Imperial Brands Plc · LSE:IMB
Imperial Brands — FY2022 Earnings Presentation
56 slides from Imperial Brands's earnings presentation, Nov 15, 2022
Slide 1: Full Year Results
FULL YEAR RESULTS 15 NOVEMBER 2022 Align images to ARA
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 TRANSFORMING IMPERIAL BRANDS Stefan Bomhard Stefan Bomhard Q&A Lukas Paravicini 3 | Full Year Results | 15 November 2022
Slide 4: 2022 Highlights
2022 Highlights PHASE ONE FOUNDATIONS IN PLACE TO DELIVER IMPROVING RETURNS Delivering Operational Delivering on our Enhancing Improvements Financial Commitments Shareholder Returns TOP FIVE AGGREGATE SHARE ADJUSTED EPS* PROGRESSIVE DIVIDEND +35bps +4.9% +1.5% NGP NET REVENUE* REACHED TARGET LEVERAG
Slide 5: Stronger Foundations in Place
Stronger Foundations in Place PHASE ONE COMPLETE TO ENABLE DELIVERY OF OUR FULL POTENTIAL PHASE 1 - STRENGTHENING Jan 2021 Sept 2021 Oct 2022 FY23-25 Top 5 aggregate Share NGP trials Exit of Russia and markets share in buyback Strategic begin Japan completed growth initiated Pillars Top 5 Further NG
Slide 6: Adapting to Evolving Consumer Behaviours
Adapting to Evolving Consumer Behaviours IMPROVED AGILITY AND CONSUMER INSIGHT TO CAPTURE OPPORTUNITIES COVID-19 UNWIND INFLATIONARY PRESSURES POTENTIALLY REDUCED HARM Lifting of restrictions has Inflation likely to affect Consumers continue to caused changes to purchasing power of some seek reduced
Slide 7: Financial Review
FINANCIAL REVIEW Lukas Paravicini CFO 7|
Slide 8: Resilient Tobacco and Strong Cash Delivery
Resilient Tobacco and Strong Cash Delivery BALANCE SHEET STRENGTHENED ENABLING START OF SHARE BUYBACK TOBACCO NET REVENUE* TOBACCO & NGP AOP* ADJUSTED EPS* +1.3% +2.0% +4.9% FREE CASH FLOW NET DEBT TO EBITDA RETURN ON INVESTED CAPITAL £2.6bn -0.2x +120bps up +£1.0bn to 2.0x to 17.7% 8 | Full Year Re
Slide 9: Further Unwind of COVID-19 Market Trends
Further Unwind of COVID-19 Market Trends TRENDS IMPACTED BY COMPARATOR PERIOD -VE impact on market +VE impact on market USA Germany UK Spain Global duty free FY19 FY20 FY21 FY22 FY19 FY20 FY21 FY22 FY19 FY20 FY21 FY22 FY19 FY20 FY21 FY22 FY19 FY20 FY21 FY22 7.4% 4.8% 109% 0.0% 4.6% -0.7% -1.9% -2.3%
Slide 10: Net Revenue Growth Driven by Tobacco Pricing
Net Revenue Growth Driven by Tobacco Pricing STRONG SECOND HALF TOBACCO PRICING IN PRIORITY MARKETS TOBACCO & NGP DRIVING GROWTH +1.5% -4.7% tobacco volumes with H2 -8.4% following decision to exit Russia H1 H1 +0.8% -0.7% +1.3% tobacco net revenue H2 H2 £7,702m excluding year on year Russia perform
Slide 11: Performance Driven by Americas and AAA
Performance Driven by Americas and AAA STRONG EUROPEAN NGP PERFORMANCE VOLUMES TOBACCO NR NGP NR • Price/mix weighted to H2 EUROPE -4.1% -1.0% +34.2% • Adverse geographic mix as covid unwinds • Strong NGP growth • Share gains across 3 focus price segments AMERICAS +2.0% +5.2% -29.7% • Positive prici
Slide 12: Delivering Adjusted Profit Growth
Delivering Adjusted Profit Growth CONTINUED INVESTMENT IN FOUNDATION BUILDING +1.8% £40m £(105)m £76m £55m £(4)m NGP reduced £3,632m £3,570m costs Tobacco AOP £11m / +0.3% FY21 AOP* FY21 net US Strategic Underlying NGP Distribution FY22 AOP state litigation investments tobacco operating & eliminatio
Slide 13: Operating Profit: Adjusting Items as Guided
Operating Profit: Adjusting Items as Guided RUSSIAN OPERATION DIVESTED AS A GOING CONCERN Adjustments to reported operating profit FY22 Reported operating profit £2,683m • Russia & associated market costs Russia & associated market exit costs £399m – Recognition of impairment and provision charge in
Slide 14: Driving Stronger EPS Growth
Driving Stronger EPS Growth WITH HIGHER OPERATING PROFIT AND REDUCED INTEREST COSTS +4.9% 265.2p 258.7p 246.5p +6.6p +8.6p 0.1p (2.8)p (0.3)p 6.5p FY22 FY21 Operating Interest Minorities Tax Number FY22 Adjusted Translation Adjusted EPS Adjusted profit & JV of shares Constant FX EPS Currency EPS *FY
Slide 15: Resilient Cash Delivery
Resilient Cash Delivery CONTINUED STRONG CASH FLOW GENERATION OVER LAST 12 MONTHS CONTINUED HIGH FREE CASH FLOW PROGRESSIVE NET CASH FLOW CASH CONVERSION DIVIDEND POLICY 102% £2.6bn +1.5% pence per share £1.3bn 12-month High free cash flow Delivering cash returns Driving strong cash conversion enabl
Slide 16: Target Leverage Achieved
Target Leverage Achieved FURTHER DELEVERAGE PROGRESS ENABLES SHARE BUYBACK GOOD DELEVERAGE PROGRESS CAPITAL ALLOCATION PRIORITIES 1 Investing in the strategy to drive sustainable growth 2.0x Lower end of target 2 Maintaining a strong and efficient balance sheet leverage range achieved Progressive di
Slide 17: FY23 Outlook
FY23 Outlook IMPROVING RETURNS IN CHALLENGING ENVIRONMENT KEY DRIVERS OF FY23 OUTLOOK* ACCELERATION IN FY23 Operational gearing • Net revenue growth of 1 – 2% Geographic mix • Adjusted operating profit growth at Cost savings including programme lower end of mid-single digit range update • EPS driven
Slide 18: Transforming Imperial Brands
TRANSFORMING IMPERIAL BRANDS Stefan Bomhard CEO 18 |
Slide 19: Transforming Imperial Brands
Transforming Imperial Brands DELIVERING A STRONGER AND MORE CONSISTENT PERFORMANCE OUR PURPOSE OUR VISION “Forging a path to a “To build a strong healthier future for challenger business moments of relaxation powered by responsibility, and pleasure” focus and choice” 19 | Full Year Results | 15 Nove
Slide 20: New ESG Framework and Priorities Established
New ESG Framework and Priorities Established ESG FULLY INTEGRATED INTO STRATEGY, VISION, PURPOSE, BEHAVIOURS September 2021 September 2022 ESG Board & ESG strategy Internal ESG priorities • Clear ESG framework in place materiality Executive signed off by ‘People & integrated into study governance ES
Slide 21: Strengthening Our Consumer Focus
Strengthening Our Consumer Focus EMBEDDING THE CONSUMER AT THE CENTRE OF OUR BUSINESS ESTABLISHED GLOBAL CONSUMER OFFICE CO-ORDINATED APPROACH UNDER SINGLE LEADERSHIP MARKETING AND REVENUE INNOVATION INSIGHTS NGP PORTFOLIO GROWTH Leveraging Enhanced Deep tobacco Blue-chip local market consumer focus
Slide 22: Building a Performance-Based Culture
Building a Performance-Based Culture MAJOR CHANGE PROGRAMME EMBEDDING PURPOSE, VISION & BEHAVIOURS Nov 2021 2021/2022 End 2022 End 2023 WAVE 1 WAVE 2 WAVE 3 WAVE 4 FY23 Embedding in 90 senior leaders 350 senior leaders 1,100 people leaders All employees management incentives UNDERSTAND BELIEVE ARE E
Slide 23: Simplified and Efficient Operations
Simplified and Efficient Operations NEW WAYS OF WORKING REINFORCING OUR FOCUS ON THE CONSUMER FROM TO Acquisitive history: fragmented Equipping our global support Digital transformation – systems and processes functions to become better investing in a new ERP system business partners to replace 60 l
Slide 24: Stabilising our Priority Market Share
Stabilising our Priority Market Share TARGETED INVESTMENT STRENGTHENING OUR SHARE OF MARKET AVERAGE PRIORITY MARKET PRIORITY MARKET SHARES SHARE PERFORMANCE (12 month share Δ) +90 bps +35 bps -85 bps -16 bps +85 bps Average Full Year +5 bps last 5 years 2022 +20 bps 24 | Full Year Results | 15 Novem
Slide 25: Americas: Strong Market Share Growth
Americas: Strong Market Share Growth MARKET FUNDAMENTALS SUPPORT POSITIVE OUTLOOK PERFORMANCE DRIVEN BY INVESTMENT PREMIUM VALUE INITIATIVES & STRATEGIC CHOICES • Strong share gains in three focus price segments +90bps TRADITIONAL DISCOUNT driven by strategic investment Cigarette market share growth
Slide 26: Germany: Investing in Our Operational Levers
Germany: Investing in Our Operational Levers PERFORMANCE AFFECTED BY MARKET SIZE AND SHARE DECLINES BRAND PORTFOLIO WELL POSITIONED ACROSS PRICING SEGMENTS • Market size decline as COVID travel restrictions BUILDING BRAND INCREASING IMPROVING PRICE removed; share down 85bps EQUITY RELEVANCE PERCEPTI
Slide 27: UK: Share Growth Driven by Strategic Initiatives
UK: Share Growth Driven by Strategic Initiatives SATISFYING CONSUMER NEEDS BY LEVERAGING OUR FULL PORTFOLIO BOTH CIGARETTE AND FINE-CUT MARKET SHARE GROWTH • Market size affected by COVID unwind • Strong market share growth benefits from investment in our brand portfolio LOCAL HERO FOCUS FINE-CUT AC
Slide 28: Spain: Delivering Another Year of Share Growth
Spain: Delivering Another Year of Share Growth FIRST PRICE INCREASES ACROSS KEY PRODUCT LINES IN FIVE YEARS URBAN CULTURE BRAND PORTFOLIO INVESTMENT DRIVES CONTINUED SHARE GAINS LEVERAGING HERITAGE • Market size recovering as tourism returns • First price increases achieved in five years NATIONAL HE
Slide 29: Australia: Delivering Share and Profit Growth
Australia: Delivering Share and Profit Growth STRATEGIC INITIATIVES DRIVE RECOVERY PORTFOLIO, PRICING & EXECUTION DRIVE PERFORMANCE • Fifth price tier now 40% of industry volumes • Brand portfolio now clearly established with consumer offer in each tier • Lambert & Butler launch drives share gain L&
Slide 30: Driving Value from Our Broader Market Portfolio
Driving Value from Our Broader Market Portfolio STRATEGIC INITIATIVES ARE DELIVERING A STRONGER PERFORMANCE AFRICA CENTRAL & EASTERN EUROPE LEVERAGING STRONG SHARE DELIVERING A STRONGER POSITIONS TO DRIVE VALUE PERFORMANCE • Consumer and brand activation delivers • New brand portfolio strategy furth
Slide 31: NGP: Continued Validation of Heated Tobacco Approach
NGP: Continued Validation of Heated Tobacco Approach NEW FLAVOURS DRIVE FURTHER SHARE GAINS IN CZECH REPUBLIC iD MARKET SHARE* KEY INDICATORS REMAIN POSITIVE • Pulze and iD further established in HT category • Continued positive feedback on key metrics ‒ iD market share sustained and growing ‒ Distr
Slide 32: NGP: Heated Tobacco Progress Initiates New Launches
NGP: Heated Tobacco Progress Initiates New Launches CONSUMER ENDORSEMENT OF OUR APPROACH INFORMS ROLL-OUTS ITALY PORTUGAL HUNGARY HT category launched 2014 2015 2019 HT % of nicotine pool 16% 11% 15% HT market size sticks 12.5bn 1.4bn 2.2bn IMB tobacco market share 5% 13% 18% 32 | Full Year Results
Slide 33: NGP: Successful Blu 2.0 Pilot Endorses UK launch
NGP: Successful Blu 2.0 Pilot Endorses UK launch POSITIVE CONSUMER RESPONSE TO NEW BLU DEVICE TRIAL IN FRANCE NEXT GENERATION VAPOUR DEVICE BLU 2.0 • Marketing approach tested in four French cities • New device well received FRANCE • Data shows good consumer retention • Sales driven by point of sale
Slide 34: NGP: Strong Performance in Modern Oral Nicotine
NGP: Strong Performance in Modern Oral Nicotine FOCUSED MARKET STRATEGY DELIVERING STRONG GROWTH MEETING CONSUMER NEEDS Modern Oral • Strong modern oral share growth in Sweden Net Revenue and Norway • Zone X launched in Norway +37% • Opportunity to attract adult consumers to our Zone X brand franchi
Slide 35: Strengthening Phase in Place
Strengthening Phase in Place PHASE ONE OF OUR FIVE-YEAR STRATEGY IMPLEMENTED FY21 TO FY22 FY23 TO FY25 Phase One – Strengthening Phase Two – Improving Returns • Increased investment in operational growth • Investment and operational drivers improvements enhance financial delivery Strategic • New way
Slide 36: Priorities for FY23
Priorities for FY23 Embedding our new ways of working and consumer capabilities Maintaining priority market share NGP investment to build momentum in existing markets and new launches Delivering the improving returns in phase two 36 | Full Year Results | 15 November 2022
Slide 37: Appendices: Group Financials
APPENDICES GROUP FINANCIALS 37 | FULL YEAR RESULTS | 17 NOVEMBER 2022
Slide 38: Net Revenue
Net Revenue +1.5% +2.7% £7,793m £7,702m £7,589m -4.7% +6.0% +0.2% +1.2% FY21 Tobacco Tobacco NGP net FY22 Translation FY22 net net revenue* volume price/mix revenue constant currency FX revenue net revenue 38 | Full Year Results | 15 November 2022 *FY21 net revenue excludes a £21m contribution from
Slide 39: Adjusted Operating Profit
Adjusted Operating Profit +1.8% +3.5% £40m £(105)m £76m £55m £(4)m £62m £3,694m NGP reduced costs £3,632m £3,570m Tobacco AOP £11m / +0.3% FY21 AOP* FY21 net US Strategic Underlying NGP Distribution FY22 AOP Translation FY22 AOP state litigation investments tobacco operating & elims constant FX char
Slide 40: Group Adjusted Results
Group Adjusted Results Constant Constant Premium FY21 excl. Foreign Currency FY22 excl. Actual Currency FY21 Cigars divestment Exchange Growth divestment ∆ ∆ Tobacco net revenue £m 7,422 (21) 7,401 91 93 7,585 +2.5% +1.3% NGP net revenue £m 188 - 188 - 20 208 +10.4% +10.8% Tobacco & NGP operating pr
Slide 41: Group Adjusted Results
Group Adjusted Results FY22 FY21* Group adjusted operating profit £m 3,694 3,573 Adjusted net finance costs £m (326) (417) Share of profit of JVs £m 9 11 Adjusted profit before tax £m 3,377 3,167 Adjusted tax rate % 22.4% 22.6% Adjusted EPS pence 265.2 247.1 Dividend per share pence 141.17 139.08 12
Slide 42: Reconciliation: Reported to Adjusted
Reconciliation: Reported to Adjusted Adjustments Russian and Amortisation Fair value Buy out of Net fair value and Post- £m (Loss)/Profit on Acquisition Adjusting above Reported associated and impairment Restructuring adjustment disposal of and disposal Excise tax liabilities on exchange losses empl
Slide 43: Income Statement
Income Statement £m (unless otherwise stated) FY22 FY21* Revenue 32,551 32,791 Adjusted operating profit 3,694 3,573 Russian and associated market exits (399) - Amortisation and impairment of acquired intangibles (349) (450) Restructuring costs (197) (257) Fair value adjustment to financial assets (
Slide 44: Balance Sheet
Balance Sheet £m FY22 FY21 Non-current assets: tangible 4,260 4,209 intangible 17,777 16,674 Current assets: inventories 4,140 3,834 other 4,781 4,373 Current liabilities (11,139) (10,808) Non-current liabilities (12,346) (12,342) Net assets 7,473 5,940 44 | Full Year Results | 15 November 2022
Slide 45: Net Finance Costs
Net Finance Costs £m FY22 FY21 Net finance income/(costs) (117) 81 Adjusted for: - interest income on net defined benefit assets (69) (89) - interest cost on net defined benefit liabilities 270 87 - fair value & exchange gains on financial instruments 8 (496) Adjusted net finance costs (326) (417) 4
Slide 46: Cash flow
Cash flow £m FY22 FY21 Group operating profit 3,694 3,573 Depreciation, amortisation and impairments 244 269 EBITDA 3,938 3,842 Other non-cash movements (20) (79) Operating cash flows before movement in working capital 3,918 3,763 Working capital 40 (664) Tax cash flow (681) (820) Cash flows from op
Slide 47: Net Debt Reconciliation
Net Debt Reconciliation Reported Accrued Lease Fair value of Adjusted £m FY22 interest liabilities derivatives FY22 Opening net debt (9,373) 140 251 367 (8,615) Free cash flow 2,562 - - - 2,562 Dividends (1,320) - - - (1,320) Net proceeds from sale of subsidiaries 14 - - - 14 Employee Share Ownershi
Slide 48: Foreign Exchange
Foreign Exchange Average Closing FY21 FY22 ∆ FY21 FY22 ∆ USD $ 1.369 1.281 -6.4% 1.346 1.104 -18.0% EURO € 1.145 1.181 +3.1% 1.162 1.133 -2.5% AUD $ 1.821 1.796 -1.4% 1.870 1.707 -8.7% 48 | Full Year Results | 15 November 2022
Slide 49: Foreign Currency
Foreign Currency DIVISIONAL CURRENCY EXPOSURE Approximate weight of EUR / • €0.01 (1 cent) movement in the € currency in EUR Other Total Net Revenue GBP £ Linked USD $ AUD $ Currencies Other includes Euro has c. £20m impact on net revenue. Polish Zloty, Czech Europe 20% 70% 0% 0% 10% Koruna Americas
Slide 50: Divisional Market Share
Divisional Market Share MAT MARKET SHARE DATA FY22 FY21R Europe 19.0% 19.4% -45bps Americas 10.1% 9.2% +90bps AAA 10.8% 10.9% -10bps Total Group 13.9% 13.9% -5bps Market Share Calculation Market share is presented as a 12 month average (MAT). Aggregate market share is a weighted average across mar
Slide 51: FY23 Guidance
FY23 Guidance OTHER FINANCIAL ITEMS Financing & Cost of Debt • Finance charge for FY23 expected to be c. £390m at current rates; all-in cost of debt of c. 4.2% for FY23 Tax Rate • Expected to be c. 22% Capex • Expect net capex to be c. £300m-350m Cash Conversion • Expect 90 to 100% range Logista M&A
Slide 52: Appendices: Financing
APPENDICES FINANCING 52 | FULL YEAR RESULTS | 15 NOVEMBER 2022
Slide 53: Financial Profile September 2022
Financial Profile 30 September 2022 Interest Split* Currency Split (adjusted) Committed Funding Split 1% 3% 24% 23% Bonds Fixed EUR Bank Floating USD ECP 97% 76% 76% Committed Financing Outstanding (£m) 14,000 12,000 Bond Issues Bank Facilities 10,000 ECP 8,000 6,000 £4.25bn headroom against facilit
Slide 54: Committed Bank Facilities and Cost of Debt Profile
Committed Bank Facilities 30 September 2022 Amount Description Maturity date (EUR m) £m equiv. Committed 3-year Revolving Credit Facility 30 March 2025 184 162 Committed 3-year Revolving Credit Facility 30 September 2025 3,316 2,928 Total 3,091 All-in Cost of Debt Profile Forecast Description FY21 F
Slide 55: Bond Issues
Bond Issues 30 September 2022 Currency Amount Issue Maturity of issue (ccy m) Issuer Coupon Date Date £m equiv. Margin* USD 354** Imperial Brands Finance PLC 3.50% Feb-13 Feb-23 320 1.13% EUR 750 Imperial Brands Finance PLC 1.13% Feb-19 Aug-23 662 1.25% GBP 600 Imperial Brands Finance PLC 8.13% Sep-
Slide 56: Glossary
Glossary Stick Equivalent (SE) volumes reflect our combined cigarette, fine cut tobacco, cigar and snus SE volumes. Constant Change at constant currency removes the effect of exchange rate movements on the translation of the Currency results of our overseas operations. Tobacco Total Tobacco includes