Financial Trends -- 3/10
Revenue and organic growth declining. FCF positive but declining (-9.7% YoY in H1 FY26). Margins
compressing across multiple lines. Diageo reports semi-annually (FYE June 30), so data reflects
half-year comparable periods. All figures in GBP millions (reporting currency). Revenue ~20B declining.
Multiple penalty modifiers apply: negative operating leverage, debt growing faster than revenue,
progressive dividend policy broken.
Weight: 25%
Revenue
Declining
Organic growth negative | Weak
FCF
Declining
-9.7% YoY H1 FY26 | Positive but deteriorating
Margins
Compressing
Multiple lines contracting | Pressure
Reporting
Semi-Annual
FYE June 30 | Limited quarterly visibility
Net Sales Trajectory (Semi-Annual, GBP M)
Revenue declining on both a reported and organic basis.
Reported net sales are trending down from ~20.3B (FY24) with H1 FY26 showing a -4.0% decline
driven by FX headwinds, tariff disruption, and continued US/China consumer weakness. Organic
growth returned briefly to +1.7% in FY25 but was flattered by the Ciroc transaction (+1.5%
ex-Ciroc). H1 FY26 organic sales guided slightly negative with growth skewed to H2 -- a pattern
management has used before to defer accountability.
| Metric | H1 FY24 | FY2024 | H1 FY25 | FY2025 | H1 FY26 |
|---|---|---|---|---|---|
| Net Sales (GBP M) | 10,962 | 20,269 | 10,901 | 20,245 | 10,460 |
| Reported YoY | — | — | -0.6% | -0.1% | -4.0% |
| Organic Growth | — | -0.6% | 1.0% | 1.7% | Neg. |
Organic net sales +1.7% FY25 (+1.5% ex-Ciroc). H1 FY26 organic guided slightly negative. Data sourced from Daloopa.
Operating Profit and Margin (Pre-Exceptional, GBP M)
Negative operating leverage: organic revenue growing but operating profit declining.
Pre-exceptional operating profit declined -4.1% in FY2025 and -3.4% in H1 FY26, despite organic
revenue growing +1.7% in FY25. Full-year pre-exceptional op margin compressed ~110bps from 29.3%
(FY24) to 28.2% (FY25). Reported operating profit was hammered in FY25 (-27.8%) by ~1.4B in
exceptional charges (Distill Ventures, Aviation impairment, Accelerate restructuring).
| Metric | H1 FY24 | FY2024 | H1 FY25 | FY2025 | H1 FY26 |
|---|---|---|---|---|---|
| Op Profit Pre-Exc (GBP M) | 3,510 | 5,945 | 3,372 | 5,704 | 3,256 |
| Pre-Exc YoY | — | — | -3.9% | -4.1% | -3.4% |
| Pre-Exc Op Margin | 32.0% | 29.3% | 30.9% | 28.2% | 31.1% |
| Op Profit Reported (GBP M) | 3,317 | 6,001 | 3,155 | 4,335 | 3,116 |
| Reported YoY | — | — | -4.9% | -27.8% | -1.2% |
FY25 reported op profit includes ~1.4B exceptional charges. Data sourced from Daloopa.
Adjusted EBITDA (LTM, GBP M)
Adjusted EBITDA declining consistently, from 7.2B to 6.5B over two years.
LTM Adjusted EBITDA has declined from 7,195M (H1 FY24) to 6,497M (H1 FY26), a cumulative drop
of ~10%. The rate of decline is moderating slightly from -5.6% (FY25 vs FY24) to -4.4% (H1 FY26
vs H1 FY25), but the trend remains firmly negative.
| Metric | H1 FY24 | FY2024 | H1 FY25 | FY2025 | H1 FY26 |
|---|---|---|---|---|---|
| Adj. EBITDA LTM (GBP M) | 7,195 | 7,037 | 6,796 | 6,645 | 6,497 |
| YoY Growth | — | — | -5.5% | -5.6% | -4.4% |
| Reported EBITDA LTM (GBP M) | 7,288 | 6,838 | 6,522 | 6,026 | 6,063 |
LTM = Last Twelve Months. Data sourced from Daloopa.
Earnings Per Share (Pre-Exceptional, Pence)
Pre-exceptional EPS declining across all periods.
Pre-exceptional EPS fell from 179.6p (FY24) to 164.2p (FY25, -8.6%) and from 97.7p (H1 FY25)
to 95.3p (H1 FY26, -2.5%). The decline is driven by lower operating profit, higher interest
costs, adverse FX, and reduced Moet Hennessy contribution. Reported basic EPS was severely
impacted in FY25 at 105.9p (-38.9%) due to ~1.4B in exceptional charges.
| Metric | H1 FY24 | FY2024 | H1 FY25 | FY2025 | H1 FY26 |
|---|---|---|---|---|---|
| Pre-Exc EPS (pence) | 108.1p | 179.6p | 97.7p | 164.2p | 95.3p |
| Pre-Exc EPS YoY | — | — | -9.6% | -8.6% | -2.5% |
| Basic EPS Reported (pence) | 98.6p | 173.2p | 87.1p | 105.9p | 89.7p |
| Reported EPS YoY | — | — | -11.7% | -38.9% | 3.0% |
Data sourced from Daloopa.
Free Cash Flow (GBP M)
FCF positive but declining -- H1 FY26 down -9.7% YoY.
Free cash flow improved from 2,609M (FY24) to 2,748M (FY25, +5.3%), but H1 FY26 reversed
to 1,532M (-9.7% vs H1 FY25). Management targets ~3B annual FCF from FY26 onward through
Accelerate savings and CapEx discipline, but the H1 trajectory puts that target at risk.
FCF remains the least-bad financial metric, but the deteriorating trend removes the one
bright spot from the prior assessment.
| Metric | H1 FY24 | FY2024 | H1 FY25 | FY2025 | H1 FY26 |
|---|---|---|---|---|---|
| Free Cash Flow (GBP M) | 1,462 | 2,609 | 1,696 | 2,748 | 1,532 |
| YoY Growth | — | — | 16.0% | 5.3% | -9.7% |
Management targets ~3B annual FCF from FY26. H1 FY26 -9.7% YoY puts target at risk. Data sourced from Daloopa.
Leverage Trajectory (Net Debt / EBITDA)
Leverage has deteriorated materially, rising from 2.5x to 3.4x over three years.
Net debt/EBITDA increased from 2.5x (H1 FY23) to 3.4x (FY25 and H1 FY26), well above the 2.5-3.0x
target range. Total net borrowings stand at ~21.7B. Debt has grown faster than revenue. Share
buybacks have been suspended. Management committed to returning within the 2.5-3.0x range by no
later than FY28 through selective disposals, Accelerate savings, and CapEx discipline.
| Metric | H1 FY23 | FY2023 | H1 FY24 | FY2024 | H1 FY25 | FY2025 | H1 FY26 |
|---|---|---|---|---|---|---|---|
| Net Debt/EBITDA | 2.5x | 2.6x | 2.9x | 3.0x | 3.1x | 3.4x | 3.4x |
| Metric | H1 FY24 | FY2024 | H1 FY25 | FY2025 | H1 FY26 |
|---|---|---|---|---|---|
| Net Borrowings (GBP M) | 20,483 | 21,017 | 20,676 | 21,854 | 21,672 |
Target range: 2.5-3.0x. Deleveraging commitment by FY28. Buybacks suspended. Data sourced from Daloopa.
Regional Net Sales Breakdown (GBP M)
Europe is the sole growth engine; NAM and APAC declining sharply.
In H1 FY26, Europe and Turkey grew +4.9% driven by Guinness strength. Latin America rebounded +7.4%.
However, North America (-5.3%) faces tariff disruption and consumer caution, while Asia Pacific
(-9.7%) suffered from Greater China weakness and SE Asia downtrade. Africa declined -5.2% on
Nigerian naira FX headwinds. Geographic mix shifting unfavorably away from higher-margin regions.
| Region | H1 FY25 | H1 FY26 | H1 YoY |
|---|---|---|---|
| North America | 4,403 | 4,168 | -5.3% |
| Europe & Turkey | 4,440 | 4,658 | +4.9% |
| Africa | 1,412 | 1,338 | -5.2% |
| Latin America & Caribbean | 1,371 | 1,473 | +7.4% |
| Asia Pacific | 3,480 | 3,143 | -9.7% |
H1 YoY = H1 FY26 vs H1 FY25 reported growth. Data sourced from Daloopa.
Acceleration / Deceleration Analysis
| Signal | Detail | Direction |
|---|---|---|
| Reported Revenue | FY25 -0.1%, H1 FY26 -4.0%; FX and tariff headwinds driving deceleration | Decelerating |
| Organic Revenue | +1.7% FY25 flattered by Ciroc; H1 FY26 guided negative | Negative |
| Operating Profit (Pre-Exc) | -4.1% FY25, -3.4% H1 FY26; declining despite modest organic revenue | Declining |
| Operating Margin | FY24 29.3% to FY25 28.2% (-110bps); multiple lines contracting | Compressing |
| Pre-Exceptional EPS | -8.6% FY25, -2.5% H1 FY26; still declining | Declining |
| Free Cash Flow | +5.3% FY25 but H1 FY26 -9.7%; positive but deteriorating | Deteriorating |
| Leverage | 2.5x to 3.4x over 3 years; above target range; debt growing faster than revenue | Deteriorating |
| Progressive Dividend | Dividend held flat FY25; progressive policy broken; interim management in place | Broken |
| North America | H1 FY26 -5.3%; tariff disruption + consumer caution | Weakening |
| Asia Pacific | H1 FY26 -9.7%; Greater China weakness, SE Asia downtrade | Deteriorating |
Score Derivation
| Factor | Assessment | Impact |
|---|---|---|
| Revenue YoY | Organic negative H1 FY26; reported -4.0%; declining trajectory | 3-4 |
| Margins | Op margin -110bps FY25; multiple lines compressing | 3 |
| Free Cash Flow | Positive but declining -9.7% H1 FY26; 3B target at risk | 4-5 |
| EPS | Pre-exc EPS declining -8.6% FY25, -2.5% H1 FY26 | 3 |
| Blended Base Score | Revenue declining, margins compressing, EPS declining, FCF deteriorating | ~4 |
| Penalty: Negative Op Leverage | Organic revenue grew but organic op profit declined in FY25; persists H1 FY26 | -1 |
| Penalty: Debt > Revenue Growth | Net debt/EBITDA 2.5x to 3.4x; borrowings up while revenue flat/declining | -1 |
| Penalty: Progressive Dividend Broken | Dividend held flat FY25; buybacks suspended; interim management | -0.5 |
| Adjusted Score | 4.0 - 2.5 penalties = 1.5 | ~1.5 |
| Mitigant: Accelerate Program | 625M savings over 3 years; credible self-help lever; CapEx discipline | +0.5 |
| Mitigant: FCF Still Positive | ~2.7B FY25 FCF; declining but still cash-generative | +1.0 |
| Net Adjustment | -2.5 penalties + 1.5 mitigants = -1.0 | -1 |
| Final Score | Base ~4 minus 1.0 net adjustment, rounded | 3/10 |
Key: Revenue declining. Organic growth negative. FCF declining -9.7% H1.
Margins compressing. Interim management. Progressive dividend broken. Score: 3/10.
Data sourced from Daloopa. FYE June 30. Semi-annual reporting. All figures in GBP millions.