Imperial Brands Plc · LSE:IMB
Imperial Brands — Imperial Tobacco Group — H1 2005 Earnings Presentation
42 slides from Imperial Brands's earnings presentation, Apr 26, 2005
Slide 1: Interim Results 26 April 2005
Interim Results 26 April 2005 Imperial Tobacco Group PLC
Slide 2: Gareth Davis and Bob Dyrbus
Gareth Davis Chief Executive Bob Dyrbus Finance Director 2
Slide 3: Results Summary
Results Summary Operating profit up 7% to £598m Pre-tax profit up 10% to £499m EPS up 10% to 49.8p DPS up 10% to 16.5p Note: results pre-amortisation & exceptionals 3
Slide 4: Operational Highlights
Operational Highlights Profit & margin gains in core markets Cigarette share progress in Western Europe Rest of World: good in-market performances - Asia/Australia/Eastern Europe/Middle East Davidoff, West & Rizla: international progress Productivity and efficiency gains Effective cash m
Slide 5: Bob Dyrbus, Finance Director
Bob Dyrbus Finance Director 5
Slide 6: Group Results
Group Results £m *Adjusted % As reported HY05 HY04 Change HY05 Turnover exc Duty 1,464 1,472 -1 1,464 Operating Profit 598 560 +7 479 Operating Margin % 40.8 38.0 32.7 Pre-tax Profit 499 454 +10 382 Tax Rate % 27.0 27.1 34.0 EPS 49.8p 45.3p +10 34.3p DPS 16.5p 15.0p +10 Note: *results pre-amortisati
Slide 7: Segmental Analysis
Segmental Analysis Turnover excl. Duty *Operating Profit (£m) (£m) HY05 HY04 HY05 HY04 UK 392 392 228 209 Germany 304 293 139 107 Rest of Western 285 297 141 151 Europe Rest of the World 483 490 90 93 Total 1,464 1,472 598 560 Operating margin 40.8% 38.0% Note: *results pre-amortisation & exceptiona
Slide 8: Regional Results
Regional Results UK Germany - share growth - cigarette volumes down - pricing benefits - price increases - cigarette volume declines - OTP growth - cost reductions - cost reductions Rest of Western Europe Rest of the World - cigarette share progress - positive in-market trends - adverse mix - Centra
Slide 9: Exceptional Items
Exceptional Items Restructuring costs £15m - Dublin & Plattsburgh factory closures Sale of fixed assets - net cash proceeds of £18m - £2m profit 9
Slide 10: Operating Cash Flow
Operating Cash Flow £m HY05 HY04 FY00-04 Adjusted operating profit 598 560 4,329 Non-cash – dep/provs 22 4 (9) Working capital (66) (69) (345) Operating cash flow *554 495 3,975 Cash flow after net capex *527 510 3,737 % conversion 88% 91% 86% Note: *before restructuring payment of £46m 10
Slide 11: Net Cash Flow
Net Cash Flow Gross capex £45m (2004:£32m) - Turkey investment: £12m Interest paid £31m (2004:£35m) - bond payment profile Taxation paid £91m (2004:£55m) - payment timings Share buyback spend £40m Reduction in net debt £199m 11
Slide 12: Net Debt & Interest
Net Debt & Interest 5 Closing Net Debt Average level of debt: £3.6bn (HY04:*£3.7bn) 4 3.7 - cash flow benefit 3.5 - additional capex & forex 3 Ave. all in cost of debt: 5.5% £bn (HY04:*5.7%) 2 - higher level of floating debt - lower euro interest rates 1 Interest down to £99m (HY04:£106m) 0 -
Slide 13: IFRS Update
IFRS Update Minimal impact estimated on FY04 results - excluding IAS39 on derivatives No change to economics of the business No change to cash flow of the business 13
Slide 14: Financial Summary
Financial Summary Growing profits & margins Focus on cost & capital employed Effective cash management Continued value creation 14
Slide 15: Gareth Davis, Chief Executive
Gareth Davis Chief Executive 15
Slide 16: UK Market Dynamics
UK Market Dynamics Cigarette duty paid market c51bn - indications of H2 stability Cigarette sector trends continue RYO duty paid market c 2,900t Manufacturer’s price increase c.7p in Jan Tax increase +8p in March - in line with inflation Note: Imperial estimates 16
Slide 17: UK Performance
UK Performance Mar 05 Cigarette share up to 44.7% Spot 47 - L&B leading the market at 16.0% Imperial - UK’s No 2 Richmond up to 14.4% 45 44.8 % Market Share - premium brands maintain sector share 43 RYO share growth to 66.2% 41 - Golden Virginia up to 50.8% Gallaher 39 38.0 37 Mar-01 Mar-02 Mar-
Slide 18: German Market Dynamics
German Market Dynamics Annual Market Size 160 151 Impact of tax increases 8 140 140 - cigarette down 19% Bn cigarette equivalents 19 11 120 28 39 - OTP up 44% 21 100 FMC PL at 16.6% 17 80 December 04 increase 60 101 - tax and MPI 103 84 40 Sept 05 tax increase 20 - under review 0 HY04 HY05 F
Slide 19: Cigarette Price Segmentation
Cigarette Price Segmentation % Dec 2002 Share of Category Dec 2004 Price Price 100 Points Points € € 90 80 70 74.9 74.0 73.4 72.6 72.0 60 2.80 – 3.80 – 50 3.00 4.00 40 30 3.3 4.5 3.50/ 20 9.4 2.65 9.9 10.0 7.4 6.9 3.60 10 15.7 2.30 16.1 16.6 16.7 16.6 3.20 0 H1 2003 H2 2003 H1 2004 H2 2004 H1 2005 P
Slide 20: German Performance
German Performance Total tobacco share at 20.4% Cigarette share stable at 19.0% - West at 8.6%: impacted by downtrading - JPS momentum: share up to 1.2% - Davidoff stable at 1.1% OTP share at 23.8% - our Singles volumes up 44% Note: Imperial estimates 20
Slide 21: Focus on Singles
Focus on Singles Strong growth: HY05:19bn (HY04:7bn) - 49% of total OTP market of 39bn (HY04:27bn) Increasing competition and price segmentation Market leaders: strengthening our portfolio - JPS Singles: market share at 8.2% - Fairwind: new value brand Singles taxation Note: Imperial estimat
Slide 22: Rest of Western Europe: Cigarette Highlights
Rest of Western Europe cigarette highlights Total market size down 6% Cigarette share progress - Ireland at 25.3%: JP Blue strength - Netherlands at 4.3%: West volumes doubled - Spain at 4.0%: JPS American growth - Italy at 1.6%: Peter Stuyvesant progress - France at 3.4%: 19 pack impact - Greec
Slide 23: Rest of Western Europe: RYO Highlights
Rest of Western Europe RYO highlights Total market size stable Regional market leader Positive trends in Southern Europe - strong performance from Golden Virginia Netherlands pressures - continued downtrading - Zilver launch Note: Imperial estimates 23
Slide 24: Rest of the World Highlights
Rest of the World highlights Asia: positive trends - Taiwan market share up to 11.5% - Vietnam and Laos continued growth China: co-operation advancing - West launch in Beijing Australia: improved profits - cigarette share stable DF: EU accession impact Note: Imperial estimates 24
Slide 25: Rest of the World Highlights
Rest of the World highlights Central Europe: challenging environment - profitability focus - Paramount launch in Poland Eastern Europe: positive progress - Russia: market share up to 5.3% - Ukraine: Classic cigarette launch - Caucasus: encouraging progress Africa & Middle East: volumes & profi
Slide 26: Focus on Turkey: The Market
Focus on Turkey the market Growing market of over 100bn sticks - 7th largest market in world Aug 04: three tier tax system introduced - <33% oriental leaf (premium) - 34-66% oriental leaf (mid price) - >66% oriental leaf (low price) Market polarisation - uptrading to premium - growth in low pr
Slide 27: Focus on Turkey: Our Position
Focus on Turkey our position Manisa factory c£35m investment - full production commenced Capacity: c10bn primary, 2bn secondary Over 300 employees: selling & production Salesforce initial focus - Istanbul, Ankara, Izmir, Adana & Mersin Launch of Davidoff & Maxim 27
Slide 28: Manufacturing
Manufacturing focus unchanged Productivity up 14% - benefits of facility closures - machinery redeployment Cigarette unit costs down 3% Factory closures: Dublin and CTC Focus on supply chain optimisation Ongoing business simplification 28
Slide 29: Second Half Outlook
Second Half Outlook trading in line with expectations Continued good performance from UK Profitable development in Germany Rest of Western Europe - cigarette share growth - OTP focus Rest of the World - Central Europe challenging - positive trends: Asia/Middle East/E Europe - ongoing investm
Slide 30: Building on Our Track Record
Building on Our Track Record Cash Sales growth Cost focus management Portfolio opportunities Capacity optimisation Working capital focus Pricing Infrastructure savings Tax efficiency Infrastructure leverage Productivity Interest reduction Effective cash allocation Acquisitions Investments Dividends
Slide 31: Interim Results 26 April 2005
Interim Results 26 April 2005 www.imperial-tobacco.com
Slide 32: Appendices
Appendices 32
Slide 33: HY2005 Profit & Loss Account
HY2005 Profit & Loss Account £m HY05 HY04 % Change Turnover inc Duty 5,342 5,453 -2 Turnover exc Duty 1,464 1,472 -1 Adjusted Operating Profit 598 560 +7 Amortisation (104) (103) Asset Disposal 2 5 Exceptional Items (15) (55) Interest (99) (106) Pre-Tax Profit 382 301 +27 Tax (130) (110) Profit Afte
Slide 34: Balance Sheet
Balance Sheet 31 March 2005 HY05 HY04 £m Fixed Assets: tangible 636 638 intangible 3,453 3,552 Other Investments 6 6 Current Assets: stocks 1,113 1,113 debtors 982 930 Current Liabilities (1,964) (1,869) Other Creditors (463) (542) Net Assets exc Funding 3,763 3,828 Net Debt (3,522) (3,721) Net Asse
Slide 35: HY05 Cash Flow
HY05 Cash Flow £m HY05 HY04 Operating Cash Flow 508 495 Net Capex (27) 15 Dividends(inc. Minority Interests) (254) (217) Acquisitions - (12) Deferred Consideration - (387) Net Interest Paid (31) (35) Taxation (91) (55) Net Cash Inflow/(Outflow) 105 (196) Exchange Movement - 160 Net Debt Movement 105
Slide 36: HY05 Cigarette Volumes
HY05 Cigarette Volumes Billion Sticks HY05 HY04 UK (exc PM)* 11.9 12.7 Germany 10.2 12.7 Southern Europe 3.9 3.5 RMO 0.2 0.2 Benelux 1.4 1.7 France 0.8 1.0 Ireland 0.9 0.9 Total Rest of Western Europe 7.2 7.3 Asia & Australia 8.9 8.8 Central & Eastern Europe 30.9 31.6 Africa & Middle East 8.5 8.2 Du
Slide 37: HY05 RYO/MYO Volumes
HY05 RYO/MYO Volumes 000’s tonnes HY05 HY04 UK 1.0 1.0 Germany 3.3 3.0 Netherlands 2.6 3.3 Belux 2.0 2.3 France 1.0 1.1 Southern Europe 1.2 1.0 RMO/Other 0.3 0.2 Total Rest of Western Europe 7.1 7.9 Total Rest of the World 0.8 0.9 Total Group 12.2 12.8 37
Slide 38: Cigarette Market Shares
Cigarette Market Shares UK and Germany UK 6 month Germany 6 month % average % average HY05 HY04 HY05 HY04 Lambert & Butler 16.0 16.4 West 8.6 9.1 Richmond 14.4 12.7 P Stuyvesant 2.1 2.1 Superkings 5.1 5.7 R1 1.8 1.7 Regal 3.8 4.2 Cabinet 1.3 1.1 Embassy 3.6 3.8 JPS 1.2 0.2 JPS 1.2 1.3 Davidoff 1.1 1
Slide 39: Rest of Western Europe Market Shares
Rest of Western Europe market shares Cigarette Share % HY05 HY04 RYO Share % HY05 HY04 (6mth average) (6mth average) Netherlands 4.3 3.1 Netherlands 50.1 55.2 France 3.4 3.6 France 28.9 29.5 Greece 5.8 5.8 Greece 49.6 52.2 Spain 4.0 3.7 Spain 62.2 64.0 Italy 1.6 0.9 Italy 57.9 57.3 Ireland 25.3 24.5
Slide 40: Market Share Comparatives
Market Share Comparatives for numbers used in presentation % 6mth Average HY05 HY04 % 6mth Average HY05 HY04 UK Rest of World Cigarette 44.7 44.6 Taiwan 11.5 11.2 RYO share 66.2 65.1 Russia 5.3 5.1 Golden Virginia 50.8 49.5 Germany Total tobacco 20.4 20.7 Cigarette 19.0 19.1 OTP 23.8 28.5 Private La
Slide 41: UK Cigarette Sector Trends
UK Cigarette Sector Trends Imperial Sector Shares (6 month average) 2005 2004 40 38% 37% Premium Market Sector Shares % 30 25% 25% Ultra Low 79% 80% 20 Low 10 Mid 61% 60% 0 Mar-01 Mar-02 Mar-03 Mar-04 Mar-05 Note: Imperial estimates (excluding PM brands & private label) 41
Slide 42: IFRS Summary
IFRS Summary est. impact of IFRS before IAS39 on FY04 Restated basic EPS +19.1p to 80.5p Adjusted Unadjusted Adjusted Adjusted Net £million OP PBT PBT EPS (p) Assets UK GAAP: 1,218 688 1,014 101.6p 136 Reported Pensions -5 -5 -5 -0.5p +33 Goodwill N/A +196 N/A N/A +196 Dividends N/A N/A N/A N/A +253
Imperial Tobacco Group — H1 2005 Earnings Presentation on 6ix