Slide 1: Interim Results 2021
Interim Results 2021 Imperial Brands PLC 18 May 2021
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 Introduction & Results Highlights Stefan Bomhard Financial Review Oliver Tant Embedding our New Strategy Stefan Bomhard 3 | Interim Results | 18 May 2021
Slide 4: 2021 Interim Results Highlights
2021 Interim Results Highlights Positive start to implementing our new strategy to strengthen delivery Begun to stabilise the aggregate share performance in our priority tobacco markets New NGP strategy delivering better results, supporting commitment to harm reduction Generating growth in revenue a
Slide 5: Strengthening Performance
Strengthening Performance Delivering in line with expectations Aggregate priority market share Organic net revenue • Begun to stabilise • Strong tobacco pricing +6 bps share +3.5% • Improved NGP performance • 3 out of 5 priority Tobacco +3.2% (MHT) • COVID disruption well markets in share NGP +16.0%
Slide 6: Embedding the New Strategy: key developments
Embedding the New Strategy Beginning the transformation – key developments Implementation of New Strategy Underway New market prioritisation and focus in place Tobacco Investment beginning to roll-out Clear strategy to strengthen Leveraging strongholds; targeted exits performance NGP through focused
Slide 7: Financial Review
Financial Review Oliver Tant
Slide 8: Volumes Benefit from Market Share Gains
Volumes Benefit from Market Share Gains Impacted by travel restrictions and inventory movements COVID impacts -3.3% • Duty free impacted by reduced travel • US inventory headwind c. 0.9bn SE Market share • +30bps market share across footprint (6 month) 114.5 Regional volume performance 110.7 (1.3)%
Slide 9: COVID-19 Continues to Impact Market Size
COVID-19 Continues to Impact Market Size Contrasting impact across markets and channels +VE impact on market -VE impact on market H1 20 -3% 2% H1 20 H2 20 12% UK ESP -9% H2 20 H1 21 10% -8% H1 21 H1 20 -3% Global -9% H1 20 H2 20 3% GER Duty -85% H2 20 H1 21 2% Free -69% H1 21 H1 20 -4% -11% H1 20 H2
Slide 10: Net Revenue Growth in Both Tobacco and NGP
Net Revenue Growth in Both Tobacco and NGP Continued strong tobacco pricing -3.3% +6.5% +0.3% +3.5% -1.1% +2.4% £(103)m £3,592m £3,611m £3,571m £3,489m +16.0% NGP net +3.2% revenue Tobacco net revenue HY20 net Premium HY20 net Tobacco Tobacco NGP net HY21 organic Translation FX HY21 organic revenue
Slide 11: Revenue Growth Driven by Strong Pricing
Revenue Growth Driven by Strong Pricing Supported by positive product mix Tobacco Net revenue Price/mix • H1 impacted by global duty free & travel retail Europe +0.1% +4.4% • Strong financial performance in UK & Germany • Price/mix benefits from market mix • +20bps cigarette share gains in US Americ
Slide 12: Organic Profit Growth Driven by NGP and Distribution
Organic Profit Growth Driven by NGP and Distribution Underlying tobacco profit growth +8.1% £7m £34m £46m HY20 items +£5m net OP impact £(9)m £76m £1,579m £1,586m £(42)m £(49)m £95m £1,469m £1,460m £(41)m HY20 Premium HY20 AOP US Australia NGP US Tobacco NGP Distribution HY21 Translation HY21 AOP Ci
Slide 13: EPS Growth Driven by Higher Operating Profit
EPS Growth Driven by Higher Operating Profit Profit upside partly offset by increased tax rate +6.9% 4.8p 0.9p 0.1p 12.6p 106.9p 107.0p 3.0p 103.0p 100.0p HY20 Premium Cigar HY20 adjusted Operating Interest & Tax Minorities & JV HY21 organic FX HY21 organic adjusted EPS EPS excl. Profit adjusted adj
Slide 14: Resilient Cash Delivery
Resilient Cash Delivery +£2.4bn increase in net cash flow over 12 months HY21 rolling 12-month cash 12-month net cash-flow +£2.4bn • Increased adjusted operating cash-flow £(0.1)bn • Rebased dividend £1.1bn • Premium cigar divestment £2.5bn £0.7bn FY21 cash delivery £0.7bn • c.80% cash conversion £0
Slide 15: Accelerated Debt Reduction
Accelerated Debt Reduction £2.5bn debt reduction from net cash flow on 12-month basis Net debt / £2.5bn EBITDA 2.6x £(4.1)bn £(0.7)bn £1.3bn £0.3bn £13.5bn £(0.7)bn £1.2bn £(0.7)bn £0.2bn £11.0bn £10.3bn HY20 EBITDA Disposal of Working Net Capex Tax & Restructuring, Dividend HY21 Foreign HY21 closin
Slide 16: Financial Summary
Financial Summary Creating a stronger platform for growth Robust and reliable Improving results and Continuing to strengthen cash generation supporting investment the balance sheet and supporting shareholder behind the new strategy reduce leverage returns 16 | Interim Results | 18 May 2021
Slide 17: Embedding Our New Strategy
Embedding Our New Strategy Stefan Bomhard 17 |
Slide 18: Positive Start To Embedding New Strategy
Positive Start To Embedding New Strategy Drive value from our broader Progress Update / Agenda market Focus portfolio • Investing in operational levers in Build a on priority priority combustible markets targeted combustible NGP business markets • Resetting to rebuild a Transforming successful NGP b
Slide 19: Stabilising Aggregate Share in Priority Tobacco Markets
Stabilising Aggregate Share in Priority Tobacco Markets Encouraging early progress; more work to do 6 month share Δ +20 bps Aggregate share in priority markets -40 bps +6 bps (MHT) vs -37 bps sply +70 bps Share growth in 3/5 of priority markets +40 bps Initial progress but will take time to address
Slide 20: USA: Remains Highly Attractive with Strong Pricing
USA: Remains Highly Attractive with Strong Pricing Gaining share in cigarettes 12mth MAT share 6mth share Key Activities on Operational Levers +20 bps +20 bps to 9.0% Sales force coverage and effectiveness • Sales force recruitment underway Stable market shares • Detailed analysis of territory/store
Slide 21: USA: Strong Growth in Mass Market Cigar Segment
USA: Strong Growth in Mass Market Cigar Segment Portfolio share gains from both Backwoods and Dutch 12mth MAT share 6mth share Key Activities on Operational Levers +380 bps +570 bps • Strong Backwoods performance driven by: – Recovery following supply constraints +380 bps – Continued activations thr
Slide 22: Germany and Australia: Share Declines Persist
Germany and Australia: Share Declines Persist Taking steps to begin to address challenges -40bps combustible share -240bps combustible share • Share declines will take time to address • Focus on financial delivery has impacted on • Sales force recruitment share performance underway • Strong growth i
Slide 23: UK and Spain: Market Share Improvements
UK and Spain: Market Share Improvements Local jewel and regional focus supporting share growth +70bps combustible share growth +40bps combustible share growth • Share driven by new Embassy • Share supported by increased focus brand approach on Nobel and Fortuna • Embassy trial activities and increas
Slide 24: Our New NGP Strategy
Our New NGP Strategy Clear focused plan to improve performance and returns Imperial NGP Ambition New Strategic Approach Turnaround our US vapour business To build Vapour Core European market focus • a successful NGP business Exit least attractive markets • that plays to our strengths European market
Slide 25: Committed to Harm Reduction: Vapour
Committed to Harm Reduction: Vapour Disciplined investment to support market strategy Market Position Share #4 4% #3 14% Spain USA #2 20% France #2 36% #1 69% UK Source: Market position at MAT brand level. Retail Pod-Mod Share for myblu across UK (ePOS Data Trad. Retail), 25 | Interim Results | 18 M
Slide 26: Committed to Harm Reduction: Vapour, Resetting the Business
Committed to Harm Reduction: Vapour Resetting the business for success Key Activities Resetting to Rebuild • Targeted investment reducing losses • Shares holding up relatively well despite reduced investment • Market exits where business case is limited On track to launch pilot trial • Working on re
Slide 27: Committed to Harm Reduction: Heated Tobacco/OND
Committed to Harm Reduction: Heated Tobacco/OND Creating platforms for future growth Heated Tobacco Oral Nicotine Resetting to Rebuild Leveraging existing market strengths • Announced exit from Japan – lacked the • Demand for modern oral nicotine route to market scale for it to be successful continu
Slide 28: Adopting New Ways of Working to Deliver our Strategy
Adopting New Ways of Working to Deliver our Strategy Progress against our three critical enablers Drive value from our broader market Focus portfolio • Clear plans to change our ways Build a on priority combustible targeted of working and culture NGP business markets Transforming • Consumer-centric
Slide 29: Becoming truly consumer centric
Progress against our critical enablers Becoming truly consumer centric Consumer at the Centre of the Business • Key business decisions grounded on consumer insights and data • Appointed Andy Dasgupta as Chief Consumer Officer (CCO) • Strengthening marketing, brand and portfolio management capabiliti
Slide 30: Performance-based Culture and Capabilities
Progress Against Critical Enablers Supporting our culture change programme Performance-based Culture and Capabilities • New incentive arrangements in place – Greater alignment on Group objectives – 80% of bonus – Aggregate priority market share metrics – Revised LTIP metrics • Attracting top talent
Slide 31: Simplified and Efficient Operations
Progress Against Critical Enablers Aligning our organisation with the strategy Simplified and Efficient Operations Operating principles • Initial focus on customer/consumer-facing areas Consumer centric • Simplified sales and marketing organisation Allocating resource to priority – Streamlined marke
Slide 32: FY21 Outlook: On Track to Meet Full Year Expectations
FY21 Outlook: On Track to Meet Full Year Expectations • COVID-19 continues to impose restrictions and influence buying patterns • Duty free unlikely to recover materially this year Tobacco • Market size benefits now lapping stronger comparator and begin to unwind • One-off benefits in stock profits
Slide 33: Priorities for 2021
Priorities for 2021 Embedding our new strategy Stepping up in priority markets Resetting NGP • Continued disciplined • Continue rigorous performance investment approach management • Prepare for trial market • Invest in operational levers launches New ways of working Capital discipline • Focused on c
Slide 34: Appendices
Appendices
Slide 35: Strengthened management team
Strengthened management team Stefan Bomhard Lukas Paravicini Dominic Brisby Joerg Biebernick Division Director, Americas, Chief Executive Officer Chief Financial Officer Division Director, Europe Africa, Asia & Australasia Murray McGowan Javier Huerta Andy Dasgupta Group Strategy & Alison Clarke Gro
Slide 36: Sustainable Governance
Sustainable Governance • Clear sustainability strategy with Chairman leading ESG Committee • ESG priorities aligned with our new business strategy • Priorities aligned to four UN Sustainability Development Goals (SDGs) – ‘A’ rating for climate change – Scope 1, 2 and 3 (supply chain) commitments app
Slide 37: Appendices: Group financials
Appendices Group financials 37 | Interim Results | 18 May 2021
Slide 38: Group Adjusted Results
Group Adjusted Results Constant Constant Premium HY20 excl. Foreign Currency Currency HY20 Cigars divestment Exchange Growth HY21 Actual ∆ ∆ Tobacco net revenue £m 3,509 (103) 3,406 (38) 108 3,476 2.1% 3.2% NGP net revenue £m 83 - 83 (2) 14 95 14.5% 16.0% Tobacco & NGP Operating profit £m 1,383 (9)
Slide 39: Group Adjusted Results
Group Adjusted Results HY21 HY20 Group reported adjusted operating profit £m 1,589 1,469 Adjusted net finance costs £m (206) (210) Share of profit of JVs £m 8 20 Adjusted profit before tax £m 1,391 1,279 Adjusted tax rate % 23.0 20.7 Reported adjusted EPS pence 107.6 103.0 DPS pence 42.1 41.7 Cash c
Slide 40: Reconciliation: Reported To Adjusted
Reconciliation: Reported To Adjusted Fair value Post Adj. attributable Amort. of Profit on Fair value (gains) / losses employment Tax on to £m Reported acquired Rest. disposal of Excise tax adj. of loan on financial net financing unrecognised non-controlling Adjusted (unless otherwise stated) HY21 i
Slide 41: Income Statement
Income Statement £m (unless otherwise stated) HY21 HY20 Revenue 15,568 14,672 Adjusted operating profit 1,589 1,469 Acquisition and disposal costs - (14) Amortisation and impairment of acquired intangibles (211) (436) Restructuring costs (40) (94) Excise tax provision 1 23 Profit on disposal of subs
Slide 42: Balance Sheet
Balance Sheet HY20 £m HY21 Reclassified Non-current assets: tangible 3,954 4,686 intangible 16,753 18,246 Current assets: inventories 4,575 5,101 other 3,850 4,876 Current liabilities (11,088) (13,256) Non-current liabilities (13,016) (14,761) Net assets 5,028 4,892 42 | Interim Results | 18 May 202
Slide 43: Cash Flow
Cash Flow £m HY21 HY20 Cash flows from operating activities pre tax 272 381 Tax paid (431) (254) Cash flows from operating activities (159) 127 Net capex (61) (165) Purchase of businesses / brands - (146) Repurchase of shares - (92) Net proceeds from sale of subsidiaries 626 - Dividends paid (inc. m
Slide 44: 12-Month Cash Conversion
12-Month Cash Conversion £m (unless otherwise stated) HY21 HY20 Net cash flow from operating activities 3,744 3,415 Tax 745 528 Net capex (170) (372) Restructuring cash spend 118 141 Cash flow post capex pre interest and tax 4,437 3,712 Adjusted operating profit 3,647 3,598 Cash conversion (%) 122 1
Slide 45: Net Finance Costs
Net Finance Costs £m HY21 HY20 Net finance (income)/costs (414) 160 Adjusted for: - interest income on net defined benefit assets 45 49 - interest cost on net defined benefit liabilities (44) (52) - fair value & exchange gains on financial instruments 619 53 Adjusted net finance costs 206 210 45 | I
Slide 46: Net Debt Reconciliation
Net Debt Reconciliation Reported Accrued Fair value of Lease Adjusted £m HY21 interest derivatives Liabilities HY21 Opening net debt (11,141) 156 387 299 (10,299) Free cash flow 151 151 Dividends (969) (969) Lease liabilities paid (20) (30) (50) Accretion of interest 70 (75) (5) Change in fair value
Slide 47: Foreign Exchange
Foreign Exchange Average Closing HY20 HY21 ∆ HY20 HY21 ∆ USD $ 1.284 1.350 5.1% 1.236 1.386 12.1% EURO € 1.162 1.125 -3.2% 1.128 1.165 3.3% AUD $ 1.915 1.796 -6.2% 2.027 1.799 -11.2% Russian Rouble 83.689 101.623 21.4% 96.964 103.213 6.4% 47 | Interim Results | 18 May 2021
Slide 48: Foreign Currency: Divisional currency exposure
Foreign Currency Divisional currency exposure Approximate weight of EUR / currency in Tobacco Net EUR Other Revenue GBP £ Linked USD $ AUD $ Currencies Other includes €0.01 (1 cent) movement in the € Euro has c. £12m impact on net Europe 20% 65% 15% Polish Zloty revenue. Americas 100% $0.01 (1 cent)
Slide 49: Divisional Market Share
Divisional Market Share MAT market share data HY21 HY20 Europe 19.5% 19.3% +20 bps Americas 9.0% 8.8% +20 bps AAA 11.1% 10.4% +90 bps Total Group 14.0% 13.6% +40 bps Market Share Calculation Market share is presented as a 12 month average (MAT). Aggregate market share is a weighted average across
Slide 50: HY20 Results Pro-forma
HY20 Results Pro-forma Removing the impact of the premium cigar divestment HY20 Premium HY20 Reported Cigars Restated Volume (Bn SE) 114.6 (0.1) 114.5 Tobacco net revenue (£m) 3,509 (103) 3,406 Adjusted operating profit (£m) 1,469 (9) 1,460 Share of JV profits (£m) 20 (21) (1) Adjusted Profit before
Slide 51: FY20 Results Pro-forma
FY20 Results Pro-forma Removing the impact of the premium cigar divestment FY20 Premium FY20 Reported Cigars Restated Volume (Bn SE) 239.1 (0.3) 238.8 Tobacco net revenue (£m) 7,784 (247) 7,537 Adjusted operating profit (£m) 3,527 (31) 3,496 Share of JV profits (£m) 45 (44) 1 Adjusted Profit before
Slide 52: Settlement Schedule: Premium cigar divestment proceeds
Settlement Schedule Premium cigar divestment proceeds Settlement schedule EUR (m) 24th September 2020 91.7 7th October 2020 85.7 28th October 2020 640.6 29th April 2021 250.0 29th October 2021 88.0 To be confirmed on transfer of Dominican Republic facility 69.0 Total consideration 1,225.0 52 | Inter
Slide 53: FY21 Guidance: Other financial items
FY21 Guidance Other financial items Impact of premium cigar divestment • EPS dilution of 2.8% on FY20 (see slide 18 for full pro-forma) Financing & Cost of Debt • Finance charge for FY21 expected to be similar to FY20 Tax Rate • Expected to be c. 23% Capex • Expect similar level of net capex spend y
Slide 54: Appendices: Financing
Appendices Financing 54 | Interim Results | 18 May 2021
Slide 55: Committed Financing Outstanding
Financial profile 31 March 2020 Interest Split Currency Split (adjusted) Committed Funding Split 37% Fixed 33% 25% Bonds EUR Floating USD Bank 63% 67% 75% Committed Financing Outstanding (£m) 16,000 14,000 12,000 Bond Issues 10,000 Bank Facilities 8,000 6,000 4,000 £3.8bn headroom against facilities
Slide 56: Committed bank facilities 31 March 2021
Committed bank facilities 31 March 2021 Amount Description Maturity date (EUR m) £m equiv. Committed 3-year Revolving Credit Facility Extending* 30 March 2024 3,316 2,826 Non-Extending 30 September 2023 184 157 Committed 1.5-year Revolving Credit Facilities EUR 300m 31 October 2021 300 256 EUR 300m
Slide 57: Bond issues 31 March 2021
Bond issues 31 March 2021 Currency Amount Issue Maturity of issue (ccy m) Issuer Coupon Date Date £m equiv. Margin* EUR 500 Imperial Brands Finance PLC 0.50% Jan-17 Jul-21** 426 0.70% GBP 1,000 Imperial Brands Finance PLC 9.00% Feb-09 Feb-22 1,016 4.83% USD 1,250 Imperial Brands Finance PLC 3.75% Ju