Ivan M. Menezes - Chief Executive Officer and Executive Director Deirdre A. Mahlan - Chief Financial Officer and Executive Director

Good morning, everyone, and thank you for your time today. Deirdre and I are now going to give you our takeaways from the results we released this morning. This half has seen a weaker set of results at the top line than we would have expected at the start of the year. But it's also a set of results which, on many levels, demonstrates what a strong business this is. It demonstrates our geographic reach. The weakness we have seen in some markets in Asia and Latin America and in Nigeria has resulted in a decline in volume in the half, but we have delivered net sales growth given our strong performance in the U.S., our improving performance in Western Europe, strong growth of our reserve brands and growth in South Africa, in Brazil, India and Russia. When you look at our performance in the more challenging markets, it also reflects the strength of our brands and our category depth. For example, in China, while baijiu has been very weak, we have delivered strong growth and share gains in super and ultra premium scotch, and Baileys continues to grow, opening up a whole new consumer opportunity for us. In Nigeria, our brand range will enable us to respond in the second half to changing consumer trends. In the West LAC and Southeast Asia, our scale and brand strength means that we have the flexibility to manage stock levels and respond quickly when market conditions improve. And markets will improve as the long-term structural growth drivers in the emerging markets are unchanged. As Deirdre and I will show you, the last 6 months have presented a number of challenges, but we have met those challenges and have continued to strengthen this business with investment behind the 6 performance drivers. These are our must-dos, and they are the focus as we drive to achieve our performance ambition to create one of the best performing, most trusted and respected consumer products companies in the world. We are now able to build an even more agile, accountable and effective organization. And over the next few months, we will develop detailed plans to delayer the organization and deliver further operating efficiency. Let me now hand over to Deirdre to talk you through the performance in more detail.

Thank you, Ivan, and good morning. While this has been a challenging half, we have, again, delivered efficient growth. We've focused our cost and maintained our investment in brands and route to consumer but with a weaker top line than we had envisaged at the beginning of the year. Top line weakness came from slower growth in the emerging markets and the continued uneven economic recovery in the developed markets, which has impacted some price points. Actions we have taken to reduce inventory levels and maintain our price positioning in an aggressive price environment in some markets also contributed to volume and net sales weakness. Emerging market volume was down 3% and net sales up 1%, reflecting the challenges we have had to manage in China, Southeast Asia, Nigeria and West LAC. In North America, our strongest business, given our scale, route to consumer and leading brands, the recovery is not yet benefiting all consumers, and growth has been uneven across price tiers. U.S. spirits, for example, delivered another good set of results, with strong growth from our super and ultra premium brands and new innovation launches but a weaker performance at value and standard price points. In Western Europe, the macro environment remains difficult in Southern Europe and in Ireland, but there are positive leading indicators elsewhere in the region. And even in Southern Europe, trends have improved. Even in this challenging trading environment, we delivered positive price/mix, from selective price increases and strong growth in reserve, overhead savings and margin improvement while continuing to invest for the future. I think these results demonstrate that while we are not immune to an economic slowdown in emerging markets, our geographic diversity and leading position in North America, together with the breadth and depth of our brand portfolio, can mitigate the…

Thank you, Deirdre. I want to talk to you now about our regional performance in the half. It's a mixed picture given some of the challenges which arose, but as I said in my introduction, Diageo's strengths enable us to manage challenges and deliver on opportunities. I also want to talk about how we have begun that step-up in executional focus on our must-dos, which I outlined at our Capital Markets Day back in November. I'm also going to explain how the changes we are looking to make in our global, regional and market structures will improve that executional focus and deliver further cost savings. Let me start with the regions. North America is a great market for Diageo, not just the biggest and the most profitable, but also a strong route to market, a market-leading position and a great team. We are one of the few consumer goods companies that has delivered sustained performance on top line growth and margin expansion. The performance is all the more impressive when you remember that the economic recovery in the U.S. has been uneven. Consumers at lower income levels have been affected by uncertainty, and this is reflected in their spending patterns. As a result, volume for standard brands has been most impacted, and price sensitivity and these segments is increasing. Smirnoff has certainly been impacted by this, losing share as competitors continue to discount prices. Innovation is helping to mitigate some of this. But to regain share and increase our pricing strength, we are working on a new communications platform that will enhance the brand's credentials with consumers. In contrast, premium and above brands are leading category growth, and our reserve brands are well placed to benefit from this trend. Johnnie Walker Platinum and Johnnie Walker Blue are great examples of…