Well, good morning everyone, and thanks for joining us today. Diageo's focus is on building brands and building superior organizations in market, thereby creating an even stronger platform for sustained growth. The results that we have announced today demonstrate the success of that focus. The acceleration in growth year-on-year on all the key financial measures shows the strength of our business. Top line growth was up year-on-year to 7%, driven by stronger performance in International and Asia-Pacific. It was ahead of the growth in the first half due to improvement in Europe from a decline of 2% to 4% net sales growth in the second half and in Asia-Pacific, net sales growth improved from 9% in the first half to 17% in the second half. We continued to increase marketing investment ahead of sales growth, with spend on a like for like basis up £85 million this year, which is ahead of last year's growth. Much of this increase is behind our most successful campaigns such as Johnnie Walker Keep Walking where net sales grew 16%, and Clearly Smirnoff, which drove 9% net sales growth. Our focus on value continues to deliver consistent improvement in operating leverage and this year operating margin has improved a further 40 basis points. Operating profit growth is therefore up from 7% last year to nearly 9% this year. This stronger growth, together with the buyback program has generated 13% underlying growth in EPS, which again is up from 10% last year. Looking to the key measures of Diageo's financial strength, free cash flow generation continues to be a key measure of success. Again, this year we have generated almost £1.4 billion allowing us to return a further £2.3 billion to shareholders and reduce our capital base by a further 5%. We have delivered our operating and financial objectives and strengthened our business across all four regions. I am going to talk later about what we have done in each region to build our brands and build our routes to market this year and how that's enabled us to increase our guidance for organic operating profit growth in 2008 to 9%. But before that Nick is now going to take you through the results in more detail. Nick.

Thank you Paul. Good morning everyone. As on previous occasions, I am going to assume that you've seen this morning's announcement and therefore just take you through the key points. Our full year performance again shows good volume growth, price and mix improvement, further investment in our brands and operating leverage. The biggest driver of our volume growth of 5% in the full year was International, led by our Scotch brands in Latin America and our beer brands in Africa. While International's performance drove 50% of our net sales growth, focus on value not volume in North America made the biggest contribution to the price and mix improvement we achieved. Further increases in marketing in International and Asia led to an overall 8% increase in marketing investment in the year. Significant operating leverage in North America meant that this region contributed 50% of our operating profit growth. As Paul said, these results reflect our stronger performance in the second half. While North America and International continued to deliver strong growth, Europe and Asia-Pacific both accelerated top line growth. In Europe, volume increased by 3% in the second half, compared to a 5% decline in the first half. This better performance was delivered across all business units with GB and Russia the key drivers. In Asia-Pacific, our key brands, Johnnie Walker, Smirnoff, and Windsor each delivered faster growth as a result of increased marketing investment. And this, along with innovation in India, led to volume growth of 17% in the second half, up from 7% in the first half. The increase in net sales growth in H2 to 9% led to the higher operating profit growth of 10% in the second half despite the increase in marketing spend, which was driven by higher spend in Europe and in Asia-Pacific. So, moving…

Thank you Nick. Diageo's strengths are the quality and diversity of our brands, our routes to market and of course our global reach. By investing each year to extend the leadership position of our brands, by improving our routes to market and by focusing on the growth opportunities in each of our four regions, we will drive consistent growth. Let me take you through some examples of exactly how we've done that this year. This chart shows our performance in each major category. We have the widest range of leading premium brands across each beverage alcohol category and we have outperformed in each category again this year. At an individual brand level, we have gained share across many markets, which extends our leadership positions even further. In Scotch, the performance of our brands within the category and across markets is a great example of this success. Scotch, as you know, accounts for around 30% of our sales and it is the category in which we are driving the highest growth. We manage the category for value and this year we delivered 4 percentage points of price mix as we increased prices and focused on our higher value brands. Many brands contributed to this strong overall growth, although the performance of two brands particularly stands out -- Johnnie Walker and Buchanan's. The performance of Johnnie Walker over recent years demonstrates the power of bringing together great brands, a focused organization with global reach, and innovative marketing. Having achieved a stellar 11% growth last year, the brand grew a further 16% this year, extending its position as the world's leading Scotch. Asia-Pacific and International have led this success, but in the brand's biggest market, the US, it grew 7% and in Europe, it was up over 10%, demonstrating that growth can be…

Hi, good morning. Christopher Gower, MF Global. I have three questions if I may. The first being, can you just describe to us the competitive environment that you are currently seeing in the US at the moment? Secondly, can we have an update on the Guinness review that I believe you are conducting at the moment? And finally, what are the gaps in the portfolio and how you're going to plug these gaps? Thank you.

Okay. Maybe we can take them in reverse order. We have very, very few gaps in our portfolio. I think people may point to lack of scaled presence in the ultra premium vodka category. We all know that there are certain vodka... super premium vodka brands likely to come to market. We will participate in that process. At the same time, we will continue to develop brands such as Ciroc and so on. I think to say more about the M&A environment beyond that is unwise at this point in time. The Guinness review that we cited was really looking at the cost effectiveness of our business in Ireland. That was linked in the press to the value that maybe ascribed to the site that we have. I think particularly as it pertains to the site and the value, nothing is going to happen there in the immediate term. And I think it is unfortunate that the review that we have on Guinness is getting such focus because the reality is that we constantly review the efficiency of our operations around the world. It just so happens that that one got so media attention, and I am sure that's what you'd expect us to in any event. Regarding the competitive environment in the United States, I'd ask Ivan maybe to comment on that.

Sure. Firstly on the marketplace, we still the marketplace as robust. And the underlying trend of premiumization is very strong. As Paul indicated, if you segment the marketplace, what's under pressure is value spirits under $10 a bottle. You go above $10 and that's 90% of our business, it's very strong, and even in the developments of the last few months, we see that robustness continue. So, our view on the outlook for spirits in the US remains still looking at an industry that will grow 2% to 3% in volume, and have a nice price mix kicker for another 2% to 3%. And that's routed in the underlying demographics, the shifts in tastes [ph], and ultimately spirits playing really as an affordable luxury. And your average household that buys three or four bottles of Johnnie Walker Black a year, it's not a lot of money, and the attachment to the brand is so strong. So the trade-down in spirits consumption we really don't see happening, the pressure is really at the low-end.

I'd just add to what Ivan said by saying let's not forget the distribution system also that we have in our marketplace, still capable of improvement, but it's really performing well for us. This will be the third year straight where we have gained share in that marketplace, and we intend to keep it that way.

James Edwardes Jones from Execution. Just looking at your guidance for 2008, assuming the £40 million disposal profit is in the base, it looks like you need to do something close to 11% underlying, if I can describe it as underlying, which of the moving parts of the P&L you rely on to step up the gear in order to achieve that?

I'll invite Nick in a moment to give some of the specifics, but let me say generally what you have with Diageo is a broad base of geographies. You have a broad base of brands. On a geographic basis and indeed on a brand basis, we have good momentum. We have very good momentum. Not only are we seeing good volume performance, but we do see our brand equities capable of taking price and as we continue to focus on value, not volume, we will get the premiumization, a mix kicker. So I would say good volume momentum, price and mix improvement will be the core of any underlying profit improvement. We are also seeing on a regional basis improvements in Europe. We certainly have to wait and see how we perform in the first half through the Christmas period, but we are encouraged. We took our pain last year in that regard by taking some very aggressive pricing. So I would say underpinning any improvement is continued commercial success by market, by brand, but is there anything on top of that Nick that you would cite?

My answer is slightly more technical than Paul's, so therefore not anywhere near as interesting. I think the single column sort of demon maybe at work here because I think we need to point out that when we quote organic growth, we strip out that exceptional gain. So when you look at our organic growth for this year, it does not include that £40 million as you rightly say on the disposal and obviously, it strips out exchange rate movements. And we would intend going forward that when we give you the organic or if you like underlying growth of the business, which in our mind is what organic really is, we'd be stripping out exceptionals and we'd be stripping out exchange, etc., etc. So it really is meant to be like for like and that 40 is out of what we call organic growth.

It's Nico Lambrechts from Merrill Lynch. I have two questions. Do you raise guidance of 9%, could we assume that is a new target for the medium term as well or is that just raised guidance for financial '08 and we revert back to 8% thereafter? Second question is there was some de-stocking of Johnnie Walker in the US over the last 12 months. I believe that the sell-in was something like 2%, sell-out 10%. Could you give us some outlook for Johnnie Walker sales for the next 12 months in the US? Thank you.

Maybe the second part, Ivan in a moment, you can comment on. Regarding guidance, I think you're right. We are moving to 9% for the fiscal year that we've just started and I think it's reasonable to assume that we'd have that target going forward. Clearly situations can change and we would update the market if we felt either on the positive or the negative it warranted a change, but I think your assumption is reasonable. But I think at this point it's worth just reflecting on the consistency of Diageo performance. And it's interesting that this time last year, we started the fiscal year with a coup d'état in Thailand, bombings in Beirut. We had a worldwide ban on liquid through duty-free. We managed all of those pressures. It happens to be this year that we are looking at some fragility in the financial markets. We will manage those too. And if stand here this time next year, there will be other issues that we have to contend with and it goes back to the broad base of our operations, whether you look at geography or brand. We will always have a geography or a brand that is not up to expectation, but because of our breadth and the strength of our brands and the strength of our markets, we will weather that. Ivan?

Yes, Nico, on Johnnie Walker, you are right. Our reported results show a 4% volume growth, 7% sales growth. Through that we have achieved de-stocking, so the actual consumer uptake, and you see it in IRI and Nielsen is very strong. This brand is truly in a category, Scotch is down in the US, I mean, Johnnie Walker has absolutely transcended Scotch. Black Label not only commands a huge price premium, but has strong on-premise call, is doing very well in old channels across the country. So we expect Johnnie Walker momentum to continue strongly. The de-stocking in the wholesale system has happened, we'll do a little more, but I think you could expect the current trends to continue in terms of reported results and the health and equity of the brand has never been stronger, not just in Black Label. I mean, Red Label, it's unbelievable. Even Standard Scotch is demonstrating great growth and together, this trademark is really in a very strong place in the US and we are very optimistic about continuing to premiumize and grow the Johnnie Walker trademark.

Yes, just building on that, Johnnie Walker is clearly a star performer, but that said, it's only about half of our total Scotch business and I referenced in my earlier remarks, the category approach that we take with the variety of brands; but if you look at our total Scotch performance, sales net up 12%, 13%; clearly, within that Johnnie Walker was the major performer. But our other brands of Scotch are equally performing very, very well.

Hi. Michael Bleakley here from Credit Suisse. A couple of questions, first of all on the international ex-Asia margin, you were commenting obviously that there were additional costs in Africa over the last year. Just wondering what is your outlook look like for international margin given the fact that obviously you are getting a lot of growth out of Scotch, which is presumably higher margin than the beer business, maybe you can confirm that? And where do you see the sort of the end game being on that international margin going forward? And the second one was really on the US. NGG, obviously, you are coming up to a period now where you will be reassigning some other contracts that you've first signed in 2002, one presumes. Can you give us some indication of that how that is going?

I will invite Ivan to offer any additional words. I think it' is pretty well from my perspective on the basis that our distributors are hitting the goals that we've set for them. In any contract renewals they will have new performance standards, which build on the success that we've already achieved. But even so, I still think there are huge opportunities in the US distribution system, and maybe, Ivan, you want to talk specifically to those opportunities.

Sure. I'd say, overall the contract renewals are going very well. Our focus really is how we take our collective gain to the next level in the distribution system. And I think as we've shown you in the past, we are putting very measurable focus on key capabilities in each distributor and we've set specific goals for raising those over time to world-class standards. There is a lot of room for improvement there. We are putting much more dedicated focus against our reserve and luxury portfolio, strengthening the on-premise. If you look at our arrangements in New York right now, I mean, they are significantly stepped up. And I think together with our distributor partners where our relationships are very strong, I mean, it really is about how do we take this good platform and keep taking it to a great place and recognizing the competitive environment, putting more distance between us and our competitors. So we are pleased with how it's going and it's very much on track with our expectations.

Stuart, do you want to address the margin question?

When you talked about the Africa comment on one-off costs, we did a number of restructurings of our distribution systems in Africa during the year to improve the stability of our business in a couple of markets, but also to increase the penetration through the distribution network. We incurred some one-off costs from that alongside some organizational restructuring, which includes the implementation of SAP in a couple of our very significant markets, which the SAP rollout will continue during the next 12 to 18 months. So, the nature of the SAP one-off costs would continue through. The restructuring and organizational nature, we wouldn't expect to come through. We also re-launched Guinness in new packaging in a few markets and had some one-off bottle write-off costs associated with that as well. To your point about the margin outlook for International, you are right. Scotch margins are somewhat higher than beer, although beer margins are very, very healthy in the international business, driven in part by the returnable bottle system that we operate with across Africa. And like everywhere else in Diageo, we are absolutely focusing on value. So pricing, premiumization, they are strong drivers of our business going forward and I would expect that through time, we will be increasing the TP [ph] margin of our business.

All right. Thanks very much.

Ian.

Ian Shackleton, Lehman Brothers. Two questions, going back to the 9% guidance for '08, could you just tell me what the assumptions around input costs, the marketing spend now that are behind that? And second question is around India, you talked quite a lot about the opportunity in China and Russia. Could you just comment on how you see the Indian opportunity with this prospect of import tariffs coming down?

Maybe Nick can handle the input cost question. Regarding India, we know that at present because of the sheer volume of locally produced alcohol that in many ways tries to emulate Scotch. We know that that volume, a lot of it would migrate to Scotch if tariff levels were lower. The Indian government had made certain statements about reducing tariff levels. I am optimistic that that will take place. I think it's unwise to be specific at this stage on which regions will or provinces will also reduce their taxes and which will not actually just offset the federal reduction with increases of their own. But overall, I think the environment is improving for general tariff reductions. That being the case, we know that the Indian consumer wants the real thing and we have the brands to make sure that they get the real thing. Johnnie Walker would be the leading brand in that category and therefore we remain very, very bullish about the long-term potential of that market. Nick, input --?

Ian, I think it's fair to say like a lot of consumer goods companies, we expect the next year to be tougher on input cost than the one that's just gone, not so much in the area of energy costs, which we've talked about a lot, but some of our very fundamental input costs; barley for instance, malt, glass, even corrugate is rising at a faster rate than we've seen for quite some time. And I think it's fair to say that factored into our guidance is an assumption that this year the supply part of our organization will certainly struggle to offset all of the inflationary pressure across our total input cost base. So, we see broadly inflation somewhere averaged across our whole input base between 3% and 4%. That's on average. Obviously, there is some big spikes within that. And historically, supply... the supply organizations managed through projects or procurement efficiency to offset most of the input cost inflation. I don't think we are going to achieve that in the current year and that impact is factored into our guidance. So a tougher year on the input side of the equation, which is moderating, if you like, always factored into the guidance that we are giving you.

Just going back to the Indian opportunity, whilst I focused on Scotch, we clearly have a much broader representation there and John, maybe you want to talk about some of the successes we've had this year because there have been a number.

Yes, correct. We are very pleased with our performance this year in India. We have grown top line by about 36%. We've principally done that by firstly focusing on our core brands, so Johnnie Walker. Johnnie Walker has expanded its distribution in India and it's increased its market share, both Black and Red. At the same time, we've introduced a number of brands in the super deluxe territory. So we are cognizant of the need to take advantage of the trend we are seeing and the higher income elements of the Indian market. We also see a very positive consumer trend in the emerging middleclass and through the year, we launched a joint venture with Radico Khaitan, the number two domestic player in India, and launched a product called Master Stroke. Within Diageo India, we have launched Haig, each to take advantage of the trading up from the Indian IMFL market, Indian Made Foreign Liquor, into high price segments. So while we'd expect to be operating at a different affordability tiers, in each instance we are operating at the higher end of those affordability tiers. In our other global priority brands, we've had a fantastic year on Smirnoff, further expanding its distribution with manufacturing in more states, and we've launched very successfully Flavors. To post point on tax, just to add to that point, while we are very positive about the change that the Indian government has made, we will need to be lobbying across each of the states to ensure that it is given a full effect at a state level, because in a number of states right now it looks like the impact maybe to in fact increase price on Johnnie Walker, and... but we remain very positive, the doors are open to those conversations and we remain very, very confident about the progress that we are making.

Sorry, Nick, just on the marketing cost assumption in '08?

Sorry. Our marketing cost assumption is very similar to where we are, if you like, in the year just ended, i.e., we will be increasing marketing ahead of sales. I think that's been fairly consistent over the last two or three years. I don't mean by huge leaps and bangs, but I certainly think in the sort of 1% to 2% territory ahead of sales growth is our assumption.

Simon Hales from Dresdner Kleinwort. Just following on from that last question, Nick, on marketing spend, could you maybe just flush out a bit how we should be thinking about spend by region, and then particularly in relation to International and Asia-Pacific for FY '08? Secondly, you talked about Korea and obviously the problems you've had post the year-end, is there any chance you could maybe give some form of quantification to the sort of level of hit we might see in EBIT terms in that market and the loss of the import license? And then finally on the root to market changes you've implemented in Spain in '07, can you just clarify that all of the issues relating to wholesale stock levels being refused were fully through in '07, there's no more to come in 2008?

Okay. Let me take the question of Korea and then maybe Nick, you can handle the other ones. The issues of Korea we have factored into the guidance. I think for us to be anymore specific than that at this stage is unwise. So I just want to leave that at that point. The Korea issue is factored into our guidance. Nick?

On marketing and obviously I'll let my colleagues modify if they want. I think broadly what you'll see in our marketing spend is quite a similar pattern to this year or perhaps more specifically to the second half of this year. So, what does that mean in my mind and I think in the way we are modeling the business, it certainly means that in Asia-Pacific, we expect John to be investing substantially in taking advantage of the opportunities in his business and some of those we have already talked about this morning. So you should expect to see good level of spend in marketing in Asia-Pacific. I think in international, as you've seen, we've got marketing spend pretty much in line with sales at the moment, and I would say that's a pretty good model, I think, for where Stuart will be in the next phase of international development. It's about maintaining the fantastic momentum we've got there rather than having to seed again a whole load of markets, which is more, if you like, what John is doing. I think in Africa, oh sorry, in Europe, you have seen Andrew in the second half really begin to invest some... behind some of the growth drivers that I think again Andrew and the team identified when we had the last investor conference. And we have got a lot more confidence about some other ways of driving growth, and Andrew invested behind those in the second half of the year, and we would expect him to do that in this coming financial year. And therefore, I think you will see marketing spend in Europe running a little ahead of sales reflecting that. And Ivan, I think, has had a very consistent kind of investment policy in North America, which has been broadly in line with sales, particularly if you strip our RTD, you are seeing broadly in line with sales in North America as the trend. So now that's how I would see the overall breakdown and when you roll all that up, as I say, I'd expect this to be one or two points ahead of overall revenue growth for Diageo. I'll just pause in case my colleagues would like to... maybe on Spain, Andrew, do you want to just pick up on kind of route to market change we've seen?

Yes, I think we are in a lot healthier place in Spain. Our trade terms changes resulted in a move away from a kind of market norm where a lot of stock was brought in by wholesalers two or three times a year, and largely on promoted deep discounted prices, particularly in Scotch. We've kind of taken that on really over the last eight months and now got a much more level kind of less polarized set of buying patterns with the trade. The side benefit of that is our pricing has stuck. So if you look at our gearing from volume to net sales, we are up 7 point swing from volume to net sales in the second half business in Spain. Is that all out? Pretty much, I would say. I would say next year, as sales out of the business should be pretty much in line with our Nielsen performance in terms of the off-take, so Scotch is running at about minus 5 at the moment. We are just beating the market. As a result, we are doing very well with Johnnie Walker and pretty much holding share with J&B. So you should see sales much more in line with consumer off-take as reflected in Nielsen.

Good.

Okay. Let me... oops, one more.

Yes, Matthew Webb from Cazenove. Just wondering whether Nick could offer some guidance on the average interest rate for '08 assuming global rates stay broadly as they are. And also perhaps into '09, if that's possible because I am aware that there a couple of fairly large low coupon bonds that are coming up for maturity over the next 12 months. I was just wondering whether that would have much of an effect going into '09. Thanks.

As far as we can see right now, and obviously it's a bit of a moving feast in the market at the moment, I would expect our average debt rate in the next financial year to be up somewhere around 30 to 40 basis points. I don't think more than that. And then going forward, I'm actually expecting things to be leveling out a little bit because we do have now a fairly regular maturity profile of our debt. It's fairly well spaced out. And when you look up everything that's maturing versus the current market rates, I'm actually expecting the profile that's been rising over the last couple of years to begin to flatten out a little bit. I'm not saying there might be another 10 basis points or so, but I don't think you are going to see anything like the 50 that we've seen this year. It's that kind of profile that we're looking for.

There was one more hand that went up very energetically, so we will take that as the last one.

Thank you, Paul. Trevor Stirling from Sanford Bernstein. You commented on input costs and also rightly pointed out that that's something that most FMCG companies are facing at the moment. And that could well lead to a distinct rise in food and beverage inflation across many categories. Is that something that's also factored into your guidance or if that does evolve that way and there are opportunities for further price increases, would that represent upside to the 9%?

I think if there were further opportunities for price increases, there maybe some upside. I think the way that I would look at it is that we felt that our brands could take the level of price increase that we plan for. We've also had to accept that there is some upward pressure on input costs and therefore cost of goods sold. I think where we are is right... I do not want to go for more price increases at this point in time beyond what are currently in our plans and which basically replicate what we have been successful in putting through this year. So, whilst any further price increases would represent upside, I think it would be very unwise to bank on that at this point in time. Okay. Thank you everyone for your attention and we'll see you around.