Imperial Brands PLC · LSE:IMB
Imperial Brands — H1 2023 Earnings Presentation
58 slides from Imperial Brands's earnings presentation, May 16, 2023
Slide 1: Imperial Brands Half Year Results 16 May 2023
IMPERIAL BRANDS
Slide 2: Disclaimer
Disclaimer Certain statements in this announcement conditions. These and other factors could the Company for current or future financial constitute or may constitute forward-looking adversely affect the outcome and financial years will necessarily match or exceed the statements. Any statement in thi
Slide 3: Agenda
Agenda RESULTS OVERVIEW Stefan Bomhard FINANCIAL REVIEW AND OUTLOOK Lukas Paravicini STRATEGIC AND OPERATIONAL UPDATE Stefan Bomhard Stefan Bomhard Q&A Lukas Paravicini 3 | Half Year Results | 16 May 2023
Slide 4: Good Progress Against Our Five Year Plan
Good Progress Against Our Five Year Plan RESULTS ARE IN LINE WITH HALF YEAR GUIDANCE On track to deliver full year results in line with guidance and drive returns Focus on top five priority markets delivered aggregate share +20bps Strong pricing mitigating volume declines; tobacco AOP margins +30bps
Slide 5: Resilient Underlying Consumer Demand
Resilient Underlying Consumer Demand OUR PORTFOLIO IS WELL-POSITIONED TO MEET CONSUMER NEEDS VOLUME HEADWINDS EASING POSITIVE DRIVERS END OF COVID-19 UNWIND STRONG TOBACCO PRICING Consumer buying patterns are Pricing across our combustible normalising markets remains robust Largely finished by end H
Slide 6: Financial Review and Outlook
FINANCIAL REVIEW AND OUTLOOK Lukas Paravicini CFO 6 | Half Year Results | 16 May 2023
Slide 7: Resilient Financial Delivery
Resilient Financial Delivery BUSINESS PERFORMANCE SUPPORTING ONGOING ADDITIONAL RETURNS OPERATIONAL DELIVERY SHAREHOLDER RETURNS TOP FIVE AGGREGATE SHARE TOBACCO & NGP NET REVENUE* INTERIM DIVIDEND +20 bps +0.6% +1.5% Tobacco price mix +6.8% NGP NET REVENUE* GROUP AOP FY23 BUYBACK COMMITMENT +19.8%
Slide 8: Managing Volumes Despite Macro Headwinds
Managing Volumes Despite Macro Headwinds VOLUMES IMPACTED BY COST OF LIVING PRESSURES AND COVID UNWIND % VOLUME CHANGE FY17 FY18 FY19 FY20 FY21 H1 22 H2 22 H1 23 -0.7% • Volumes have been affected by -2.1% COVID unwind -2.7% -3.0% -3.6% -4.1% -4.4% • We expect these pressures to COVID ease with a no
Slide 9: Strong Tobacco Pricing Across Footprint
Strong Tobacco Pricing Across Footprint POSITIVE PRICING OFFSETTING VOLUME PERFORMANCE VOLUME AND PRICE/MIX Net -6% -1% +9% +0% • Volume headwinds are easing Revenue FMC +5% MMC -11% 3% • Strong pricing despite cost-of-living 1% pressures 12% 9% • Positive geographic mix 9% 7% -3% • Adverse product
Slide 10: Resilient Adjusted Operating Profit
Resilient Adjusted Operating Profit GROWTH THROUGH TOBACCO AND LOGISTA +1.2% £(7)m £10m £(14)m £23m £1,612m £1,600m £1,593m HY22 AOP Russia HY22 AOP (ex- Tobacco NGP Logista and HY23 AOP Russia) performance losses Elims constant Tobacco AOP margins currency +80 bps 10 | Half Year Results | 16 May 20
Slide 11: EPS Delivery in Line With Plan
EPS Delivery in Line With Plan OP AND SHARE BUYBACK OFFSET BY HIGHER INTEREST AND MINORITIES (1.7)% 4.9% 118.5 113.0 111.1 +1.3p (2.4)p (1.7)p (0.4)p +1.3p +7.4p HY23 HY22 Operating Interest Minorities Tax Number HY23 Translation Adjusted EPS Adjusted profit & JV of shares Adjusted FX EPS Constant C
Slide 12: On Track With Capital Allocation Priorities
On Track With Capital Allocation Priorities UNDERPINNED BY STRONG BALANCE SHEET KEY CASH FLOW DRIVERS DISCIPLINED CAPITAL ALLOCATION Change in working capital outflow c. £0.9bn: • c. £0.5bn increased inventories ahead of price increases 1 • Continuing to invest in the business • c. £0.2bn payment of
Slide 13: On Track To Deliver Full Year Guidance
On Track To Deliver Full Year Guidance IMPROVING RETURNS IN CHALLENGING MACRO ENVIRONMENT KEY DRIVERS OF H2 PERFORMANCE FY23 OUTLOOK* Strong embedded pricing • Guidance for the full year unchanged Volume headwinds ease • Low single digit net revenue growth • Adjusted operating profit growth at Opera
Slide 14: Transforming Imperial Brands
TRANSFORMING IMPERIAL BRANDS Stefan Bomhard CEO 14 | Half Year Results | 16 May 2023
Slide 15: Our Purpose, Vision and Strategy
Our Purpose, Vision and Strategy CREATING A COMMON HIGH-PERFORMANCE CULTURE FOR IMPERIAL BRANDS OUR PURPOSE “Forging a path to a healthier future for moments of relaxation and pleasure” OUR VISION “To build a strong challenger business powered by responsibility, focus and choice” Consumer with Purpo
Slide 16: Transforming Imperial Brands
Transforming Imperial Brands LEVERAGING THE CRITICAL ENABLERS TO DRIVE PERFORMANCE CONSUMER AT THE CENTRE PERFORMANCE-BASED SIMPLIFIED AND EFFICIENT OF THE BUSINESS CULTURE OPERATIONS Behaviours embedded in performance Consistent consumer insights Shared business services in Poland reviews Coaching
Slide 17: Good Progress Against ESG Priorities
Good Progress Against ESG Priorities FORGING A PATH TO A HEALTHIER FUTURE Initiatives in 2023: ✓ CDP A listing, fourth consecutive year on climate change ✓ Triple zero approach adopted ✓ FT’s ‘Europe Climate’ leader award, third consecutive year Zero Injury | Zero Landfill | Net Zero ✓ Workforce Dis
Slide 18: Stabilising our Priority Market Share
Stabilising our Priority Market Share OPERATIONAL LEVERS CONTINUE TO DELIVER SHARE BENEFITS AGGREGATE WEIGHTED PRIORITY MARKET SHARE PERFORMANCE 35 bps • Achieving our objective of no longer 20 bps being the number one share donor • Managing the share performance as a portfolio of markets -6 bps -10
Slide 19: Americas: Positive FMC Market Share Growth
Americas: Positive FMC Market Share Growth STRONG PERFORMANCE AGAINST CHALLENGING MARKET VOLUMES PERFORMANCE DRIVEN BY OPERATIONAL IMPROVEMENTS & STRATEGIC CHOICES • Strong share gains driven by strategic investment PREMIUM VALUE • Strong cigarette pricing, offset by change in product TRADITIONAL DI
Slide 20: Americas: COVID Unwind Normalising MMC Volume
Americas: COVID Unwind Normalising MMC Volume FOCUS ON PRODUCT, PROMOTION AND PACKAGING INDUSTRY MMC VOLUMES • Impacted by wholesaler destock following Hurricane Ian, Covid-19 share pressure and market size decline • Focus on initiatives to support the portfolio: – Portfolio innovation and new packa
Slide 21: Priority Markets: Strong Pricing Gains
Priority Markets: Strong Pricing Gains FOCUSED ON MANAGING SHARE AND VALUE DELIVERY • Market size affected by -75 bps • Return to pricing in the +15 bps COVID unwind and market excise increase • Maintaining market share gains in • Increased prices, following strong FY22 share gains in FY20 – FY22 •
Slide 22: Broader Market Portfolio: Driving Value
Broader Market Portfolio: Driving Value STRATEGIC INITIATIVES ARE DELIVERING A STRONGER PERFORMANCE CENTRAL & EASTERN AFRICA EUROPE NR: +12.9% NR: +4.0% • To enhance our • Strong pricing offset capabilities in smaller markets, we by weaker volumes have moved the management from Europe to AAA divisio
Slide 23: Challenger Mindset and Step-Up in NGP Innovation
Challenger Mindset and Step-Up in NGP Innovation SUCCESSFUL NEW MARKET AND PRODUCT LAUNCHES IN NGP European NR growth 16% 435% 16% Total # of markets 11 7 8 Market launches 8 5 - Flavour launches 10 5 5 Market share range 10-40% 1-5% 5-35% Notes: NR growth H1 23 vs. H1 22. Market launches and flavou
Slide 24: Vapour: Encouraging Market Share Gains
Vapour: Encouraging Market Share Gains STRONG RESPONSE FROM CONSUMERS AND TRADE BLU 2.0 RSV MARKET SHARE (%) SUCCESSFUL LAUNCH OF BLU 2.0 • Improved product design, pod performance and battery life 9.1% • National launches following successful pilots • Also in Germany, Portugal, Czech Republic, Gree
Slide 25: Heated Tobacco: Successful Launches in Seven Markets
Heated Tobacco: Successful Launches in Seven Markets IMPROVED PULZE 2.0 PRODUCT ROLLED OUT IN SELECTED MARKETS iD SPOT SHARE OF HTP PULZE 2.0 LAUNCHED STICKS (FEB ‘23) • Improved product nicotine satisfaction, quality, simplicity and sensory experience 4.6% • New tobacco and flavour additions • Now
Slide 26: OND: Strong Performance in Modern Oral Nicotine
OND: Strong Performance in Modern Oral Nicotine NEW FLAVOUR LAUNCHES DELIVERING GROWTH MEETING CONSUMER NEEDS DRUMBEAT OF FLAVOUR LAUNCHES NORWAY • Investing in the Nordics and other selected European markets • Opportunity to attract adult consumers to our Zone X brand franchise Modern Oral • New fl
Slide 27: Transformation of Imperial on Track
Transformation of Imperial on Track STRENGTHENING OUR CULTURE, PERFORMANCE AND RESILIENCE Embedding our new ways of working and consumer capabilities Focus on maintaining our priority markets aggregate market share NGP investment delivering acceleration in performance Delivering improving shareholde
Slide 28: Investor event 27th June
Investor event 27th June AM Starting with the Consumer Wall Street Hotel NYC 28 |
Slide 29: Appendices
APPENDICES 29 | Half Year Results | 16 May 2023
Slide 30: High Combustible Affordability Supports Continued Pricing
High Combustible Affordability Across Imperial Markets Supports Continued Pricing RELATIVE CIGARETTE COST PER STICK VS AVERAGE COFFEE COST AFFORDABILITY OF TOBACCO Average espresso cost (# Packs earned per hour of work at average salary) $3.7 $3.7 $3.8 Average price per stick $3.1 $2.8 Imperial top
Slide 31: Smoking Levels Remain High Despite Regulation, Pricing and NGP
Smoking Levels Remain High Despite Regulation, Pricing and NGP 18% 20% 14% 24% 13% incidence incidence incidence incidence incidence 49.5 million adult smokers Implied legal tobacco 2.7 million market 14.2 million number of adult smokers 8.0 million 9.8 million adult smokers adult smokers adult smok
Slide 32: Market Volume Trends
Market Volume Trends USA Germany UK FY19 FY20 FY21 FY22 H1 23 FY19 FY20 FY21 FY22 H1 23 FY19 FY20 FY21 FY22 H1 23 4.6% 7.4% 0.0% -0.7% -1.9% -2.3% -2.3% -3.1% -5.5% -4.1% -7.1% -11.0% -7.9% -9.1% -17.9% Spain Australia Global duty free FY19 FY20 FY21 FY22 H1 23 FY19 FY20 FY21 FY22 H1 23 FY19 FY20 FY
Slide 33: Consumer Adoption Varies by Market
Consumer Adoption Varies by Market EUROPE IS THE LARGEST NGP REGION IN OUR FOOTPRINT NGP penetration of Penetration by nicotine product in priority markets by RSV nicotine pool (by RSV £bn) 1% 1% 8.2% 8.1% 3% 1% 5% 6% 200 5% 1% 150 98% 100% 100 92% 94% 92% 93% 50 92% 0 Europe US USA Germany UK Spain
Slide 34: Group Financials
APPENDICES GROUP FINANCIALS 34 | Half Year Results | 16 May 2023
Slide 35: Net Revenue
Net Revenue 0.6% +6.5% £3,663m £3,495m £3,461m £3,441m £(54)m £(227)m £227m £20m £202m HY22 Tobacco Ex-Russia HY22 NR Tobacco Tobacco NGP Net HY23 Translation FX HY23 & NGP Net (ex-Russia) Volume Price/Mix Revenue Constant Tobacco & Revenue Currency NGP Net NR Revenue 35 | Half Year Results | 16 May
Slide 36: Adjusted Operating Profit
Adjusted Operating Profit +1.2% +7.7% £1,716m £1,612m £1,600m £1,593m £(7)m £10m £(14)m £23m £104m HY22 AOP Russia HY22 AOP Tobacco NGP Logista and HY23 AOP Translation HY23 AOP (ex-Russia) performance losses Elims constant FX currency 36 | Half Year Results | 16 May 2023
Slide 37: Adjusted Earnings Per Share
Adjusted Earnings Per Share (1.7)% 4.9% 118.5p 113.0p 111.1p +1.3p (2.4)p (1.7)p (0.4)p +1.3p +7.4p HY23 HY22 Operating Interest Minorities Tax Number HY23 Translation Adjusted EPS Adjusted profit & JV of shares Adjusted FX EPS Constant Currency EPS 37 | Half Year Results | 16 May 2023
Slide 38: Russia Contribution
Russia Contribution H1 22 H2 22 FY 22 Tobacco volume bn SE 6.9 0.9 7.8 Total net revenue £m 54.0 2.0 56.0 Tobacco net revenue £m 54.0 2.0 56.0 NGP net revenue £m - - - Adjusted operating profit £m 7.0 (2.0) 5.0 38 | Half Year Results | 16 May 2023
Slide 39: Group Adjusted Results
Group Adjusted Results Constant Constant Foreign Currency Currency HY22 Exchange Growth HY23 Actual ∆ ∆ Tobacco net revenue £m 3,394 198 (54) 3,538 4.2% -1.6% NGP net revenue £m 101 20 4 125 23.8% 4.0% Tobacco & NGP adj. operating profit £m 1,481 98 (11) 1,568 5.9% -0.7% Tobacco & NGP profit margin
Slide 40: Group Adjusted Results
Group Adjusted Results HY23 HY22 Group adjusted operating profit £m 1,716 1,600 Adjusted net finance costs £m (199) (165) Share of profit of JVs £m 3 4 Adjusted profit before tax £m 1,520 1,439 Adjusted tax rate % 22.4% 21.9% Adjusted EPS pence 118.5 113.0 Dividend per share pence 43.2 42.5 12-month
Slide 41: Reconciliation: Reported to Adjusted
Reconciliation: Reported to Adjusted Amort. of Loss on Fair value (gains)/ Taxation £m Reported Post employment Fair value adj. of Uncertain tax Adjusted acquired disposal of losses on financial settlement (unless otherwise stated) HY23 net financing cost loan receivable positions HY23 intangibles s
Slide 42: Income Statement
Income Statement £m (unless otherwise stated) HY23 HY22 Revenue 15,411 15,362 Adjusted operating profit 1,716 1,600 Russian and associated market exits - (201) Acquisition and disposal costs - (5) Amortisation and impairment of acquired intangibles (174) (182) Restructuring costs - (7) Excise tax pr
Slide 43: Balance Sheet
Balance Sheet £m HY23 HY22 Non-current assets: tangible 3,665 3,813 intangible 17,006 16,431 Current assets: inventories 5,025 4,445 other 3,516 3,422 Current liabilities (11,523) (11,158) Non-current liabilities (11,467) (11,060) Net assets 6,222 5,893 43 | Half Year Results | 16 May 2023
Slide 44: Cash Flow
Cash Flow £m HY23 HY22 Group adjusted operating profit 1,716 1,600 Depreciation, amortisation and impairment 141 125 EBITDA 1,857 1,725 Other non-cash movements 1 (45) Operating cash flows before movement in working capital 1,858 1,680 Working capital (1,626) (665) Tax cash flow (175) (273) Cash flo
Slide 45: 12-month Cash Conversion
12-month Cash Conversion 77% £3.8bn £2.9bn 45 | Half Year Results | 16 May 2023
Slide 46: 12-month Cash Conversion
12-month Cash Conversion £m (unless otherwise stated) HY23 HY22 Net cash flow from operating activities 2,482 3,026 Tax 583 662 Net capex (232) (153) Restructuring cash spend 110 108 Cash flow post capex pre interest and tax 2,943 3,643 Adjusted operating profit 3,810 3,584 Cash conversion (%) 77% 1
Slide 47: Net Finance Costs
Net Finance Costs £m HY23 HY22 Net finance (costs) / income (94) 75 Adjusted for: - interest income on net defined benefit assets (87) (53) - interest cost on net defined benefit liabilities 80 49 - fair value & exchange gains on financial instruments (108) (236) - taxation settlements interest cost
Slide 48: Net Debt Reconciliation
Net Debt Reconciliation Reported Accrued Lease Fair value of Adjusted £m HY23 interest liabilities derivatives HY23 Opening net debt (8,492) 105 248 85 (8,054) Free cash flow (432) - - - (432) Lease liabilities - (43) (43) Acquisitions/disposals (119) (119) Dividends paid (921) - - - (921) Repurchas
Slide 49: Foreign Exchange
Foreign Exchange Average Closing HY22 HY23 ∆ HY22 HY23 ∆ USD $ 1.346 1.194 (11.3%) 1.312 1.237 (5.7%) EURO € 1.188 1.141 (4.0%) 1.182 1.137 (3.8%) AUD $ 1.853 1.782 (3.8%) 1.753 1.850 5.5% 49 | Half Year Results | 16 May 2023
Slide 50: Foreign Currency
Foreign Currency DIVISIONAL CURRENCY EXPOSURE Approximate weight of EUR / currency in EUR Other Tobacco Net Revenue GBP £ Linked USD $ AUD $ Currencies Other includes Europe 22% 72% 3% - 3% Polish Zloty, Bulgarian • €0.01 (1 cent) movement in the € Lev Euro has c. £9m impact on net Americas - - 100%
Slide 51: Divisional Market Share
Divisional Market Share MHT MARKET SHARE DATA HY23 HY22 Europe 19.3% 20.1%R -80bps Americas 10.8% 9.8% +95bps AAACE 13.2% 11.9%R +130bps Total Group 14.7% 13.9% +80bps Market Share Calculation Market share is presented as a 6-month average to the end of March (MHT – moving half-year trend), unless
Slide 52: FY23 Guidance
FY23 Guidance OTHER FINANCIAL ITEMS Financing & Cost of Debt • Finance charge for FY23 expected to be c. £410m at current rates; all-in cost of debt of c. 4.3% for FY23 Tax Rate • Expected to be c. 22-23% Capex • Expect net capex to be c. £300m-350m Cash Conversion • Expect 90 to 100% range Logista
Slide 53: Financing
APPENDICES FINANCING 53 | Half Year Results | 16 May 2023
Slide 54: Committed Financing Outstanding (£m)
Financial Profile 31 March 2023 Interest Split Currency Split (adjusted) Committed Funding Split 10% 24% 2% Bonds Fixed EUR 23% Bank Floating USD ECP 90% 76% 75% 14,000 Committed Financing Outstanding (£m) 12,000 10,000 Bond Issues Bank Facilities 8,000 ECP 6,000 c.£2.5bn headroom against facilities
Slide 55: Committed Bank Facilities
Committed Bank Facilities 31 March 2023 Amount Description Maturity date (EUR m) £m equiv. Committed 3-year Revolving Credit Facility 30 September 2025 309 272 Committed 3-year Revolving Credit Facility 31 March 2026 3,191 2,805 Total 3,077 55 | Half Year Results | 16 May 2023
Slide 56: Bond Issues
Bond Issues 31 March 2023 Currency of Amount issue (ccy m) Issuer Coupon Issue Date Maturity Date £m equiv. Margin**** EUR 750 Imperial Brands Finance PLC 1.13% Feb-19 Aug-23 659 1.25% GBP 600* Imperial Brands Finance PLC 8.13% Sep-08 Mar-24 679 3.02% USD 1,000* Imperial Brands Finance PLC 3.13% Jul
Slide 57: Glossary
Glossary Stick Equivalent (SE) volumes reflect our combined cigarette, fine cut tobacco, cigar and snus SE volumes. Change at constant currency removes the effect of exchange rate movements on the translation of the Constant Currency results of our overseas operations. Tobacco Total Tobacco includes
Slide 58: Imperial Brands
fe IMPERIAL f. BRANDS & 4 4 pr.