Imperial Brands Plc · LSE:IMB

Imperial Brands — Imperial Tobacco Group — FY2013 Earnings Presentation

72 slides from Imperial Brands's earnings presentation, Nov 5, 2013

  1. Slide 1: Preliminary Results 2013

    Preliminary Results 2013 Imperial Tobacco Group PLC 5 November 2013 1

  2. Slide 2: Disclaimer

    Disclaimer Certain statements in this document constitute or may constitute forward-looking statements. Any statement in this document that is not a statement of historical fact including, without limitation, those regarding the Company’s future expectations, operations, financial performance, finan

  3. Slide 3: FY13 Overview

    FY13 Overview transition on track  Significant progress with strategic transition in tough year  H2: improved results in USA and Russia  Established Growth & Returns Markets  strategic clarity; effective resource allocation  Prioritised brand portfolio to drive quality growth  Growth Brands sh

  4. Slide 4: FY13 Summary Results

    FY13 Summary Results robust performance in tough environment FY13 FY12 ∆ Growth Brands volume (SE bn) 129 132 -2% Tobacco net revenue (£m) 7,007 7,005 -1% Adjusted operating profit (£m) 3,180 3,161 +1% Adjusted EPS (p) 210.7 201.0 +6% DPS (p) 116.4 105.6 +10% Cash conversion (%) 86 71 +1500bps RoIC

  5. Slide 5: FY14 Outlook

    FY14 Outlook important transition year; building on successes  Strengthening our portfolio and footprint  Backing growth with increased investment in:  Growth Brands  Growth Markets  Fontem Ventures  Building resilience:  advancing cost optimisation programme  implementing stock optimisation

  6. Slide 6: Strategic Transition

    Strategic Transition realising our growth potential 6

  7. Slide 7: Prioritised Portfolio; Realigned Markets

    Prioritised Portfolio; Realigned Markets maximising growth opportunities Tobacco net revenue* Tobacco net revenue* by by brand market 32% 49% 39% 42% 12% 26% Growth Specialist Portfolio Growth Markets Returns Markets North *FY13 tobacco net revenue £7,007m Returns Markets South 7

  8. Slide 8: Key Metrics

    Key Metrics driving quality growth Growth Brands: quality growth Specialist Brands: value growth Volume (SE bn) Net revenue (£m) Market share (%) % of Tobacco net revenue Net revenue (£m) % of Group SE volumes % of Tobacco net revenue Growth Markets: share, revenue & quality Returns Markets: profita

  9. Slide 9: Strategic Transition

    Strategic Transition prioritised brands: Growth & Specialist Growth Brands Specialist Brands 9

  10. Slide 10: Growth Brands

    Growth Brands focus for high quality growth This space appears blank because we have removed the images that appear in the presentation. This is because we currently do not feature tobacco product brand imagery on our website. 10

  11. Slide 11: Growth Brands

    Growth Brands driving higher quality FY13 FY12 ∆ Volume (SE bn) 129 132 -2% Market share (%) 5.4 5.1 +30bps Net revenue (£m) 2,729 2,647 +2% % of Group SE volumes 41 39 +200bps % of Tobacco net revenue 39 38 +100bps  Outperforming market trends; growing share; driving quality growth  7 of 10 brand

  12. Slide 12: Specialist Brands

    Specialist Brands satisfying consumer occasions across total tobacco This space appears blank because we have removed the images that appear in the presentation. This is because we currently do not feature tobacco product brand imagery on our website. 12

  13. Slide 13: Specialist Brands

    Specialist Brands unique total tobacco platform driving growth FY13 FY12 ∆ Net revenue (£m) 866 817 5% % of Tobacco net revenue 12 12 -  Excellent results: net revenue +5%  Strong revenue growth from Style and Gitanes  Underpinned world leadership in fine cut tobacco and rolling papers  Premium

  14. Slide 14: Fontem Ventures

    Fontem Ventures IP acquisition adds to growth potential  Non-Tobacco focus  Current focus on eVapour  launches in 2014  Acquisition of IP from Dragonite  leading eVapour know-how  e-cigarette pioneer joins Fontem  driving technological advancement 14

  15. Slide 15: Focused Market Investment

    Focused Market Investment strategic role drives market classification From geographic To strategic role proximity Western Europe Central Europe Growth Eastern Europe USA Returns Africa Middle East Returns Markets North Returns Markets South Asia-Pacific 15

  16. Slide 16: Growth and Returns Markets

    Growth and Returns Markets effective resource allocation Growth Markets Returns Markets Scale existing presence for Footprint strength driving sales long term growth and high returns Large profit and/or volume pools Strong established presence Significant share growth potential Build on strong posit

  17. Slide 17: Germany and Italy

    Germany and Italy same continent; different strategy Germany Italy  Hold share; drive profit  Drive scale Clarity of Purpose  Leading player: 25% stick  3% stick equivalent equivalent market share market share Effective  Medium term investment  Invest for long term Resource horizon  Focus on

  18. Slide 18: Growth Markets

    Growth Markets driving quality growth FY13 FY12 ∆ Market share (%) 5.8 5.9 -10bps Market share ex Russia (%) 5.0 4.9 +10bps Tobacco net revenue (£m) 2,254 2,192 +2% Adjusted operating profit 668 633 +7% Growth Brands % Tobacco net 37 36 - revenue Growth Brand volumes (bn) 53 54 -2%  Focus on share,

  19. Slide 19: Growth Markets

    Growth Markets good progress across our markets  Italy: JPS building momentum  Turkey: Davidoff; West and route to market strategy driving growth This space appears blank because we have removed the images that appear  Kazakhstan: Davidoff & West in the presentation. share and volume gains This i

  20. Slide 20: USA

    USA strategic transition delivering  Highly attractive market  Re-engineered business model  What did we do?  state by state resource allocation  sales force re-organisation  pricing strategy implemented  key account activation  Result  +20bps cigarette share in Focus States  +20bps cigare

  21. Slide 21: Russia

    Russia improved H2 performance  Challenging operating environment  excise increases; regulatory changes  What did we do?  invested ahead of regulatory changes  driving growth in high and value-for-money price segments  growth in modern formats: Davidoff B&W; Style; West Compact  Maxim line ex

  22. Slide 22: Returns Markets

    Returns Markets Returns Markets £4.8bn Returns Markets North Returns Markets South £2.9bn £1.8bn Main Markets Main Markets Australia Poland Algeria France Netherlands UK Central Africa Morocco Germany Ukraine Central Europe Spain Figures are tobacco net revenue 22

  23. Slide 23: Returns Markets

    Returns Markets driving quality in difficult markets FY13 FY12 ∆ Market share (%) 27.3 27.7 -40bps Net revenue per ‘000 SE (£) 23.4 21.9 +6% Adjusted operating profit 2,335 2,356 -1% Growth Brands % of Tobacco net 40 38 +200bps revenue  Balancing share, revenue and profit  Higher quality  strong

  24. Slide 24: Returns Markets North

    Returns Markets North strong performance in key markets FY13 FY12 ∆ Market share (%) 25.5 26.0 -50bps Net revenue per ‘000 SE (£) 27.0 24.4 +10% Adjusted operating profit 1,543 1,502 +3% Growth Brands % of Tobacco 44 42 +200bps Net Revenue  Good results: adjusted operating profit +3%  Excellent re

  25. Slide 25: Returns Markets South

    Returns Markets South focused on improving delivery FY13 FY12 ∆ Market share (%) 29.9 30.3 -40bps Net revenue per ‘000 SE (£) 19.3 18.8 - Adjusted operating profit 792 854 -8% Growth Brands % of Tobacco net 34 32 +200bps revenue  Performance impacted by weak markets in France, Morocco and Spain  E

  26. Slide 26: Logistics

    Logistics robust performance FY13 FY12 ∆ Distribution fees (£m) 850 872 -5% Adjusted operating profit (£m) 176 176 -2% Margin (%) 20.7 20.2 +50bps  Weak tobacco industry volumes impacting France, Italy and Spain  Robust performance  Adjusted operating profits +2% excluding impact of Italian VAT t

  27. Slide 27: Operational Transition

    Operational Transition building a stronger business  2014: important transition year  Improved market resource allocation  investment step up in Growth Markets  Portfolio priorities: investment; SKU reductions; migrations  Portfolio agenda key to cost optimisation  complexity reduction  impro

  28. Slide 28: FY14 Outlook

    FY14 Outlook important transition year; building on successes  Strengthening our portfolio and footprint  Backing growth with increased investment in:  Growth Brands  Growth Markets  Fontem Ventures  Building resilience:  advancing cost optimisation programme  implementing stock optimisation

  29. Slide 29: Group Results

    Group Results 6% constant currency EPS growth Constant Constant Foreign Currency Currency FY12 Exchange Growth FY13 ∆ ∆ Tobacco net revenue 7,005 86 (84) 7,007 - -1% Tobacco operating profit 2,989 (17) 31 3,003 - +1% Logistics operating profit 176 4 (4) 176 - -2% Operating margin % 42.7 (0.2) 0.4 42

  30. Slide 30: Growth Markets

    Growth Markets strong profit delivery FY13 FY12 ∆ Net revenue (£m) 2,254 2,192 +2% Adjusted operating profit (£m) 668 633 +7% Margin (%) 29.6 28.9 +70bps  +2% revenue growth; +7% adjusted operating profit growth  Strong profit growth in Russia, Taiwan and Turkey  Increased profits in USA  Iraq i

  31. Slide 31: Returns Markets

    Returns Markets robust North mitigating weaker South FY13 FY12 ∆ Net revenue (£m) 4,753 4,813 -2% Adjusted operating profit (£m) 2,335 2,356 -1% Margin (%) 49.1 49.0 +10bps  Difficult conditions in a number of markets  Robust result  Margins maintained % change is in constant currency terms 31

  32. Slide 32: Returns Markets North & South

    Returns Markets North & South addressing weakness in key South Markets North FY13 FY12 ∆ Net revenue (£m) 2,929 2,924 -1% Adjusted operating profit (£m) 1,543 1,502 +3% Margin (%) 52.7 51.4 +130bps  Good results in Germany and Australia  Stable in other key markets South FY13 FY12 ∆ Net revenue (£

  33. Slide 33: Cost Optimisation

    Cost Optimisation aligned with strategic priorities Product Cost Overheads £300m pa savings by September 2018 Incremental c£60m Incremental c£210m £30m in 2013 in 2014 2015-2018 33

  34. Slide 34: Group Results

    Group Results Spanish impairment  £0.6bn impairment; conservative view of Spanish tobacco market  Non-cash; accounting requirement Financing and cost of debt  Average all-in cost of net debt 5.1% (FY12: 5.5%)  Net interest charge £532m Adjusted tax rate  22% sustainable 34

  35. Slide 35: FY13 Adjusted Net Debt

    FY13 Adjusted Net Debt £0.3bn £3.4bn £1.6bn £1.2bn £0.2bn £0.3bn £0.1bn £8.8bn £9.1bn Opening EBITDA Working Net capex Tax and Restruc- Dividends FX & Closing net debt capital interest turring & share other net debt buy-back Opening adjusted net debt is as at 1 October 2012. Adjusted debt figures ex

  36. Slide 36: Maximising Shareholder Returns

    Maximising Shareholder Returns £9.5bn returned since Hanson de-merger High £1,565m Margin Profits Sales Strong Cash Flow £113m 1997 2013 Reinvest Share buy-back in year Maximising Shareholder Dividends paid in year Returns FY97 shows the interim and final dividend for FY97 to reflect a full year. Th

  37. Slide 37: Preliminary Results 2013

    Preliminary Results 2013 Imperial Tobacco Group PLC 5 November 2013 37

  38. Slide 38: Appendices

    Appendices 38

  39. Slide 39: Financial

    Financial 39

  40. Slide 40: Income Statement

    Income Statement £m FY13 FY12 Revenue 28,269 28,574 Adjusted operating profit 3,180 3,161 Acquisition accounting adjustments - 10 Amortisation and impairment of acquired intangibles (952) (1,552) Restructuring costs (270) (101) Net finance costs* (697) (437) Profit before tax 1,261 1,081 Tax (300) (

  41. Slide 41: Reconciliation: Reported to Adjusted

    Reconciliation: Reported to Adjusted Net fair value and exchange Amortisation Impairment gains on Post Reported of acquired of acquired certain employment Restructuring Adjusted FY13 intangibles intangibles instruments net financing costs FY13 Operating profit 1,958 372 580 - - 270 3,180 Finance cos

  42. Slide 42: Tobacco Net Revenue

    Tobacco Net Revenue FY13 % Change Foreign Constant Constant £m Actual1 Exchange Currency2 FY12 Currency Growth Markets 2,254 (26) 2,228 2,192 2 Returns Markets North 2,929 (23) 2,906 2,924 -1 Returns Markets South 1,824 (37) 1,787 1,889 -5 Total Returns Markets 4,753 (60) 4,693 4,813 -2 Total Tobacc

  43. Slide 43: Tobacco Operating Profit

    Tobacco Operating Profit FY13 % Change Foreign Constant Constant £m Actual1 Exchange Currency2 FY12 Currency Growth Markets 668 10 678 633 7 Returns Markets North 1,543 11 1,554 1,502 3 Returns Markets South 792 (4) 788 854 -8 Total Returns Markets 2,335 7 2,342 2,356 -1 Total Tobacco 3,003 17 3,020

  44. Slide 44: Logistics

    Logistics FY13 % Change Foreign Constant Constant £m Actual1 Exchange Currency2 FY12 Currency Distribution fees 850 (18) 832 872 -5 Operating profit 176 (4) 172 176 -2 Distribution margin % 20.7 20.7 20.2 1Based on average exchange rates for twelve months ended 30 September 2013 44 2Assumes that ave

  45. Slide 45: Foreign Currencies

    Foreign Currencies Average Closing £1 = FY13 FY12 FY13 FY12 Euro 1.190 1.216 1.196 1.253 US dollar 1.561 1.577 1.615 1.620 45

  46. Slide 46: Balance Sheet

    Balance Sheet £m FY13 FY12 Non-current assets: tangible 2,648 2,917 intangible 17,382 17,609 Current assets: inventories 3,296 3,132 other 5,092 3,981 Current liabilities (11,082) (9,142) Non-current liabilities (11,688) (12,413) Net assets 5,648 6,084 46

  47. Slide 47: Cash Flow

    Cash Flow £m FY13 FY12 Cash flows from operating activities pre tax 3,038 2,561 Tax paid (686) (442) Cash flows from operating activities 2,352 2,119 Net capex (includes software) (291) (303) Net acquisitions (businesses and trademarks) (34) - Employee Share Ownership Trust - 8 Share buy backs (500)

  48. Slide 48: Cash Conversion

    Cash Conversion £m FY13 FY12 Net cash flow from operating activities 2,352 2,119 Tax 686 442 Net capex (291) (303) Cash flow post capex pre interest and tax 2,747 2,258 Adjusted operating profit 3,180 3,161 Cash conversion 86% 71% Working capital (outflow) (82) (505) 48

  49. Slide 49: Net Finance Costs

    Net Finance Costs £m FY13 FY12 Net finance costs 697 437 Adjusted for: - expected return on retirement benefit assets 168 168 - interest on retirement benefit liabilities (168) (187) - unwind of discount on redundancy and long term provisions (9) (8) - net fair value and exchange gains on certain in

  50. Slide 50: Net Debt Reconciliation

    Net Debt Reconciliation Reported Accrued Fair value of Finance lease Adjusted £m FY13 interest derivatives creditors FY13 Opening net debt (8,965) 287 (94) 20 (8,752) Free cash flow 1,548 (20) 1,528 Share buy backs (500) (500) Dividends (1,084) (1,084) Acquisitions (34) (34) Accretion of interest (3

  51. Slide 51: Volumes

    Volumes 51

  52. Slide 52: Total Tobacco SE Volumes

    Total Tobacco SE Volumes Billion stick equivalents FY13 FY12 Growth Markets 113.5 121.4 Returns Markets North 108.6 119.7 Returns Markets South 94.7 100.3 Total Returns Markets 203.3 220.1 Total Group 316.8 341.4 SE is stick equivalents; Total Tobacco includes cigar, snus and other tobacco products;

  53. Slide 53: Financing

    Financing 53

  54. Slide 54: Committed Bank Facilities

    Committed Bank Facilities 30 September 2013 Maturity Description date Amount £m equiv. Margin EUR Committed 2 Year Revolving Credit Facility Nov-14 €300m £251m 0.700% EUR Committed 2 Year Revolving Credit Facility1 Nov-15 €1,185m £991m 0.530% Committed 5 Year Revolving Credit Facility Dec-15 £2,483m

  55. Slide 55: Bond Issues

    Bond Issues 30 September 2013 Maturity Amount Issuer Coupon Issue Date Date £m equiv. Margin €500m Altadis Finance BV 5.125% Oct-03 Oct-13 £418m 0.8% €1,200m Imperial Tobacco Finance PLC 4.375% Nov-06 Nov-13 £1,003m 0.6% €750m Imperial Tobacco Finance PLC 7.250% Sep-08 Sep-14 £627m 2.7% €500m Altadi

  56. Slide 56: Core Financing maturity profile

    Core Financing maturity profile at 30 September 2013 16,000 14,000 ECP 12,000 Bank Facilities Bond Issues1 £m equivalent 10,000 8,000 6,000 4,000 2,000 - Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Sep-18 Sep-19 Sep-20 Sep-21 Sep-22 Sep-23 Sep-24 Sep-25 Sep-26  Facilities in place as at 30 September c.£14.7

  57. Slide 57: Main Market Classifications

    Main Market Classifications 57

  58. Slide 58: Main Market Classifications

    Main Market Classifications Growth Markets Returns Markets North Returns Markets South Cambodia Australia Algeria China Azerbaijan Austria Iraq Belux Czech Republic Italy Germany France Japan Ireland Hungary Russia Netherlands Morocco Saudi Arabia New Zealand Portugal Taiwan Poland Slovenia Turkey U

  59. Slide 59: Former Disclosure

    Former Disclosure 59

  60. Slide 60: Tobacco Net Revenue

    Tobacco Net Revenue FY13 % Change Foreign Constant Constant £m Actual1 Exchange Currency2 FY12 Currency UK 915 - 915 936 -2 Germany 907 (19) 888 861 3 Spain 435 (9) 426 470 -9 Rest of EU 1,515 (35) 1,480 1,534 -4 Total EU 3,772 (63) 3,709 3,801 -2 Americas 653 (6) 647 660 -2 Rest of World 2,582 (17)

  61. Slide 61: Tobacco Operating Profit

    Tobacco Operating Profit FY13 % Change Foreign Constant Constant £m Actual1 Exchange Currency2 FY12 Currency UK 623 6 629 627 - Germany 475 (4) 471 448 5 Spain 178 0 178 202 -12 Rest of EU 625 (2) 623 626 - Total EU 1,901 0 1,901 1,903 - Americas 219 (1) 218 214 2 Rest of World 883 18 901 872 3 Tota

  62. Slide 62: Total Tobacco SE Volumes

    Total Tobacco SE Volumes Billion stick equivalents FY13 FY12 UK (exc PMI1) 22.2 25.5 Germany 32.8 32.5 Spain 20.1 22.6 Rest of European Union 70.0 76.0 Total EU 145.1 156.6 Americas 11.4 12.1 Asia-Pacific 24.4 23.0 Eastern Europe 60.7 72.7 Africa & Middle East 69.9 71.5 Duty Free 5.3 5.5 Total Rest

  63. Slide 63: Cigarette Volumes

    Cigarette Volumes Billion stick equivalents FY13 FY12 UK (exc PMI1) 15.7 18.7 Germany 22.4 22.6 Spain 15.2 18.7 Rest of European Union 47.2 53.4 Total EU 100.5 113.4 Americas 9.2 10.3 Asia-Pacific 22.4 21.0 Eastern Europe 60.3 72.4 Africa & Middle East 69.5 71.0 Duty Free 4.2 4.4 Total Rest of the W

  64. Slide 64: Fine Cut Tobacco Volumes

    Fine Cut Tobacco Volumes Billion stick equivalents FY13 FY12 UK 6.3 6.6 Germany 9.9 9.4 Spain 4.3 3.3 Rest of European Union 21.4 21.3 Total EU 41.9 40.6 Americas 0.5 0.5 Asia-Pacific 1.9 1.9 Eastern Europe 0.3 0.2 Africa & Middle East 0.2 0.2 Duty Free 0.7 0.7 Total Rest of the World 3.1 3.0 Total

  65. Slide 65: Returns & Growth Markets Historical Data

    Returns & Growth Markets Historical Data 65

  66. Slide 66: Historical Data

    Historical Data Reporting Basis To support the change in reporting basis, additional detail of historical information is available on the Imperial Tobacco website using the following URL: http://www.imperial-tobacco.com/historical_data_new_structure Key metrics are provided for 2011, 2012 and 2013 b

  67. Slide 67: Historical Data: Growth Markets

    Historical Data growth markets HY11 FY11 HY12 FY12 HY13 FY13 Volumes (SE bn) 58.7 122.9 55.6 121.4 52.5 113.5 Tobacco net revenue (£m) 980 2,090 1,000 2,192 988 2,254 Adjusted operating profit (AOP) (£m) 262 584 258 633 225 668 Volumes - Growth Brands (SE bn) 23.4 48.5 25.2 54.2 25.8 53.5 Growth bra

  68. Slide 68: Historical Data: Returns Markets

    Historical Data returns markets HY11 FY11 HY12 FY12 HY13 FY13 Returns Markets North Volumes (SE bn) 60.8 127.9 56.8 119.7 52.1 108.6 Returns Markets South Volumes (SE bn) 49.1 100.4 48.9 100.3 47.6 94.7 Total Returns Markets Volumes (SE bn) 109.9 228.3 105.7 220.0 99.7 203.3 Returns Markets North To

  69. Slide 69: Historical Data: Returns Markets

    Historical Data returns markets HY11 FY11 HY12 FY12 HY13 FY13 Returns Markets North adjusted operating profit (£m) 701 1,466 751 1,502 755 1,543 Returns Markets South adjusted operating profit (£m) 446 873 447 854 379 792 Returns Markets Total adjusted operating profit (£m) 1,147 2,339 1,198 2,356 1

  70. Slide 70: Historical Data: Growth and Specialist Brands

    Historical Data growth and specialist brands HY11 FY11 HY12 FY12 HY13 FY13 Growth Brands Volume (SE bn) 60.5 125.3 62.1 131.9 62.2 128.8 Growth Brands Volume as % of group 35.9% 35.7% 38.5% 38.6% 40.9% 40.7% Growth Brands Tobacco net revenue (£m) 1,176 2,509 1,259 2,647 1,274 2,729 Growth Brands Tob

  71. Slide 71: Basis of Results Presentation

    Basis of Results Presentation Use of Adjusted Measures Management believes that non-GAAP or adjusted measures provide a useful comparison of business performance and reflect the way in which the business is controlled. Accordingly, adjusted measures of operating profit, net finance costs, profit bef

  72. Slide 72: Contacts

    Contacts Investor Relations department Tom Corran John Nelson-Smith Director of Investor Communications Investor Relations Manager tom.corran@uk.imptob.com john.nelson-smith@uk.imptob.com Tel: +44 (0) 117 933 7510 Tel: +44 (0) 117 933 7032 Jo Brewin Grant Edmunds Investor Relations Manager Investor

Imperial Tobacco Group — FY2013 Earnings Presentation on 6ix