Imperial Brands Plc · LSE:IMB

Imperial Brands — Imperial Tobacco Group — Corporate Update (March 2005)

42 slides from Imperial Brands's corporate update, Mar 21, 2005

  1. Slide 1: Trading Update

    Trading Update 21 March 2005 Imperial Tobacco Group PLC

  2. Slide 2: Agenda

    Agenda ƒ Trading update Gareth Davis ƒ International Financial Reporting Standards Bob Dyrbus/ Alison Cooper ƒ Regulatory & litigation update Frank Rogerson 2

  3. Slide 3: International Financial Reporting Standards (IFRS)

    International Financial Reporting Standards (“IFRS”) Bob Dyrbus Finance Director Alison Cooper Director of Finance and Planning

  4. Slide 4: Agenda

    Agenda ƒ Introduction ƒ Reporting timetable ƒ Key areas affected ƒ Major impacts on financial statements ƒ Summary 4

  5. Slide 5: Introduction

    Introduction ƒ Caveat - best estimates - based on FY04 results ƒ Background ƒ Key principles - balance sheet given greater focus - greater volatility in P&L reporting - no change to economics of our business - no effect on free cash flows - dividend policy unchanged 5

  6. Slide 6: Reporting Timetable

    Reporting Timetable Accounting date 1/10/04 31/3/05 30/9/05 31/3/06 30/9/06 Opening IFRS balance Restate Restate IFRS only IFRS only Requirement sheet Reporting date Nov 05 Nov 05 Nov 05 Apr 06 Nov 06 6

  7. Slide 7: First Time Adoption – Elections

    First Time Adoption – Elections ƒ Business combinations – no restatement prior to transition date (1 October 2004) ƒ Pensions - cumulative actuarial gains and losses recognised in equity at 1 October 2004 ƒ Share based payments – implemented in respect of share options granted post 7 November 2002 ƒ

  8. Slide 8: Key Areas Affected

    Key Areas Affected ƒ Pensions ƒ Goodwill ƒ Proposed dividends ƒ Share based payments ƒ Financial instruments ƒ Other 8

  9. Slide 9: Pensions

    Pensions In 2004, pension costs were accounted for under SSAP24 – most recent actuarial surplus/deficit spread over expected future working lives of employed members. The balance sheet represents cumulative P&L charge less cash UK GAAP contributions paid. (SSAP24/ FRS17 disclosure requires annual fa

  10. Slide 10: Pensions

    Pensions Impact on: Adjusted Unadjusted Adjusted Adjusted Net OP PBT PBT EPS Assets -£5m -£5m -£5m -0.5p +£33m* Cash None Impact * 10 gross impact £47m; less deferred tax of £14m

  11. Slide 11: Goodwill

    Goodwill UK GAAP Goodwill capitalised and amortised on straight line basis over its useful economic life, a period not exceeding 20 (FRS10) years IFRS Goodwill capitalised and subject to annual impairment (IFRS3) review instead of amortisation Impact on: Adjusted Unadjusted Adjusted Adjusted Net OP

  12. Slide 12: Final Dividends

    Final Dividends UK GAAP Accrued in period to which they relate (SSAP17) IFRS Accounted for in period in which they are declared and (IAS10) approved Impact on: Adjusted Unadjusted Adjusted Adjusted Net OP PBT PBT EPS Assets None None None None +£253m Cash None Impact 12

  13. Slide 13: Share Based Payments

    Share Based Payments UK GAAP P&L charge based on difference between exercise price and share price at date of grant spread over the (UITF 17&38) performance (vesting) period IFRS P&L charge based on the fair value of options granted calculated at the date of grant, spread over the vesting (IFRS2) pe

  14. Slide 14: Financial Instruments

    Financial Instruments Our derivative financial instruments portfolio qualifies for UK GAAP hedge accounting. (FRS4 & 13) P&L charges reflect the hedged position. Disclosure of fair values only (note 15). Detailed and prescriptive hedge accounting rules. IFRS All instruments recognised on balance she

  15. Slide 15: Other Areas Affected by IFRS

    Other Areas Affected by IFRS Other IAS19 – providing for employee benefits, employment particularly holiday pay benefits IAS14 – segmentation based on management Segmental structure and systems of internal financial reporting reporting to directors. No change anticipated IAS38 – wider range of intan

  16. Slide 16: Other Areas Affected by IFRS (cont)

    Other Areas Affected by IFRS (cont) UK GAAP and IFRS similar. No material change Taxation to current tax charge or tax rate Cash flow Move back to focus on “cash and cash statements equivalents” No more “ super exceptionals” on the face of the P&L account eg profit/loss on sale of fixed Exceptionals

  17. Slide 17: Summary of Major Impacts

    Summary of Major Impacts estimated impact of IFRS before IAS39 on 2004 Restated basic EPS +19.1p to 80.5p Adjusted Unadjusted Adjusted Adjusted Net £million OP PBT PBT EPS (p) Assets UK GAAP: Reported 1,218 688 1,014 101.6p 136 Pensions -5 -5 -5 -0.5p +33 Goodwill N/A +196 N/A N/A +196 Dividends N/A

  18. Slide 18: Summary

    Summary ƒ No change to economics of the business ƒ No change to cash flow of the business 18

  19. Slide 19: Regulatory & Litigation Update

    Frank Rogerson Corporate Affairs Director Regulatory & Litigation Update

  20. Slide 20: Smoking in Public Places

    Smoking in Public Places Impetus for smoking bans: ƒ World Health Organisation ƒ Medical Associations ƒ Health Professionals ƒ Non-Government Organisations ƒ European Commission Examples of Bans/Restrictions: ƒ New York – July 2003 ƒ Ireland – March 2004 ƒ Norway – June 2004 ƒ Malta – October 2004 ƒ

  21. Slide 21: Smoking in Public Places – The UK

    Smoking in Public Places – The UK England ƒ Health White Paper proposes ban on smoking in: - all Government departments and NHS by end 2006 - workplaces by end 2007 - licensed premises where food is prepared/served by end 2008 ƒ Liverpool and London Authorities: - seeking separate powers through Par

  22. Slide 22: Smoking in Public Places - Our View

    Smoking in Public Places - Our View Consistent Message: ƒ Science inconclusive ƒ Smoking bans: disproportionate and unnecessary ƒ Voluntary approach is working ƒ Practical solutions: well-ventilated smoking and non-smoking areas Common Sense Can Prevail: ƒ Support hospitality sector ƒ Spain: stakeho

  23. Slide 23: Smoking in Public Places - Ireland

    Smoking in Public Places - Ireland Cigarette Volume Decline Factors: ƒ Successive tax increases ƒ Cross-border trade ƒ Euro vs Sterling ƒ Increase in low cost flights Cigarette Market (2004 calendar year): ƒ Total Market decline – 11% ƒ Smoking ban impact – up to 5% ƒ ITG market share – up 1% to 25%

  24. Slide 24: WHO FCTC – Ratifying Countries

    WHO FCTC – Ratifying Countries FCTC Parties (60 as of 15 March) Armenia Kenya Qatar Australia Latvia San Marino Bangladesh Lesotho Senegal Bhutan Lithuania Seychelles Botswana Madagascar Singapore Brunei Maldives Slovakia Canada Malta Slovenia Cook Islands Marshall Islands Solomon Islands Denmark Ma

  25. Slide 25: WHO FCTC – Conference of the Parties

    WHO FCTC – Conference of the Parties Conference of the Parties: ƒ Governing body ƒ Convened by end February 2006 ƒ Permanent secretariat to be established ƒ Implementation regularly reviewed ƒ No disciplinary action for failure to implement 25

  26. Slide 26: WHO FCTC - Implementation

    WHO FCTC - Implementation Timeline for only two provisions: ƒ Advertising - restrict or ban all tobacco advertising/sponsorship within five years - disclose advertising spend ƒ Health Warnings and Descriptors - implement minimum health warnings within three years - “effective measures” to ensure tob

  27. Slide 27: Descriptors – Our View

    Descriptors – Our View ƒ Allow smokers to navigate between brands of different tar yields and/or taste characteristics ƒ Help smokers to choose lower tar and/or lighter tasting brands if they wish to do so ƒ Prohibition of descriptors would - blur those choices and could lead to consumer confusion -

  28. Slide 28: Descriptors - Australia

    Descriptors - Australia ACCC requesting: ƒ Cease using descriptors on Australian cigarette packs and marketing materials from April 30, 2005 ƒ Cease using yield information on cigarette packaging and advertising from March 2006 ƒ Contribute funding towards national smoking cessation programmes and a

  29. Slide 29: Australia – Our View

    Australia – Our View Imperial Tobacco: ƒ Willing to engage in constructive dialogue ƒ Market entry 1999 therefore no reasonable grounds to request funding for smoking cessation campaigns ƒ Some descriptors already removed as part of routine packaging changes ƒ Seeking to remove other descriptors in

  30. Slide 30: EU Tobacco Product Directive Review

    EU Tobacco Product Directive Review Directive states that: ƒ “No later than 31 December 2004, and every two years thereafter, the Commission shall submit to the European Parliament, the Council and the Economic and Social Committee a report on the application of this Directive” Current Position: ƒ N

  31. Slide 31: EU Tobacco Excise Tax Directive

    EU Tobacco Excise Tax Directive ƒ Directive reviewed every four years ƒ Current review underway: due to be complete by first half of 2006 for adoption by Member States in 2007 ƒ Fine-cut tobacco tax increase potential ƒ Imperial Tobacco opposing - distorts markets/impact on new Member States ƒ Commi

  32. Slide 32: Pictorial Health Warnings

    Pictorial Health Warnings ƒ Currently in use in: - Canada, Brazil, Singapore, Thailand ƒ Due to be introduced in: - Australia, Romania ƒ No obligation for EU Member States to introduce PHWs ƒ Proposed images published by Commission; not yet available from central library ƒ Technical specifications t

  33. Slide 33: Pictorial Health Warnings - Our View

    Pictorial Health Warnings - Our View Pictorial Health Warnings: ƒ Do not add to public awareness of risks associated with smoking, which are already well known to both smokers and non-smokers ƒ Designed to vilify, stigmatise and shock adult smokers ƒ Disruptive burden on manufacturing operations ƒ U

  34. Slide 34: Litigation – UK Office of Fair Trading

    Litigation – UK Office of Fair Trading UK Office of Fair Trading: ƒ Inquiry into supply of rolling papers ended with no action taken ƒ Imperial Tobacco thanked for co-operation ƒ Information requested from a number of parties re: UK tobacco supply chain received August 2003 ƒ Additional information

  35. Slide 35: Litigation – Product Liability Claims

    Litigation – Product Liability Claims McTear: ƒ Judgement awaited Ireland: ƒ 23 claims (from 307 in 1997) Poland: ƒ One individual claim; decision expected 2005 ƒ One claim vs industry; no statement of claim served Netherlands: ƒ 29 individual claims threatened 35

  36. Slide 36: US Litigation

    US Litigation Department of Justice: ƒ $280 billion disgorgement remedy rejected ƒ DoJ appeal to be heard in coming months Engle class action: ƒ Class decertified in 2003 ƒ Verdict on whether to uphold or reverse decertification expected shortly Price class action: ƒ Industry appeal underway Imperia

  37. Slide 37: Smuggling and Counterfeiting

    Smuggling and Counterfeiting Treasury Sub-Committee: ƒ Inquiry into excise duty fraud in oil, alcohol, tobacco ƒ Industry meeting January 12, 2005 ƒ Opportunity for Imperial to highlight success of MoU with UK Customs ƒ Positive comments from Treasury Economic Secretary Report Published March 15, 20

  38. Slide 38: Counterfeit

    Counterfeit ƒ 92% reduction in volume of seizures of genuine smuggled Imperial Tobacco products since 2001 ƒ Majority of 2004 UK Customs tobacco seizures were counterfeit ƒ In six months to end September 2004, 93% of all large seizures of Imperial Tobacco cigarettes were counterfeit ƒ Counterfeiting

  39. Slide 39: Pre-emptive Action

    Pre-emptive Action ƒ Totally opposed to smuggling and counterfeiting ƒ Ongoing commitment to work with Governments and Customs authorities worldwide ƒ Replicating success of UK MoU in other markets ƒ Dedicated team of specialists combating illicit trade ƒ Success of joint operations with customs aut

  40. Slide 40: Ongoing Co-operation

    Ongoing Co-operation Imperial Tobacco: ƒ Committed to working with Chinese authorities to tackle criminal activities ƒ ITG and STMA are part of an industry coalition set up to combat smuggling and counterfeiting ƒ Support Chancellor’s pledge to strengthen co- operation between UK Customs and China ƒ

  41. Slide 41: Summary and Outlook

    Summary and Outlook ƒ Challenging external environment ƒ Increasing speed, scope, scale and sophistication of regulation ƒ Track record of operating successfully in these conditions ƒ Continued focus on maintaining our competitive advantage 41

  42. Slide 42: Imperial Tobacco Group PLC

    Imperial Tobacco Group PLC www.imperial-tobacco.com

Imperial Tobacco Group — Corporate Update (March 2005) on 6ix