscal '20. Our leverage ratio at 3.4x is better than we anticipated and in line with what we reported at the end of full year fiscal '20, enabled by our strong cash flow performance. The strong cash flow performance in the half also enabled a reduction in closing net debt of about GBP 600 million over the last 6 months and about GBP 200 million reduction compared to the end of the first half of fiscal '20. Net interest charge was broadly flat compared to the second half of fiscal '20 with reduced gains from our foreign exchange swap portfolio and the costs associated with enhancing our liquidity position mostly offset by more efficient borrowing despite higher average debt during the period. Compared to the first half of fiscal '20, net interest charge was up due to higher average debt and a higher effective interest rate. Our effective interest rate at 2.8% increased 40 basis points due to the costs associated with enhancing our liquidity position and reduced gains from our foreign exchange swap portfolio which were partially offset by the impact of more favorable funding costs. Other financing charges were flat compared to the second half of fiscal '20. Compared to the first half, other financing charges were ahead due to adjustments required because of the hyperinflation in the Lebanese economy. I expect other financing charges to be at a similar level for the second half. Our effective interest rate at 2.8% was flat compared to the second half of fiscal '20 and 40 basis points higher than the same time last year due to the changes in net interest charges and other finance charges that I just mentioned. Our effective interest rate was better than our guidance of roughly 3% due to more efficient new borrowings. As I look ahead, I expect our effective interest rate to be marginally higher for the second half, mainly dependent on the movement we see in short-term interest rates and the timing of cash flows. We remain committed to a leverage range of 2.5 to 3x adjusted net debt-to-EBITDA over the medium term, but we continue to anticipate that we'll be above this range throughout this fiscal year. Our disciplined approach to capital allocation remains unchanged. Our strong liquidity and balance sheet gives us confidence to invest in the business to deliver sustainable and efficient organic growth and to generate value through acquisitions that further strengthen our exposure to fast-growing categories and occasions. Over the course of the half year, we've announced 2 acquisitions. We have completed the acquisition of Aviation American Gin; and we announced the agreement to acquire Chase Distillery, subject to regulatory approval. We continue to invest in Distill Ventures, which allows us to partner with drinks industry entrepreneurs. This has led to exciting acquisitions, including Seedlip distilled nonalcoholic spirit and Belsazar vermouth. We look forward to future acquisitions coming from our portfolio of seed investments. Today, we have announced an interim dividend of 27.96p, bringing the interim dividend growth to 2% compared to the fiscal '20 interim dividend. The increase is in line with the fiscal '20 full year dividend increase. This reflects the improved first half year performance and our confidence in the long-term fundamentals of the industry and our business, while recognizing the ongoing economic uncertainty that's created by the pandemic. In April 2020, we announced that we had paused our share buyback program. This will continue to be the case until leverage is back within our target range. We will keep future returns of capital, including dividends under review through fiscal '21 to ensure that we allocate Diageo's capital in the best way to maximize value for the business and stakeholders. We have a track record of increasing shareholder value and have increased our dividend per share every full year since fiscal 2001. Over the last 20 years, our absolute dividend per share has increased 213%. Our decision to increase the interim dividend by 2% continues this trend and reflects our commitment to maximizing shareholder returns. Moving on now to foreign exchange. Unfavorable exchange significantly impacted both net sales and operating profit in the first half, driven by the weakening U.S. dollar and other emerging market currencies, partially offset by the strengthening euro. Given the continued uncertainty, we are not able to provide specific financial guidance for the full year fiscal '21. However, I would highlight that sterling has continued to strengthen against the U.S. dollar and other currencies. If these conditions persist, I would expect an ongoing significant negative impact building through the second half. Earnings per share before exceptional items declined 12.8%. This decline is largely due to the unfavorable foreign exchange impact just discussed as well as the decrease in organic operating profit, and to a smaller extent, higher financing charges and the impact of acquisitions and disposals. This was partially offset by the positive impact of lower tax and noncontrolling interest and the impact from share buybacks. Our tax liability decreased mainly due to the decline in taxable profit. Our tax rate before exceptional items was 22.4%. We expect the tax rate before exceptional items for fiscal '21 to be at the upper end of the 21% to 22% range we guided to back in August. Noncontrolling interest had a positive impact on EPS as a result of the lower profit in our listed subsidiaries. Prior year share repurchases reduced the weighted average number of shares, generating a positive impact on EPS. I'm encouraged by the strong performance that Diageo has delivered over the first half of fiscal '21. Our continued focus on rock-solid day-to-day cash management has enabled us to deliver strong free cash flow performance, stable leverage and to invest ahead for the future. This focus on creating value for our shareholders is reflected in our resilient long-term record of consistent dividend growth. The external environment is volatile and we expect that to continue, driven by the pandemic and related economic impacts. The pace and shape of the recovery will vary from market to market and will depend on many different factors. For example, the successful rollout of the vaccine and other public health measures, the impact of economic policies, the pace at which lockdown measures are eased and how quickly consumers choose to return to bars and restaurants and resume international travel. The actions we have taken over the last few years to make Diageo a stronger, sharper business give us confidence that we can continue to well manage this volatility and to emerge from the pandemic stronger. Our industry is resilient, and the strength of our business has been demonstrated in our results this half. We are not providing specific guidance due to the ongoing volatility. However, we will be lapping the second half of fiscal '20, which was significantly impacted by the onset of COVID-19, and therefore, expect to see a net sales value improvement over this weak comparator period across all regions. We expect continued momentum in North America, augmented by a lapping of inventory reductions by distributors. The pace of recovery in other regions will be more closely aligned with the gradual reopening of the on-trade and the degree to which restrictions continue to be in place. We expect Travel Retail to continue to be heavily impacted by the reduction in travelers. We expect organic operating profit growth in the second half of fiscal '21 will be ahead of organic net sales growth in all regions due to the weak comparable period except North America where we experienced strong organic operating margin gains in the second half of fiscal '20. Organic operating margin in the second half of fiscal '21 will continue to be pressured from channel and product mix as Travel Retail will continue to be heavily impacted and restrictions on the on-trade continue. We expect to continue investing in A&P to emerge stronger from the crisis. Despite the pace of recovery differing significantly across the globe, we are confident in our ability to return the business back to being a high-quality growth compounder longer term. And with that, back over to you, Ivan. Ivan Menezes: Thank you, Kathy. Our strategic priorities are clear and we are executing strongly to drive quality growth. We are moving at pace in a dynamic environment, investing smartly and doing business in the right way. I will cover each of these areas in more detail, starting with an update on how we are sustaining quality growth and investing smartly. As I mentioned earlier, the drivers of our strong performance are our insights, our tools and our ability to respond at pace. At the same time, we continue to invest for the long term. We are able to activate at speed and scale on the consumer insights that come from our data analytics and tools. COVID-19 has accelerated pre-existing trends in consumer behavior, and we've created brand activations that resonate with consumers in a changed landscape. As at-home occasions have grown, our brands have found creative ways to engage, inspire and entertain consumers virtually. When people couldn't visit their local pub for a pint of Guinness, we used beautiful assets to show the perfect serve for Guinness at home. This drove high engagement and excellent results. In Great Britain, Ireland and the U.S., Guinness has grown market share in the off-trade in the first half of fiscal '21. As consumers have looked to reward themselves and others, we have shown Baileys as an indulgent adult treat and reminded consumers that Johnnie Walker can be the perfect gift for any reason. Changes in how consumers are purchasing alcohol are creating new and fast-evolving opportunities. We have provided our on-trade partners with the tools to offer cocktails to go and created cocktail making kits for on-demand delivery. As e-commerce accelerated, we increased the visibility and ease of shop of our brands for online purchase. We know when times are challenging that our brands have a powerful opportunity to demonstrate our support for communities. During the recent IPL season in India, the Royal Challengers Bangalore cricket team wore tribute jerseys and used their reach of over 90 million social media followers, to honor frontline workers fighting the pandemic. Since the outbreak of COVID-19, our brands from Crown Royal to Don Julio have raised awareness and provided support for bartenders around the world. During COVID-19, we have seen a significant acceleration in consumer demand in the off-trade channel. We have rapidly pivoted to this opportunity, particularly in markets like the U.S., Great Britain and Australia, where the large off-trade channel has been extremely resilient. We moved at pace to adapt our plans and reallocate our marketing spend. We've delivered brilliant commercial execution and brand activation, both in-store and online. This has driven strong growth in the off-trade channel and share gains in a number of markets. We are using data to deliver relevant content in the right place at the right time. This data-led targeted marketing maximizes our effectiveness and returns. Baileys is a great example of how we're using this approach to win in the indulgent at-home occasion from baking to creative cocktails. We use data from search and social listening to identify and prioritize when to target treating occasions across the year. We track global holidays, seasonal triggers and weekly rhythms and combine this with the deep understanding of real-time emerging trends such as baking banana bread during lockdown. We buy media to target indulgent moments and adjust our content to match those moments. Baileys' online success was a key driver of the brand's double-digit growth in the first half of fiscal '21. We are delivering against our innovation strategy using purposeful innovation to recruit new consumers, unlock new occasions and drive sustainable growth. During COVID-19, consumers have sought the reassurance of well-known and trusted brands. We prioritized innovation against our global giants and executed at speed and scale. We've increased our focus on off-trade and e-commerce opportunities and adapted quickly to consumers looking for convenience, personal reward and celebration at home. Our limited editions to mark the 200th anniversary of Johnnie Walker have tapped into at-home celebrations and gifting occasions, especially during the festive period. In the U.S., Captain Morgan Sliced Apple was a top 10 innovation in Nielsen in the 6 months to December and has helped move the brand beyond cola. We also launched Captain Morgan Tiki in Europe to access the growing early evening occasion with a lower ABV variant. Our seasonal limited time offer Baileys Apple Pie taps into current treat trends of nostalgic classics and home baking. In the U.S., it was a top 5 innovation in Nielsen in the 6 months to December. We have accelerated innovation behind increased demand for bar-quality cocktails in convenient and portable formats. The growth of hard seltzers in the U.S. in the last few years has been phenomenal. We are participating in the category through our Smirnoff portfolio, which continues to grow strongly, and we've recently launched Smirnoff Seltzers in Europe. We have launched ready-to-drink cocktails across many of our brands, such as Crown Royal, Tanqueray and Ketel One. With the goal of bringing new drinkers into these trademarks, we have seen early signs of success. And we are looking forward to the upcoming launch of Guinness Nitro Cold Brew coffee in the U.S. Innovation is also enabling us to unlock new revenue streams. We are rapidly expanding our offerings in growth areas such as gifting, premiumization, convenience and no and low. Our brands are maximizing the opportunity for gifting during the festive season and also for celebrating more everyday occasions. We anticipated gifting would be even more important in 2020. We increased our participation and ensured our brands had great visibility in-store and online. Innovation is a key driver of premiumization using new launches to inspire consumers to trade up within our portfolio. We are using innovation to create unparalleled experiences of rare and exceptional whiskeys. Our new Prima & Ultima collection of unrepeatable bottlings of single malts targets high net worth consumers. The launch of Casamigos Mezcal at a luxury price point has built on the strong momentum of our Casamigos portfolio. Innovation is driving our response to consumers increasingly seeking convenience. We are rapidly expanding our portfolio of portable formats, including seltzers and ready-to-drink cans. We recently started the launch of Crown Royal cans in 2 U.S. states, and it was the #1 RTD brand in both states in the first 2 weeks. The launch of Guinness Smooth cans in Kenya, Nigeria and Uganda has driven incremental share gains for the brand in every market. You can see here that no and low occasions remain a key focus for our portfolio development and are broadening choices for consumers. Our recent launch of Gordon's 0.0% has had a positive initial response, and Baileys Deliciously Light with 40% less calories launches in early February. We expect our strong global innovation pipeline to continue recruiting new consumers into new occasions to drive sustainable growth. E-commerce remains a small channel for spirits relative to other consumer product categories, but it provides an exciting growth opportunity. Online sales of alcohol have rapidly accelerated across our markets during COVID-19. We are leveraging our strong foundation in e-commerce and benefiting from our leading market share positions with key customers. We are partnering with e-retailers and grocery stores as well as building our direct-to-consumer presence with platforms such as Malts.com. We have accelerated investment to strengthen our channel presence, expand our capabilities and grow quality market share. In the U.S., for example, we doubled our marketing investment in the first half of fiscal '21 compared to the prior year. Our actions are delivering results. In the U.S., 5 Diageo brands were in the top 10 liquor brands sold on Drizly in 2020, including 2 of the top 3. On Amazon Prime Day in Europe, our retail sales were up 98% in GB and up 90% in Germany compared to the prior year. On Tmall, the largest platform in Greater China, Diageo was the market leader in whisky in the last 6 months with a 25% market share, and Johnnie Walker was the number 1 whiskey brand. In the U.S., cocktail kits for home delivery via our partners have seen increasing consumer engagement and interest during COVID-19. We are growing our participation and testing and trialing new approaches so that we can maximize the availability of our brands. In India, an easing of certain regulations during COVID-19 has allowed for home delivery of alcohol. Our industry is working hard to establish this as a permanent opportunity. We have significantly up-weighted our marketing investment to increase the visibility, shopability and relevance of our brands. We're creating high-quality digital experiences so consumers can discover our brands with an easy path to purchase. This has included the creation of virtual stores such as Amazon brand store. These provide hubs for inspiration and education and drive conversion. We're also using digital tools like What's your Whisky to engage consumers online. We have expanded this from a brand discovery tool to a platform that enables consumers to buy the recommendations directly. Our partnership with SafeBoda in Uganda is a good example of how we're using online tools to reach consumers in new ways. SafeBoda is an app that enables consumers to access the full range of our portfolio and place orders for home delivery. I am pleased with the progress we're making in e-commerce. However, we still have much more to do to achieve our ambitions, and we will continue to build on this momentum. We take a disciplined approach to portfolio management. Since 2015, we made a number of disposals, including Bushmills Irish whiskey, Gleneagles, our main U.S. wine businesses and 19 brands that we sold to Sazerac. These actions enabled us to focus on our premium-plus brands and increase our presence in fast-growing categories including the acquisition of Don Julio and Casamigos in the super-premium tequila category. In fiscal '21, we acquired Aviation American Gin and we've agreed, subject to regulatory clearance, to acquire Chase Distillery, strengthening our portfolio with these fast-growing premium-plus brands. We will continue to supplement our organic portfolio development with strategic bolt-on acquisitions. We are investing to expand capacity and deliver our sustainability agenda and also to support brand building. This includes our ongoing investment of GBP 150 million in scotch whisky tourism. In October, we completed the transformation of Glenkinchie, the first of our Johnnie Walker 4-corner distillery experiences. We expect to open our Johnnie Walker brand home in Edinburgh later in 2021. Society 2030: Spirit of Progress, our 10-year action plan, sets out 25 ambitious goals that will deliver our commitment to: promote a positive role for alcohol; champion inclusion and diversity; preserve the natural resources on which our long-term success depends; and make a positive contribution to the communities in which we live, work, source and sell. We want to change the way the world drinks for the better by celebrating moderation, continuing to address alcohol-related harm and expanding our programs that tackle underage drinking, drink-driving and binge drinking. Our brands are made to be enjoyed responsibly. That's why by 2030, we commit to: reaching 1 billion people with messages of moderation through our brands; educating over 10 million people on the dangers of underage drinking through programs such as Smashed, our award-winning alcohol education program; and changing attitudes towards drink driving for 5 million drivers. In Kenya, we partnered with the National Transport and Safety Authority to educate and sensitize road users on responsible drinking. Our responsible drinking education module, DRINKiQ, is being embedded into the national driving school curriculum. This means that every driver licensed in Kenya will participate in a training module based on DRINKiQ. We believe the most inclusive and diverse culture makes for a better business and a better world. We've set an industry-leading ambition to increase representation of leaders from ethnically diverse backgrounds to 45% by 2030 as well as 50% of leaders being women. This year, we launched mandatory training to confront racial bias. This thought-provoking and interactive learning experience aims to enhance multicultural awareness and provide practical skills to eliminate racial prejudice in our day-to-day lives. We are championing inclusion and diversity across our business, but also with our partners and communities. As advertisers of some of the world's most loved brands, we will continue to use our creative and media spend to support progressive voices, celebrate diversity in our advertising and help shape a tolerant society. We are collaborating with the world's leading advertisers to create industry-wide change. On U.S. election night, we launched a Johnnie Walker ad featuring Brittany Howard performing a remake of You'll Never Walk Alone. It was shot by a female-owned production company. Through our Raising the Bar program, we have established a $20 million community fund to support businesses, consumers and partners in the hospitality industry in Black communities across the United States. We've committed to working towards a low-carbon future. By 2030, our goal is to have net zero carbon emissions across our direct operations. As the first step, our prestigious Scottish distilleries of Oban and Royal Lochnagar are both now carbon-neutral. The new Bulleit distillery we're building in Kentucky is expected to be one of the largest carbon-neutral distilleries in North America. By 2030, we will use 30% less water in every drink we make. And we will achieve a net positive water impact in our key water-stressed basins and communities. We've committed to delivering over 150 community water projects across the world. And we've renewed our 5-year partnership with Water Aid to help provide access to clean water, sanitation and hygiene. We want our business to be sustainable by design. In November, we launched Diageo Sustainable Solutions, a new global platform that invites innovators to share and develop their ideas in partnership with Diageo to enhance the sustainability of our supply chain and brands. Our initial areas of focus are energy, water, packaging and agriculture. We have received over 200 applications since the program opened. I am pleased and encouraged by the strength of our performance in the first half of fiscal '21. Sustained spirits momentum and premiumization provide a long-term runway for growth. Our people have responded with pace, agility and creativity to seize the opportunities presented by changing consumer behaviors. And while the operating environment remains challenging and we expect continued volatility in the second half of the year, we are driving broad-based top line growth and market share gains. Building on a strong ESG track record, our Society 2030 action plan sets out ambitious commitments on positive drinking, inclusion and diversity and sustainability, ensuring we will have a positive impact on our communities through the decade ahead. I am confident in our people, our strategy, the resilience of our business and our ability to deliver long-term shareholder value. Thank you very much. End of Q&A: