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Daniel Powell 06012190 Laurie Rowbottom 07012612 Alanna Shingirai Muza 06037229 Pierre Izydorczyk 07048588 Maria Park 07016946 22 nd March 2010. Agenda. Introduction Diageo 2005-2009 Annual Report Analysis ‘Impression Management’ OFR Provisions ‘Greenwash Guide’ Conclusion. - PowerPoint PPT Presentation
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Daniel Powell 06012190Laurie Rowbottom 07012612
Alanna Shingirai Muza 06037229Pierre Izydorczyk 07048588
Maria Park 07016946
22nd March 2010
Agenda
• Introduction
• Diageo 2005-2009
• Annual Report Analysis
• ‘Impression Management’
• OFR Provisions
• ‘Greenwash Guide’
• Conclusion
Introduction - Diageo
• Company established 1997 1
• Premium drinks industry 2
• Global Leader 2
• 180 markets 2
• 20,000 employees 2
• 80 countries 2
Introduction – Brands
Spirits 4
• Smirnoff
• J&B Whiskey
• Gordon’s Gin
• Pimm’s
• Baileys
• Captain Morgan
• Johnnie Walker
• Bells
Beers 5 & Wines 6
• Guinness
• Red Stripe
• Kilkenny
• Blossom Hill
• Rosenblum
• Sterling Vineyards
• Piat d'Or
• Acacia
5 Year Review2005 7 2006 7 2007 8 2008 9 2009 10
£8. 97b sales 6% ↑ sales 7 ↑% sales 7% ↑ sales 3% ↑ sales
29.62p full dividends
5% ↑ dividend per share (ps) 5% ↑ dividend ps 5% ↑ dividend ps 5.3% ↑ dividend
ps
N/A 7% ↑in profit 9% ↑ profit 9% ↑ profit 17% ↑ profit
£1.44b cash flow £1.36b cash flow £1.37b cash flow £1. 25b cash flow £387m cash flow
£1.93b profit £1.97b profit £2.12b profit £1.597b profit £1.73b profit
N/A £2.26b shareholders
£2.3b shareholders
£1.9b shareholders
£1.2b shareholders
Annual Report 2006 7
• General Mills plant sold ⇩ moved to St Patricks Dublin
• Katrina hit North America
• £1.97b in operating profit
• £3m employee shares
• 6% ↑ in net sales
• 5% ↑ in dividends
• 3% ↓ in Guinness sales
• ↓ in ready to drink sales
Annual Report vs Media CoverageThe Issue being reported Diageo’s 2006 company report Media coverage
Hurricane KatrinaNorth American division assisted victims as part of the CSR efforts.
Shares fell to 833p.11 (Telegraph 2005)
Sales affected in the southern parts of the USA .12 (Forbes 2005)
Guinness London plant moved to Dublin.7
(Annual Report 2006: p 14)
Diageo had no intension to close down Guinness.13
(BBC 2006)
Diageo FTSE slide and disappointed investors
Results justified with the disposal of a plant, creation of employee share scheme and investment in treasury fund.(Preliminary results 2006)
Diageo did not increase targets on results. 14
(Guardian 2006)
‘Impression Management’15
• Voluntary disclosures → PR practiced
• Glossy overlay → statutory messages
• Management
• Conformity to normative rules
• Linguistic construction
• Symbols → particular outcomes
• Distorted graphs
OFR Provision 1 7
‘The OFR should include a description of the business and the external environment in which it operates as context for the
directors’ discussion and analysis of performance and financial position.’
Diageo →
OFR Provision 2 7
‘The OFR should discuss the objectives of the business to generate or preserve value over the longer-term.’
Diageo →
OFR Provision 3 7
‘The OFR should set out the directors’ strategies for achieving the objectives of the business.’
Diageo →
OFR Provision 4 7
‘The OFR should include a description of the principal risks and uncertainties facing the entity, together with a commentary
on the directors’ approach to them.’
Diageo →
OFR Risk Factors 7
• Diageo faces competition that may reduce its market share and margins
• Diageo may not be able to derive the expected benefits from its strategy
• Systems change programmes may not deliver the benefits intended
• Regulatory decisions and changes• Changes in consumer preferences and tastes• Social acceptability of Diageo’s products may decline
OFR Risk Factors 7
• Increased costs or shortages of raw materials/labour
• Unfavourable economic or political conditions
• Failure to renegotiate distribution and manufacturing agreements
• Diageo may not be able to protect its intellectual property rights
• IFRS may introduce greater volatility into Diageo’s financial statements
‘Greenwash Guide’16
‘Greenwash Guide’7
Correct Adherence
1) Diageo corporate citizenship ⇩ a. Hurricane Katrina b. Water of Life c. Skills for Life ⇩ Irrelevant Claims
Poor Adherence
1) Diageo business interests ⇩
‘Innovative responsible drinking support’
⇩ Fluffy Language
‘Greenwash Guide’7
Correct Adherence
2) Diageo & Thalidomide Trust ⇩
a. A further agreement b. Long-term care
⇩ Out-right lying
Poor Adherence
2) Diageo & World Health Org. ⇩
a. An important role b. Alcohol and responsibility
⇩ Best in class? & Just not credible
Conclusion• Global leader in the premium drinks industry
• Financial underperformance in 2006
• Media coverage differed
• Impression Management used
• OFL provisions very good
• Diageo corporate citizenship & Diageo + Thalidomide Trust
• Diageo business interests & Diageo + World Health Org.
Thank you for listening!
Any questions?
References• 1 Diageo – History [Www] diageo.com/ourbusiness/Pages/History.aspx (11.03.2010)• 2 Diageo – About Us [Www] diageo.com/ourbusiness/aboutus/Pages/default.aspx (11.03.2010)• 3 Diageo - Diageo Global Supply [Www] diageo.com/ourbusiness/Pages/DiageoGlobalSupply.aspx
(11.03.2010)• 4 Diageo – Spirits [Www] diageo.com/ourbrands/categories/spirits/Pages/default.aspx (11.03.2010)• 5 Diageo – Beers [Www] diageo.com/ourbrands/categories/Pages/Beers.aspx (11.03.2010)• 6 Diageo – Wines [Www] diageo.com/ourbrands/categories/Pages/Wines.aspx (11.03.2010)• 7 Diageo – 2006 Annual Report [Www] diageo.com/NewsMedia/pages/resource.aspx?ID=450 (11.03.2010)• 8 Diageo – 2007 preliminary results (30 August 2007); Preliminary results presentation script [Www]
diageo.com/investor/Pages/Financial-Results.aspx#2007 (11.03.2010)• 9 Diageo – Annual Report 2008 [Www] diageo.com/NewsMedia/pages/resource.aspx?ID=552 (11.03.2010)• 10 Diageo – Annual Report 2009 [Www] diageo.com/NewsMedia/pages/resource.aspx?ID=214
(11.03.2010)• 11 Telegraph - Diageo warns US hurricanes will affect results: Caroline Muspratt Published; 15th November
2005 [Www] telegraph.co.uk/finance/2926028/Diageo-warns-US-hurricanes-will-affect-results.html (15.03.2010)
• 12 Forbes - Possible First Half Hangover for Walsh's Diageo; 15th of November 2005 [Www] forbes.com/fdc/welcome_mjx.shtml (15.03.2010
• 13 BBC News - Diageo to keep pouring Guinness Thursday; 31st August 2006 [Http://] news.bbc.co.uk/1/hi/business/5301102.stm (15.03.2010)
• 14 Guardian - Diageo disappointment leads FTSE slide; 31st of August 2006 [Www] guardian.co.uk/business/2006/aug/31/ftse.marketforces (15.03.2010)
• 15 Stanton, P. et al, Impressions of an Annual Report – an experimental study, Corporate Communications, 9 (1), pp 57 – 69
• 16 Futerra.co.uk – Greenwash Guide [Www] Futerra.co.uk/downloads/Greenwash_Guide.pdf (15.03.2010)