Exceptional items

6 Months Ended

Dec. 31, 2023

Exceptional items are those that in management’s judgement need to be disclosed separately. Such items are included within the

income statement caption to which they relate. Management believes that that separate disclosure of exceptional items and the

classification between operating and non-operating items further helps investors to understand the performance of the group.

Changes in estimates and reversals in relation to items previously recognised as exceptional are presented consistently as

exceptional in the current year.

Exceptional operating items are those that are considered to be material and unusual or non-recurring in nature and are part of

the operating activities of the group, such as one-off global restructuring programmes which can be multi-year, impairment of

intangible assets and fixed assets, indirect tax settlements, property disposals and changes in post employment plans.

Gains and losses on the sale or directly attributable to a prospective sale of businesses, brands or distribution rights, step up

gains and losses that arise when an investment becomes an associate or an associate becomes a subsidiary and other material,

unusual non-recurring items that are not in respect of the production, marketing and distribution of premium drinks, are

disclosed as exceptional non-operating items below operating profit in the income statement.

Exceptional current and deferred tax items comprise material and unusual or non-recurring items that impact taxation.

Examples include direct tax provisions and settlements in respect of prior years and the remeasurement of deferred tax assets

and liabilities following tax rate changes.


	Six months ended 31 December 2023	Six months ended 31 December 2022
	$ million	Re-presented $ million
Exceptional operating items
Brand impairment (1)	(54)	—
Supply chain agility programme (2)	(31)	(56)
Various dispute and litigation matters (3)	(108)	—
Winding down Russian operations (4)	—	17
	(193)	(39)
Non-operating items
Sale of businesses and brands
Windsor business (5)	(53)	—
Guinness Cameroun S.A. (6)	(11)	(2)
USL Popular brands (7)	4	5
Archers brand (8)	—	23
United National Breweries (9)	—	3
Step acquisition - Mr Black (10)	—	(10)
	(60)	19

Exceptional items before taxation	(253)	(20)

Items included in taxation
Tax on exceptional operating items	43	14
Tax on exceptional non-operating items	(1)	2
Exceptional taxation (11)	—	68
	42	84

Total exceptional items	(211)	64

Attributable to:
Equity shareholders of the parent company	(213)	63
Non-controlling interests	2	1
Total exceptional items	(211)	64

(1) In the six months ended 31 December 2023, an impairment charge of $54 million in respect of certain brands in the US

ready to drink portfolio was recognised in exceptional operating items. The charge is mainly driven by the reduction in forecast

cash flow assumptions due to the reprioritisation of the portfolio and the more challenging macroeconomic environment. A pre-

tax discount rate of 10% (2022 – 9%) for North America has been used to calculate the net present value of the future cash

flows expected to be generated by these brands. The brand impairment reduced the deferred tax liability by $13 million

resulting in a net exceptional loss of $41 million.

(2) In the six months ended 31 December 2023, an exceptional charge of $31 million was accounted for in respect of the supply

chain agility programme (2022 – $56 million). With this five-year spanning programme launched in July 2022, Diageo expects

to strengthen its supply chain, improve its resilience and agility, drive efficiencies, deliver additional productivity savings and

make its supply operations more sustainable. Total implementation cost of the programme is expected to be up to $600 million

over the five-year period, which will comprise non‐cash items and one‐off expenses, the majority of which are expected to be

recognised as exceptional operating items. The exceptional charge for the six months ended 31 December 2023 was primarily

in respect of accelerated depreciation in North America, being additional depreciation of assets in the period directly

attributable to the programme. Restructuring cash expenditure was $11 million in the six months ended 31 December 2023

(2022 – $nil).

(3) In the six months ended 31 December 2023, $108 million was recorded as an exceptional operating item in respect of

various dispute and litigation matters in North America and Europe, including certain costs and expenses associated therewith.

(4) In the six months ended 31 December 2022, Diageo released unutilised provisions of $17 million from the $64 million

exceptional charge taken in the year ended 30 June 2022 in respect of winding down its operations in Russia.

(5) On 27 October 2023, Diageo completed the sale of Windsor Global Co., Ltd. to PT W Co., Ltd., a Korean company

sponsored by Pine Tree Investment & Management Co., Ltd. for a total consideration of KRW 206 billion ($152 million). The

transaction resulted in a loss of $53 million in the six months ended 31 December 2023, which was recognised as a non-

operating item attributable to the sale, including cumulative translation losses of $26 million recycled to the income statement.

(6) On 26 May 2023, Diageo completed the sale of its wholly owned subsidiary, Guinness Cameroun S.A., its brewery in

Cameroon, to Castel Group. In the six months ended 31 December 2023, $11 million charges directly attributable to the

disposal have been accounted for. Transaction costs relating to the prospective sale in the six months ended 31 December 2022

amounted to $2 million.

(7) On 30 September 2022, Diageo completed the sale of the Popular brands of its USL business. The aggregate consideration

for the disposal was $97 million, the disposed net assets included $34 million net working capital and $23 million brand, and

$19 million goodwill was derecognised. In the six months ended 31 December 2022, the transaction resulted in an exceptional

gain of $5 million. $4 million of the purchase price, that was subject to administrative actions within 12 months and considered

uncertain at the time of the transaction, was paid to Diageo in the six months ended 31 December 2023 and recognised as

exceptional gain.

(8) On 8 September 2022, Diageo announced the sale of its Archers brand. The transaction resulted in an exceptional gain of

$23 million.

(9) In the six months ended 31 December 2022, ZAR 46 million ($3 million) of deferred consideration was paid to Diageo in

respect of the sale of United National Breweries, the full amount of which represented a non-operating gain.

(10) On 29 September 2022, the group acquired the part of the entire issued share capital of Mr Black Spirits Pty Ltd, owner of

the Mr Black Australian premium cold brew coffee liqueur, that it did not already own. As a result of Mr Black becoming a

subsidiary of the group, in the six months ended 31 December 2022, a loss of $10 million arose, being the difference between

the book value of the associate prior to the transaction and its fair value plus transaction costs.

(11) Exceptional tax credits of $84 million in the six months ended 31 December 2022 include tax credits of $68 million in

respect of the deductibility of fees paid to Diageo plc for guaranteeing externally issued debt of US group entities.