TIDM36VY
RNS Number : 9780F
Diageo Capital plc
12 March 2020
Diageo Capital plc
LEI: 213800L23DJLALFC4O95
Half-year results for the six months ended 31 December 2019
The directors present their interim financial report for the six
months ended 31 December 2019.
Activities
Diageo Capital plc (the "company") is engaged in the provision
of treasury, risk and cash management services for Diageo plc and
its subsidiary undertakings (the "group"). Diageo Capital plc's
principal activity is to raise external funds, principally using
the London and New York financial markets. The company finances
other companies of the group via intragroup loans and deposits.
Foreign exchange translation and transactional hedging, interest
rate risk management and cash management are also performed by the
company.
The company does not anticipate any changes in its activities in
the remaining six months of the financial year.
Business review
Development and performance of the business of the company
during the period and position of the company as at 31 December
2019
The results of the company and the development of its business
are influenced to a considerable extent by group financing
requirements. Further information on the risk management policies
of the group is included in the annual report of Diageo plc for the
year ended 30 June 2019 (see note 15 of the consolidated financial
statements of Diageo plc).
Net finance charge was GBP33 million in the six months ended 31
December 2019, which is a GBP26 million increase from net finance
charge of GBP7 million in the six months ended 31 December
2018.
External borrowings increased by GBP1,462 million in the six
months ended 31 December 2019 to GBP6,068 million from GBP4,606
million in the year ended 30 June 2019, which was mainly due to the
issuance of bonds and commercial papers in amount of GBP1,289
million and GBP407 million, respectively. The increase in balance
of external borrowings was partially offset by the weakening of the
USD versus GBP.
Financial and other key performance indicators
As the company forms part of the group's treasury operations,
the company's performance is measured at the group level.
The loss for the period transferred to reserves is GBP32 million
(six months ended 31 December 2018 - loss of GBP6 million) and the
other comprehensive loss for the six months ended is GBP8 million
(six months ended 31 December 2018 - profit of GBP43 million).
The directors do not propose the payment of an interim dividend
to be distributed to shareholders in regard to the six months ended
31 December 2019 (six months ended 31 December 2018 - GBPnil).
Going concern
The company is expected to remain in positive net asset position
for the foreseeable future. The company participates in the group's
centralised treasury arrangements and the parent and fellow group
undertakings are expected to provide financial support for the
foreseeable future. The directors have no reason to believe that a
material uncertainty exists that may cast significant doubt about
the ability of the group to continue as a going concern. On the
basis of their assessment, the company's directors have a
reasonable expectation that the company will be able to continue in
operational existence for the foreseeable future. Thus, they
continue to adopt the going concern basis of accounting in
preparing the annual financial statements.
Principal risks and uncertainties facing the company as at 31
December 2019
The company forms part of the group's treasury operations, which
manage the group's funding, liquidity, interest rate and foreign
exchange risks. (See detailed description under note 4. Financial
instruments and risk management.) The principal risks and
uncertainties facing the company are foreign currency risk
associated with certain foreign currency denominated bonds and
interest rate risk arising principally on changes in US dollar and
sterling interest rates. The company uses derivative financial
instruments to hedge its exposures to fluctuations in interest and
exchange rates. Cash flow hedges are carried out to hedge the
currency risk of highly probable future foreign currency cash
flows, as well as the cash flow risk from changes in interest
rates. Fair value hedges are carried out to manage the currency
and/or interest rate risks to which the fair value of certain
assets and liabilities are exposed.
Brexit and related risks
The process surrounding the United Kingdom's future trading
relationship with the European Union continues. We remain of the
view that, in the event of either a future free trade agreement
(FTA) or a 'no FTA' outcome at the end of the implementation period
between the UK and the EU, the direct financial impact to Diageo
will not be material. The full implications of Brexit will not be
understood until future trade, regulatory and tax arrangements to
be entered into by the United Kingdom are established. Furthermore,
we could experience changes to laws and regulations post Brexit, in
areas such as intellectual property rights, employment,
environment, supply chain logistics, data protection, and health
and safety.
A cross-functional working group is in place that meets on a
regular basis to identify and assess the consequences of Brexit,
with all major functions within our business represented. We
continue to monitor this risk area very closely, as well as the
broader environment risks, including a continuing focus on
identifying critical decision points to ensure potential disruption
is minimised, and take prudent actions to mitigate these risks
wherever practical. More specific details on the impact of Brexit
are included in the 2020 interim results presentation and press
release of Diageo plc which are publicly available.
Independent review
This interim report has not been audited or reviewed by
auditors.
Statement of directors' responsibilities
The directors confirm that this condensed set of interim
financial information has been prepared in accordance with
Financial Reporting Standard 104: Interim Financial Reporting,
issued by the Financial Reporting Council, and that the interim
management report includes a fair review of the information
required by DTR 4.2.7R and DTR 4.2.8R namely:
-- an indication of important events that have occurred during
the first six months of the financial year and their impact on the
condensed set of financial statements, and a description of the
principal risks and uncertainties for the remaining six months of
the financial year, and
-- material related party transactions in the first six months
of the financial year and any material changes in the related party
transactions described in the last annual report.
The directors of the Company are listed in the Company's annual
report and financial statements for the year ended 30 June
2019.
M Pais
Director
12 March 2020
INCOME STATEMENT (UNAUDITED)
FOR THE SIX MONTHSED 31 DECEMBER 2019
Six months ended Six months ended
31 December 31 December
2019 2018
Notes GBP million GBP million
Other operating income 1 1
Finance income 1 120 199
Finance charges 1 (153) (206)
----------------
Operating loss (32) (6)
---------------- ------------------
Loss before taxation on ordinary
activities (32) (6)
Taxation on loss on ordinary
activities 2 - -
Loss for the period (32) (6)
STATEMENT OF COMPREHENSIVE INCOME (UNAUDITED)
FOR THE SIX MONTHSED 31 DECEMBER 2019
Six months ended Six months ended
31 December 31 December
2019 2018
Note GBP million GBP million
Other comprehensive (loss)/profit
Items that may be recycled
subsequently to the income
statement
Effective portion of changes
in fair value of cash flow
hedges
- losses taken to other comprehensive
income (60) (28)
- recycled to income statement 50 71
Tax income on effective portion
of changes in fair value of
cash flow hedges 2 2 -
---------------- ----------------
Other comprehensive (loss)/profit (8) 43
---------------- ----------------
Loss for the period (32) (6)
Total comprehensive (loss)/profit
for the period (40) 37
================ ==================
BALANCE SHEET (UNAUDITED)
AT 31 DECEMBER 2019
31 December
2019 30 June 2019
Notes GBP million GBP million
Non-current assets
Trade and other receivables 7,319 7,965
Other financial assets 4 301 371
----------
7,620 8,336
Current assets
Trade and other receivables 12 36
Other financial assets 4 4 6
16 42
---------- -----------
Total assets 7,636 8,378
---------- -----------
Current liabilities
Trade and other payables (1,448) (3,616)
Other financial liabilities 4 (3) (3)
Borrowings and bank overdrafts 3 (2,215) (1,306)
----------
(3,666) (4,925)
Non-current liabilities
Borrowings 3 (3,853) (3,300)
Other financial liabilities 4 (45) (38)
Deferred tax liability (5) (7)
---------- -----------
(3,903) (3,345)
Total liabilities (7,569) (8,270)
---------- -----------
Net assets 68 108
---------- -----------
Equity
Called up share capital - -
Share premium 250 250
Fair value and hedging reserves 30 38
Other reserves 70 70
Retained deficit (282) (250)
----------
Total equity 68 108
---------- -----------
STATEMENT OF CHANGES IN EQUITY (UNAUDITED)
FOR THE SIX MONTHSED 31 DECEMBER 2019
ATTRIBUTABLE TO SHAREHOLDERS OF THE COMPANY
Subtotal
Share Hedging Other Other Retained
premium reserve reserves reserves deficit Total
GBP GBP
million GBP million million GBP million GBP million GBP million
Balance at 30
June
2018 250 (53) 70 17 (257) 10
Other
comprehensive
income - 43 - 43 - 43
Loss for the
period - - - - (6) (6)
Balance at 31
December
2018 250 (10) 70 60 (263) 47
Balance at 30
June
2019 250 38 70 108 (250) 108
Other
comprehensive
loss - (8) - (8) - (8)
Loss for the
period - - - - (32) (32)
Balance at 31
December
2019 250 30 70 100 (282) 68
========== ========= === =========== ========= === ========== ========= ===
NOTES TO THE FINANCIAL STATEMENTS (UNAUDITED) FOR THE SIX
MONTHSED 31 DECEMBER 2019
The company is incorporated and domiciled as a public limited
company in the United Kingdom.
The interim financial statements of the company for the six
months ended 31 December 2019 were authorised for issue in
accordance with a resolution of the directors on 12 March 2020.
Basis of preparation
The annual report and financial statements of the company for
the year ended 30 June 2019 were prepared in accordance with
Financial Reporting Standard 101 Reduced Disclosure Framework (FRS
101) and Companies Act 2006.
The interim condensed financial statements for the six months
ended 31 December 2019 have been prepared in accordance with
Financial Reporting Standard 104 Interim Financial Reporting (FRS
104), issued by the Financial Reporting Council. The interim
condensed financial statements do not include all of the
information and disclosures required in the annual financial
statements, and should be read in conjunction with the company's
annual financial statements at 30 June 2019.
The accounting policies adopted in the preparation of the
interim financial statements are consistent with those followed in
the preparation of the company's annual report and financial
statements for the year ended 30 June 2019.
These condensed interim financial statements have not been
subject to a full audit or audit review and do not constitute
statutory financial statements as defined in section 434 of the
Companies Act 2006. The annual report and financial statements for
the year ended 30 June 2019 were approved by the directors of the
company on 25 October 2019 and have been filed with the Registrar
of Companies. The report of the auditors on those financial
statements was unqualified, did not contain an emphasis of matter
paragraph and did not contain any statement under section 498 of
the Companies Act 2006.
The company is a wholly owned subsidiary of Diageo plc and is
included in the consolidated financial statements of Diageo plc
which are publicly available.
These financial statements are separate financial
statements.
Functional and presentational currency
These financial statements are presented in sterling (GBP),
which is the company's functional currency.
All financial information presented in sterling has been rounded
to the nearest million.
Going concern
The financial statements have been prepared on a going concern
basis as a fellow group undertaking has agreed to provide financial
support for the foreseeable future.
1. FINANCE INCOME AND CHARGES
Six months Six months
ended ended
31 December 31 December
2019 2018
GBP million GBP million
Net interest
Interest income from fellow group
undertakings 107 170
Fair value gain on intra-group derivative
financial instruments 7 27
Fair value adjustment on borrowings 5 1
Amortisation of bonds 1 1
Total interest income 120 199
--------- ---------
Interest charge to fellow group undertakings (45) (94)
Interest charge on all other borrowings (88) (79)
Fair value loss on intra-group derivative
financial instruments (12) (10)
Fair value adjustment on borrowings (1) (17)
Discount and fee amortisation (7) (6)
Total interest charges (153) (206)
--------- ---------
Net finance charges (33) (7)
========= =========
2. TAXATION
The total tax income for the six months ended 31 December 2019
was GBP2 million (31 December 2018 - GBPnil), in accordance with
decrease in deferred tax liability in relation to the effective
portion of changes in fair value of cash flow hedges. The change in
deferred tax liability is presented as part of the other
comprehensive income.
3. BORROWINGS AND BANK OVERDRAFTS
31 December
2019 30 June 2019
GBP million GBP million
Bank overdrafts 34 27
Commercial paper 899 492
US$ 500 million 3.000% bonds due 2020 379 393
US$ 500 million 2.565% bonds due 2020 379 394
US$ 696 million 4.828% bonds due 2020 522 -
Fair value adjustment to borrowings 2 -
Borrowings due within one year and
bank overdrafts 2,215 1,306
----------- ------------
US$ 696 million 4.828% bonds due 2020 - 538
US$ 500 million 3.500% bonds due 2023 378 393
US$ 1,350 million 2.625% bonds due
2023 1,020 1,060
US$ 500 million 3.875% bonds due 2028 377 391
US$ 600 million 5.875% bonds due 2036 450 468
US$ 500 million 3.875% bonds due 2043 372 387
US$ 600 million 2.125% notes due 2024 453 -
US$ 1,000 million 2.375% notes due
2029 748 -
Fair value adjustment to borrowings 55 63
Borrowings due after one year 3,853 3,300
----------- ------------
Total external borrowings 6,068 4,606
=========== ============
The interest rates of external borrowings shown in the table
above are those contracted on the underlying borrowings before
taking into account any interest rate hedges. Bonds are stated net
of unamortised finance costs of GBP33 million (30 June 2019 - GBP29
million). The company issued new bonds in the six months period
ended 31 December 2019, with a nominal value of US$ 600 million and
US$ 1,000 million.
Bonds are reported at amortised cost with a fair value
adjustment shown separately. All bonds, medium term notes and
commercial papers issued by the company are fully and
unconditionally guaranteed by Diageo plc.
4. FINANCIAL INSTRUMENTS AND RISK MANAGEMENT
Fair value measurements of financial instruments are presented
through the use of a three-level fair value hierarchy that
prioritises the valuation techniques used in fair value
calculations.
The group maintains policies and procedures to value instruments
using the most relevant data available. If multiple inputs that
fall into different levels of the hierarchy are used in the
valuation of an instrument, the instrument is categorised on the
basis of the most subjective input.
Foreign currency forwards and swaps, cross currency swaps and
interest rate swaps are valued using discounted cash flow
techniques. These techniques incorporate inputs at levels 1 and 2,
such as foreign exchange rates and interest rates. These market
inputs are used in the discounted cash flow calculation
incorporating the instrument's term, notional amount and discount
rate, and taking credit risk into account. As significant inputs to
the valuation are observable in active markets, these instruments
are categorised as level 2 in the hierarchy.
The company's financial assets and liabilities measured at fair
value are categorised as follows:
31 December
2019 30 June 2019
GBP million GBP million
Derivative assets 305 377
Derivative liabilities (48) (41)
Valuation techniques based on observable
market input 257 336
========= === ========= ===
(Level 2)
This information is provided by RNS, the news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
IR FLFLEVDIFLII
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