Imperial Brands PLC · LSE:IMB
Imperial Brands — Barclays Global Consumer Staples Conference 2016
35 slides from Imperial Brands's conference presentation, September 2016
Slide 1: Quality Revenue, Sustainable Returns
Quality Revenue, Sustainable Returns Oliver Tant Chief Financial Officer Barclays Global Consumer Staples Conference: September 2016
Slide 2: Disclaimer
Disclaimer Certain statements in this presentation and financial effects of the plans and events has been prepared for, and only for the constitute or may constitute forward-looking described in this presentation. As a result, members of the Company, as a body, and no statements. Any statement in th
Slide 3: Delivering More Returns: Investment case
Delivering More Returns Investment case Investing for quality growth; Value creation supported by brands, products and markets agility and discipline; with long-term profit potential continuous improvement 10% dividend growth pa Strong cash generation over medium term 3 | Barclays Global Consumer St
Slide 4: Quality, Agility, Discipline
Quality, Agility, Discipline Consistent themes inform strategic choices Sustainability Driving revenue, margins, cash and dividend growth Quality Agility Discipline Brand, product and Simplification and Resource, cost market choices continuous and cash improvement optimisation 4 | Barclays Global Co
Slide 5: Our Strategy
Our Strategy Maximise sustainable shareholder returns Drive Cost Embed Capital Strengthen Portfolio QUALITY Develop Footprint DISCIPLINE Optimisation Discipline • Further simplification • Opportunities in Growth • Operating model • Cash conversion Markets • Investment in Growth & • Lean manufacturin
Slide 6: And for the Next 5 Years: More, more, more, more
And for the Next 5 Years More, more, more, more Maximise sustainable shareholder returns Strengthen Develop Drive Cost Embed Capital Portfolio Footprint Optimisation Discipline • More simplification • More • More • More discipline and focus prioritisation optimisation 6 | Barclays Global Consumer St
Slide 7: Footprint & Portfolio
Footprint & Portfolio Focus on strongest markets & biggest brands Markets that matter Fewer, bigger, stronger Rigorous evaluation Optimise portfolio Portfolio Disciplined & agile approach Brands Growth Strengthen brands Brands Focus on profitable growth Build equity Footprint Brands 7 | Barclays Glo
Slide 8: Developing our Footprint
Developing our Footprint Majority of revenue from most affordable markets 330 240 c.75% revenue in markets with ≈ Minuets of labour at avg. wage per 20 cigarettes 210 better than average affordability 180 150 Markets representing > 0.5% of IMB net revenue: 120 Returns Markets 90 Growth Markets No pr
Slide 9: Imperial Brands
Ve IMPERIAL A BRANDS
Slide 10: Video
Video 10 | Barclays Global Consumer Staples Conference | September 2016
Slide 11: Footprint: US - ITG Brands positioned to win
Footprint: US ITG Brands positioned to win Market Attractiveness Ability to Win • Stable economy • Highly experienced team • Growing consumer confidence • National sales force building brand equity • World’s largest profit pool1 • Strong cigarette, cigar and E-vapour portfolio • High affordability –
Slide 12: ITG Brands Snapshot
ITG Brands Snapshot US profits c. 25% of Group • Cigarettes ~ 85% of net revenue Cigars Cigars • Focus Brands ~ 70% other brands Focus Brands • Other brands ~ 30% • Cigars ~ 15% of net revenue Cigarettes • Focus Brands ~ 80% other brands Cigarettes • Other brands ~ 20% • 2,700 total employees • Nati
Slide 13: Business Performing Strongly
Business Performing Strongly Optimistic about future growth prospects To Date Looking Forward Start of increase Merger in promo • c.90% volume under retailer contracts • Continued brand building activities: • One national sales force across portfolio • Focus on visibility and availability • Integrat
Slide 14: Strengthening our Portfolio
Strengthening our Portfolio We focus on brands with strongest equity Growth Brands Specialist Brands 14 | Barclays Global Consumer Staples Conference | September 2016
Slide 15: Portfolio Development
Portfolio Development Improving quality of growth Growing share of Growth Brands More revenue from strongest brands 80 25 49 46 43 41 110 75 40 51 54 57 59 20 FY13 FY14 FY15 HY16 FY13 FY14 FY15 HY16 Target Portfolio Brands Growth & Specialist Brands 15 | Barclays Global Consumer Staples Conference |
Slide 16: Brand Simplification Drives Efficiencies
Brand Simplification Drives Efficiencies Agile cost base, effective assets – more to go for # Brands 249 200 • Footprint optimisation 125 • Complexity reduction • Machine effectiveness & scalability FY13 FY15 Target • Quality & availability • Simplification of portfolio • Better fixed cost absorptio
Slide 17: Transforming our Operating Model
Transforming our Operating Model Simplification supports efficiency & effectiveness Our Past Our Present Our Future 160 markets 20 clusters Fewer bigger clusters 5 divisions 3 divisions Focused market investment 250 brands 5 brand chassis Stronger portfolio 2 supply functions 1 function Lean princip
Slide 18: Optimising Costs: Footprint
Optimising Costs: Footprint 11 closed in recent years – continuing to review CURRENT Cigarettes and Other Tobacco Products Cigar 28 Cigarettes & OTP Tobacco Processing Operations 7 Cigar Papers/Tubes 4 Processing 2 Papers/Tubes 18 | Barclays Global Consumer Staples Conference | September 2016
Slide 19: Reducing Complexity
Reducing Complexity Great progress on component reduction Pack Wrap -18% Inner Frame -54% Tear Tape -46% Adhesive -49% 28% weighted average Tipping Paper -20% reduction Plug Wrap -32% Filter Tow -46% Cigarette Paper -25% 19 | Barclays Global Consumer Staples Conference | September 2016
Slide 20: Scalability
Scalability Building production in key consumer led growth areas Big Box Queen Size Snus 30 16 2.5 14 25 2 Capacity 000 tns 12 20 Capacity Bn SE 10 Capacity Bn SE 1.5 15 8 6 1 10 +113% 4 +226% +77% 5 0.5 2 0 0 0 FY11 FY12 FY13 FY14 FY15 FY11 FY12 FY13 FY14 FY15 FY11 FY12 FY13 FY14 FY15 20 | Barclays
Slide 21: Focus Drives Quality
Focus Drives Quality Improved quality – fewer complaints Complaint system upgrade +20% +17% Production +10% quality Complaints per 100m sticks 0% World Class = 5 Imperial = 3.4 -10% -11% Consumer complaints (volume adjusted) -20% FY12 FY13 FY14 FY15 21 | Barclays Global Consumer Staples Conference |
Slide 22: Focus Drives Availability
Focus Drives Availability World class performance Availability in market FY16 Supply reliability 100% 100% 99% 95% 98% 90% 97% 85% 96% 80% FY13 FY14 FY15 H116 FY13 FY14 FY15 H116 Worst Average World Class Worst Average World Class 22 | Barclays Global Consumer Staples Conference | September 2016
Slide 23: Manufacturing Conversion Costs
Manufacturing Conversion Costs Maintaining cost leadership 1.6 1.6 1.6 1.6 • 143bn SE capacity reduction • Overheads lowered by 21% £s per 000 • Lean - Overall Equipment Effectiveness +9% • Fully offset inflation FY13 FY14 FY15 Est. FY16 • FMC Europe benchmark study -11% 23 | Barclays Global Consume
Slide 24: Leaf Costs
Leaf Costs Leadership in costs of key input 5.34 Agile Leaf Strategy 5.07 5.15 4.81 4.33 4.39 4.23 3.99 2012 2013 2014 2015 Alliance One average sales price Sustainability vs. Supply Integrity Imperial average purchase price (excl. cigar leaf) Cost Leadership 24 | Barclays Global Consumer Staples Co
Slide 25: Managing Costs Across the Group
Managing Costs Across the Group Significant annual savings Savings across all parts of business £70m £55m Other £300m Back… FY15: £85m Manufacturing & supply chain Global FY14: procurement £60m FY13: £30m Sales & To date FY16 To go By FY18 Marketing • Changes ensure more efficient cost base • Delive
Slide 26: Capital Allocation
Capital Allocation Focused use of cash Sources of Cash Uses of Cash Cash flow from Investment in strongest operations Clearly brands and key markets defined Working capital priorities Dividend growth of efficiency at least 10% pa Effective asset management Reduction of net debt 26 | Barclays Global
Slide 27: Investment Choices
Investment Choices Investing in predictable, sustainable returns Higher risk assets Disciplined capital allocation Returns/opportunity Returns/opportunity Probability Probability • Broader range of outcomes • Narrower outcome range • Less stability, less predictable • Stability and predictability •
Slide 28: Cash Conversion
Cash Conversion Consistent improvement 105% 97% >90% • Key KPI 91% 82% 86% • ‘Incremental’ £850m cash FY13–FY15 versus previous average Average 2013 2014 2015 HY16 Target 2011-13 28 | Barclays Global Consumer Staples Conference | September 2016
Slide 29: Managing Working Capital
Managing Working Capital Supports better cash generation Stock Debtors Creditors FY13 FY15 FY13 FY15 FY14 FY15 • 22% reduction in leaf stock • 10% reduction in debtor days • Supplier days on renegotiated versus 10% volume decline over past 2 years ‘indirects’ improved by c.50% 29 | Barclays Global C
Slide 30: Net Debt
Net Debt Capital discipline supports de-leverage £1.0bn £1.1bn £2.1bn reduction £4.6bn £11.6bn in like-for-like £9.1bn £8.1bn £7.0bn debt since FY13 Closing adj. Like-for-like Closing adj. Like-for-like Adj. net debt USA Closing adj. net debt reduction net debt reduction pre-acquisition acquisition
Slide 31: Growing Dividend
Growing Dividend Consistent growth over time – up more than 120% Dividend pence per share 141 128 116 • 8th year of >10% growth 105 • 12% CAGR since 2008 95 84 • £8bn in declared dividends 73 63 2008 2009 2010 2011 2012 2013 2014 2015 31 | Barclays Global Consumer Staples Conference | September 2016
Slide 32: Growing Dividend: Growing ahead of peers and FTSE
Growing Dividend Growing ahead of peers and FTSE Dividend growth over past 4 years 10% 9% 8% 7% 7% 6% 5% 4% 4% 1% Imperial Diageo PMI SAB Altria RAI BAT Unilever Reckitt FTSE Brands 32 | Barclays Global Consumer Staples Conference | September 2016 % growth is CAGR over last 4 years of dividends up t
Slide 33: Growing Dividend: Compelling growth and with more cover
Growing Dividend Compelling growth and with more cover 16% 14% 12% 10% DPS 3Yr Fwd. CAGR 8% 6% 4% FTSE 100 2% – 50% 55% 60% 65% 70% 75% 80% 85% 90% 95% 100% Payout ratio 33 | Barclays Global Consumer Staples Conference | September 2016
Slide 34: In Conclusion
In Conclusion Consistent application of strategy Maximise sustainable shareholder returns Strengthen Develop Drive Cost Embed Capital Portfolio Footprint Optimisation Discipline • More simplification • More • More • More discipline and focus prioritisation optimisation 34 | Barclays Global Consumer
Slide 35: Quality Revenue, Sustainable Returns
Quality Revenue, Sustainable Returns Oliver Tant Chief Financial Officer Barclays Global Consumer Staples Conference: September 2016
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