Imperial Brands Plc · LSE:IMB
Imperial Brands — H1 2022 Earnings Presentation
58 slides from Imperial Brands's earnings presentation, May 17, 2022
Slide 1: Interim Results
INTERIM RESULTS 1| 17 MAY 2022
Slide 2: Delivering on Our Strategic Priorities
DELIVERING ON OUR STRATEGIC PRIORITIES Stefan Bomhard CEO 2|
Slide 3: 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 4: Agenda
Agenda RESULTS OVERVIEW Stefan Bomhard FINANCIAL REVIEW AND OUTLOOK Lukas Paravicini TRANSFORMING IMPERIAL BRANDS Stefan Bomhard Stefan Bomhard Q&A Lukas Paravicini 4|
Slide 5: Good Progress In Line With Five Year Plan
Good Progress In Line With Five Year Plan DELIVERING ON YOUR STRATEGIC PRIORITIES Investment drives aggregate market share growth in top-five markets Successful NGP trials underpin further roll-outs Strong cash generation enables further deleverage On track to deliver full year results in line with
Slide 6: Strengthening the Business
Strengthening the Business GOOD PROGRESS DELIVERING ON OUR OBJECTIVES Strategic investment drives market share growth Market prioritisation delivers improved performance NGP trials validate focused, challenger approach Consumer insights are building innovation pipeline Culture change programme enabl
Slide 7: On Track with Our Five-Year Transformation
On Track with Our Five-Year Transformation COMPLETING OUR TWO-YEAR STRENGTHENING PHASE PHASE 1 - STRENGTHENING Jan 2021 Sept 2021 Sept 2022 FY23-25 Top 5 aggregate NGP trials Exit of Russia markets share in Strategic begin completed growth Pillars Top 5 Further NGP NGP trials aggregate market Five-y
Slide 8: Stabilising our Priority Market Share
Stabilising our Priority Market Share TARGETED INVESTMENT STRENGTHENING OUR SHARE OF MARKET AVERAGE PRIORITY MARKET PRIORITY MARKET 12 month shareSHARES Δ MAINTAINING PRICING DISCIPLINE SHARE PERFORMANCE (6 month share Δ) Phasing of Price Delivery +70 bps +3.8% +25bps -80 bps +1.2% -1.5% +105 bps Q1
Slide 9: Understanding Consumer Dynamics
Understanding Consumer Dynamics ACTIVELY MANAGING THE BUSINESS TO MEET EVOLVING CONSUMER NEEDS COVID-19 UNWIND INFLATIONARY PRESSURES POTENTIALLY REDUCED HARM Lifting of restrictions is Inflation likely to affect Consumers continue to causing changes to purchasing power of some seek reduced harm con
Slide 10: Financial Review
FINANCIAL REVIEW Lukas Paravicini CFO 10 |
Slide 11: Delivering Against Our Plan
Delivering Against Our Plan INITIATIVES TO STRENGTHEN THE BUSINESS ON TRACK AHEAD OF PHASE 2 AGGREGATE PRIORITY SHARE TOTAL NET REVENUE* NGP NET REVENUE* +25bps +0.3% +8.7% ADJUSTED OPERATING PROFIT* ADJUSTED EPS* ADJUSTED NET DEBT TO EBITDA +2.9% +7.7% -0.2x to 2.4x 11 | Interim Results | 17 May 20
Slide 12: COVID-19 Market Trends Beginning to Unwind
COVID-19 Market Trends Beginning to Unwind REVERTING AS EXPECTED TO HISTORICAL TRENDS -VE impact on market +VE impact on market GLOBAL DUTY USA GERMANY UK SPAIN CANARIES FREE 11.3% 3.7% 3.3% 19% 19% 133% 1.3% 2.3% -1.4% -30% -3.5% -69% -4.5% -2.9% -6.7% -28% -6.8% -4.3% H1 21 H2 21 H1 22 H1 21 H2 21
Slide 13: Net Revenue Growth Driven by NGP
Net Revenue Growth Driven by NGP TOBACCO PRICE MIX OFFSETS VOLUME DECLINES; STRENGTHENS IN Q2 VOLUMES REMAIN STRONG +0.3% • -0.7% tobacco volumes ‒ Remain better than historical trend; reflecting strong performance in the US, Middle East and Australia • +0.1% tobacco net revenue Price: +1.2% £3,583m
Slide 14: Performance Driven by Americas and AAA
Performance Driven by Americas and AAA STRONG VOLUME PERFORMANCE IN AMERICAS AND AAA VOLUMES TOBACCO NR NGP NR • Price/mix impacted by price phasing EUROPE -3.6% -3.8% +45% • Adverse geographic mix • Strong NGP growth • Share gains; trade buying ahead of price rise AMERICAS +3.9% +3.2% -28% • Positi
Slide 15: Delivering Adjusted Profit Growth
Delivering Adjusted Profit Growth CONTINUED INVESTMENT IN FOUNDATION BUILDING +2.9% £36m £(35)m £44m £1m £1,632m FY21 event Foundation NGP reduced £1,586m building costs Tobacco AOP £1m / 0.0% HY21 AOP* HY21 US state Strategic NGP Distribution HY22 AOP litigation charge investments operating & elims
Slide 16: Operating Profit: Adjusting Items as Guided
Operating Profit: Adjusting Items as Guided RUSSIAN OPERATION DIVESTED AS A GOING CONCERN Adjustments to reported operating profit HY22 Reported operating profit £1,201m • Russia & associated market costs – Recognition of impairment and provision Russia & associated market exit costs £201m charge (i
Slide 17: Driving Stronger EPS Growth
Driving Stronger EPS Growth WITH HIGHER OPERATING PROFIT AND REDUCED INTEREST COSTS +7.7% 115.2p 113.0p +4.8p +4.2p (0.2)p (0.4)p (0.2)p (2.2)p 107.0p HY22 HY21 Operating Interest Minorities Tax Number HY22 Translation Adjusted EPS Adjusted profit & JV of shares Adjusted FX EPS Constant Currency EPS
Slide 18: 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 (12-MONTH) DIVIDEND POLICY (12-MONTH) 102% £2.4bn +1% £1.3bn 12-month High free cash flow Delivering cash returns Driving de-leverage cash convers
Slide 19: Strong Cash Supports Further Debt Reduction
Strong Cash Supports Further Debt Reduction DELIVERING 0.2 TIMES IMPROVEMENT IN LEVERAGE Year-on-Year de-leverage Progress Capital allocation priorities 18000 4 3.5x 16000 3.5 1 Investing in the strategy 14000 2.6x 3 12000 2.4x 10000 2.5 2 2 Strong and efficient balance sheet 8000 £13.5bn £10.3bn 1.
Slide 20: FY22 Outlook: On Track to Meet Full Year Expectations
FY22 Outlook: On Track to Meet Full Year Expectations FINANCIAL SUMMARY On track to deliver in line with our revised guidance Net revenue constant currency growth of between 0 to 1% Adjusted operating profit at constant currency to grow c. 1% EPS driven by profit growth, lower interest & revised tax
Slide 21: Transforming Imperial Brands
TRANSFORMING IMPERIAL BRANDS Stefan Bomhard CEO 21 |
Slide 22: 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” 22 | Interim Result
Slide 23: On Track in Implementing Our Critical Enablers
On Track in Implementing Our Critical Enablers WE’VE MADE A SIGNIFICANT PEOPLE INVESTMENT Building a Movement: Embedding our Global Change Programme Consumer at the centre Performance-based culture Simplified and efficient of the business and capabilities operations • Group Consumer Office • Compreh
Slide 24: ESG: Foundations for a Responsible Business
ESG: Foundations for a Responsible Business REFRESHED APPROACH WITH THREE KEY PRIORITY AREAS POSITIVE 12 CONTRIBUTION month share Δ TO SAFE AND INCLUSIVE HEALTHIER FUTURES SOCIETY WORKPLACE Consumer Climate Packaging Farmer Sustainable Human Employee Diversity, equity & livelihoods & responsible hea
Slide 25: Priority Markets: Clear Levers to Improve Performance
Priority Markets: Clear Levers to Improve Performance >25 GROWTH INITIATIVES IN OUR FIVE PRIORITY MARKETS SIX OPERATIONAL LEVERS IN OUR FIVE PRIORITY MARKETS Cigarettes 1 Increase participation in premium 2 Drive and rejuvenate local jewel brands 3 Optimise our approach to the value segment Fine-cut
Slide 26: Americas: Strong Market Share Growth
Americas: Strong Market Share Growth MARKET FUNDAMENTALS SUPPORT POSITIVE OUTLOOK PERFORMANCE DRIVEN BY INVESTMENT TRADE PARTNERSHIPS INITIATIVES & STRATEGIC CHOICES • Market size beginning to revert to historic trend • Strong H1 market share growth driven by FOCUSED BRAND underlying share gains & s
Slide 27: Germany: Investing in Our Operational Levers
Germany: Investing in Our Operational Levers MARKET SIZE CONTRACTON AS TRAVEL INCREASES POST COVID BRAND PORTFOLIO WELL POSITIONED ACROSS PRICING SEGMENTS IMPROVING BUILDING INCREASING • Market size down against strong comparator PRICE BRAND EQUITY RELEVANCE PERCEPTION • Increased price competition
Slide 28: UK: Initiatives Supporting Market Share Growth
UK: Initiatives Supporting Market Share Growth MANAGING THE FULL PORTFOLIO TO MEET CONSUMER NEEDS SHARE GAINS DRIVEN BY VALUE TIER SUCCESS & OPERATIONAL EXCELLENCE • Market size beginning to revert to historical trends as travel increases NEW VALUE GROWTH FINE-CUT ACTIVATION • Price increase in mid-
Slide 29: Spain: Focus on Revitalising Local Jewel Brands
Spain: Focus on Revitalising Local Jewel Brands PRICE INCREASES SUPPORT FINANCIAL PERFORMANCE PACKS URBAN EFFECTIVELY LEVERAGING OUR LOCAL REINFORCING CULTURE SPANISH HISTORY LIMITED EDITIONS JEWELS AND INTERNATIONAL BRANDS • First price increases achieved in five years NEW UPGRADE • Temporary price
Slide 30: Australia: Initiatives Delivering Share Growth
Australia: Initiatives Delivering Share Growth MARKET DYNAMICS STABILISING AFTER PERIOD OF CHANGE IMPERIAL POSITION STABILISING; DRIVEN BY PORTFOLIO, PRICING & ENGAGEMENT • Affordability pressures continue to drive consumer downtrading; 5th price tier now 40% of industry volumes L&B LAUNCHED 5th TIE
Slide 31: NGP: Trials Validate Heated Tobacco Proposition
NGP: Trials Validate Heated Tobacco Proposition CONSUMER AND TRADE FEEDBACK VALIDATES PRODUCT OFFERING 1 MARKET SHARE 2 DISTRIBUTION 3 FEEDBACK 6 MONTH iD SOM iD WEIGHTED DISTRIBUTION “iD sticks are of “The devices a good quality longer battery life and flavour” 84% 88% 91% 91% 91% 3.7% 71% means I
Slide 32: NGP: Heated Tobacco Expanding Further This Year
NGP: Heated Tobacco Expanding Further This Year SELECTED FURTHER MARKET ROLL-OUT AND FLAVOUR EXTENSIONS MARKET ROLL-OUTS FLAVOUR EXTENSIONS MARKET SELECTION CRITERA 5 FLAVOURS TRIALLED TO DATE Existing heated IMB established tobacco category tobacco presence TWO FURTHER FLAVOURS LAUNCHED PLANS UNDER
Slide 33: NGP: blu Consumer Trials Support Further Roll-outs
NGP: blu Consumer Trials Support Further Roll-outs EXTENDING US BLU TRIAL AND TRIALLING NEW BLU DEVICE IN FRANCE EXPANSION OF CONSUMER NEW BLU DEVICE LAUNCHED IN FRANCE MARKETING APPROACH IN USA • Pilot trial validates further targeted • Market trial of next generation blu device expansion of new ma
Slide 34: 2022 Will Enhance Our Investment Case
2022 Will Enhance Our Investment Case CLEAR ACTIONS TO IMPROVE PERFORMANCE AND RETURNS STATUS FY22 PRIORITIES INVESTMENT CASE Increased investment in priority Revitalised tobacco business driving strong cash markets returns A disciplined NGP business providing options for NGP targeted trials potenti
Slide 35: Group Financials
APPENDICES GROUP FINANCIALS 35 | INTERIM RESULTS | 17 MAY 2022
Slide 36: Net Revenue
Net Revenue +0.3% -2.1% £8m £(23)m £27m £(88)m £3,583m +8.7% £3,571m +0.1% NGP net Tobacco net revenue revenue £3,495m -0.7% +0.8% +0.2% -2.5% 1 Net HY21 2 Tobacco 3 Tobacco NGP4 Net 5 HY22 Constant 6 Translation FX HY227 Net Revenue Volume Price/Mix Revenue Currency Revenue Net Revenue * HY21 net r
Slide 37: Adjusted Operating Profit
Adjusted Operating Profit +2.9% +0.9% £1m £(32)m £44m £36m £(35)m £1,632m £1,600m £1,586m Tobacco AOP £1m / 0.0% HY21 1AOP 2 HY21 3 Strategic NGP4 AOP 5 Distribution HY226 AOP 7 Translation HY228 AOP US State investments AOP Constant FX Litigation (including Currency eliminations) * HY21 adjusted op
Slide 38: Adjusted Earnings Per Share
Adjusted Earnings Per Share +7.7% +5.6% (0.2)p (0.4)p (0.2)p 4.2p (2.2)p 115.2p 4.8p 113.0p 107.0p 1 2 3 4 5 6 7 8 9 HY21 Operating Interest Minorities Tax Number HY22 Adjusted Translation HY22 Adjusted Profit & JV of shares Constant FX Adjusted EPS EPS Currency EPS * HY21 adjusted EPS excludes the
Slide 39: Group Adjusted Results
Group Adjusted Results Constant Constant Premium HY21 excl. Foreign Currency HY22 excl. Currency HY21 Cigars divestment Exchange Growth divestment Actual ∆ ∆ Tobacco net revenue £m 3,497 (21) 3,476 (86) 4 3,394 -2.4% +0.1% NGP net revenue £m 95 - 95 (2) 8 101 +5.7% +8.7% Tobacco & NGP operating prof
Slide 40: Group Adjusted Results
Group Adjusted Results HY22 HY21* Group adjusted operating profit £m 1,600 1,589 Adjusted net finance costs £m (165) (206) Share of profit of JVs £m 4 8 Adjusted profit before tax £m 1,439 1,391 Adjusted tax rate % 21.9% 23.0% Adjusted EPS pence 113.0 107.6 Dividend per share pence 42.5 42.1 12-mont
Slide 41: Reconciliation: Reported to Adjusted
Reconciliation: Reported to Adjusted Adj. Acquisition Fair value Post Brand Deferred attributable £m Russian & Amort. of Excise Fair value Loss on Uncertain Tax on Reported associated and Rest. losses on employment impairment tax on to Adjusted (unless otherwise acquired tax adj. of loan disposal ta
Slide 42: Income Statement
Income Statement £m (unless otherwise stated) HY22 HY21* Revenue 15,362 15,568 Adjusted operating profit 1,600 1,589 Russian and associated market exits (201) - Acquisition and disposal costs (5) - Amortisation and impairment of acquired intangibles (182) (211) Restructuring costs (7) (40) Excise ta
Slide 43: Balance Sheet
Balance Sheet £m HY22 HY21 Non-current assets: tangible 3,813 3,954 intangible 16,431 16,753 Current assets: inventories 4,445 4,575 other 3,422 3,850 Current liabilities (11,158) (11,088) Non-current liabilities (11,060) (13,016) Net assets 5,893 5,028 43 | Interim Results | 17 May 2022
Slide 44: Cash flow
Cash flow £m HY22 HY21 Cash flows from operating activities pre tax 973 272 Tax paid (273) (431) Cash flows from operating activities 700 (159) Net Capex (64) (61) Purchase of subsidiaries (13) - Repurchase of shares by Employee share ownership trusts (1) - Net proceeds from sale of subsidiaries 57
Slide 45: 12-month Cash Conversion
12-month Cash Conversion 102% £(0.2)bn £(0.0)m £0.2bn £0.0bn £3.6bn £3.6bn HY22 AOP Working capital Depreciation & Capex Pension/share HY22 Adj. operating amortisation scheme/other cash flow 45 | Interim Results | 17 May 2022
Slide 46: 12-month Cash Conversion
12-month Cash Conversion £m (unless otherwise stated) HY22 HY21 Net cash flow from operating activities 3,026 3,744 Tax 662 745 Net capex (153) (170) Restructuring cash spend 108 118 Cash flow post capex pre interest and tax 3,643 4,437 Adjusted operating profit 3,584 3,647 Cash conversion (%) 102%
Slide 47: Net Finance Costs
Net Finance Costs £m HY22 HY21 Net finance (income) (75) (414) Adjusted for: - interest income on net defined benefit assets 53 45 - interest cost on net defined benefit liabilities (49) (44) - fair value & exchange gains on financial instruments 236 619 Adjusted net finance costs 165 206 47 | Inter
Slide 48: Net Debt Reconciliation
Net Debt Reconciliation Reported Accrued Lease Fair value of Adjusted £m HY22 interest liabilities derivatives HY22 Opening net debt (9,373) 140 251 367 (8,615) Free cash flow 437 - (34) - 403 Dividends paid (incl. minority interests) (975) - - - (975) Accretion of interest 69 (72) 3 - - New leases
Slide 49: Foreign Exchange
Foreign Exchange Average Closing HY21 HY22 ∆ HY21 HY22 ∆ USD $ 1.350 1.346 -0.3% 1.376 1.312 -4.6% EURO € 1.125 1.188 +5.5% 1.174 1.182 +0.7% AUD $ 1.796 1.853 +3.2% 1.809 1.753 -3.1% Russian Rouble 101.623 106.380 +4.7% 103.647 108.784 +5.0% 49 | Interim Results | 17 May 2022
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 • €0.01 (1 cent) movement in the € Polish Zloty, Hungarian Euro has c. £9m impact on net Europe 20% 70% 0% 0% 10% Franc, revenue. Ame
Slide 51: Divisional Market Share
Divisional Market Share MAT MARKET SHARE DATA HY22 HY21 Europe 19.3% 19.5% -20bps Americas 9.5% 9.0% +50bps AAA 10.8% 11.1% -30bps Total Group 13.9% 14.0% -10bps Market Share Calculation Market share is presented as a 12 month average (MAT). Aggregate market share is a weighted average across mark
Slide 52: FY22 Guidance
FY22 Guidance OTHER FINANCIAL ITEMS Financing & Cost of Debt • Finance charge for FY22 expected to be c. £330m Tax Rate • Expected to be c. 22% Capex • Expect net capex to be c. £300m Cash Conversion • Expect 90 to 100% range Foreign Exchange • Translation FX: c. 1.5% tailwind at prevailing FX rates
Slide 53: Financing
APPENDICES FINANCING 53 | INTERIM RESULTS | 17 MAY 2022
Slide 54: Committed Financing Outstanding (£m)
Financial Profile 31 March 2022 Interest Split Currency Split (adjusted) Committed Funding Split 4% 34% 26% Bonds Fixed EUR 24% Bank Floating USD ECP 66% 74% 72% Committed Financing Outstanding (£m) 14,000 12,000 10,000 Bond Issues Bank Facilities 8,000 ECP 6,000 4,000 £2.5bn headroom against facili
Slide 55: Committed Bank Facilities
Committed Bank Facilities 31 March 2022 Amount Description Maturity date (EUR m) £m equiv. Committed 3-year Revolving Credit Facility 30 March 2025 3,500 2,961 Total 2,961 55 | Interim Results | 17 May 2022
Slide 56: Bond Issues
Bond Issues 31 March 2022 Currency Amount Issue Maturity of issue (ccy m) Issuer Coupon Date Date £m equiv. Margin* USD 1,250** Imperial Brands Finance PLC 3.75% Jul-15 May-22*** - - USD 1,000 Imperial Brands Finance PLC 3.50% Feb-13 Feb-23 762 1.13% EUR 750 Imperial Brands Finance PLC 1.13% Feb-19
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: Interim Results
INTERIM RESULTS 58 | 17 MAY 2022