Imperial Brands Plc · LSE:IMB
Imperial Brands — Investor Day (January 2021)
97 slides from Imperial Brands's investor day presentation, Jan 27, 2021
Slide 1: Our Transformation to Unlock Value
Our Transformation to Unlock Value Capital Markets Event 27 January 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: Driving change to strengthen performance
Driving change to strengthen performance Introduction from Chair • Decisive Board action to strengthen leadership capabilities and performance • Three Non-Executive hires with deep experience: – Pierre-Jean Sivignon – Finance; retail/technology – Bob Kunze-Concewitz – CEO; consumer goods – Alan John
Slide 4: Transforming our Business
Summary: Strategy Review & Priority Areas Transforming 14:00 Stefan Bomhard – Chief Executive our Business Combustibles: Driving Value from our Core Business Stefan Bomhard; Joerg Biebernick (Europe); Dominic Brisby (AAAA) 14:55 10-minute break NGP: Resetting our Strategy Murray McGowan – Group Stra
Slide 5: Strengthened management team
Strengthened management team Stefan Bomhard Oliver Tant Dominic Brisby Joerg Biebernick Division Director, Americas, Chief Executive Officer Chief Financial Officer Division Director, Europe Africa, Asia & Australasia Murray McGowan Javier Huerta TBC Group Strategy & Alison Clarke Group Manufacturin
Slide 6: We are Imperial Brands PLC
We are Imperial Brands PLC 120 A global markets Net revenue Adjusted consumer operating margin £8bn 44% business 27,500 employees 6|
Slide 7: Transforming Imperial Brands: a clear and compelling strategy
Transforming Imperial Brands: a clear and compelling strategy to strengthen performance Greater focus on priority tobacco markets with clear operational improvement drivers More disciplined execution in NGP; category strategy tailored to key markets Consumer-centric and data-led approach strengthens
Slide 8: Strategic review: strategy defined by Imperial for Imperial
Strategic review: strategy defined by Imperial for Imperial Rigorous Approach • Fresh perspectives and expertise • Fact-based (market, consumer, competitor) Clear areas of future focus where we have a Guiding Principles right to win • Developed with broader leadership team • Leveraging our stronghol
Slide 9: Strategic review: solid foundations for the future
Strategic review: solid foundations for the future Solid share positions Encouraging brand Competitive Solid customer in Europe and US; performances despite manufacturing and partnerships as #2 or leadership in several limited investment; supply chain #3 in market African markets strong local jewels
Slide 10: Strategic review: areas for improvement
Strategic review: areas for improvement Tobacco Delivery NGP Underperformance • Share performance has been poor • Scaling of vapour too rapid and too broad • Insufficient focus on markets that drive • Lack of consumer validation greatest value • Investment decisions lacked robust data • Distracted b
Slide 11: Five-year plan overview: three strategic pillars
Five-year plan overview: compelling plan centred around three strategic pillars Focus on Priority Drive Value From Our Build A Targeted NGP Combustible Markets Broader Market Portfolio Business • Target increased investment in • Efficiently manage broader • Focus on heated tobacco in our most appeal
Slide 12: Five-year plan overview: new ways of working
Five-year plan overview: new ways of working to enable plan delivery • Strengthen critical capabilities: marketing, innovation, digital and consumer Consumer at the Centre of insight our Business • Leverage relevant brand portfolio to address key consumer needs • Embed fact-based and collaborative w
Slide 13: Opportunity to differentiate our approach
Opportunity to differentiate our approach Focus on selected battlegrounds More targeted with our investment A strong retail partner Execute with a clear challenger Relentlessly consumer focused mindset A differentiated fast follower Faster, more agile decision-making 13 | Capital Markets Day | 27 Ja
Slide 14: What our strategy will deliver
What our strategy will deliver Clearly defined New ways of Stronger A targeted and role for the working and business in our more disciplined broader market culture that five priority NGP business portfolio to reinforce focus on combustible committed to optimise value consumer and markets harm reduct
Slide 15: Clear sustainability agenda aligned with our strategy
Clear sustainability agenda aligned with our strategy Consumer Health Climate and Energy Farmer Livelihoods and Welfare Human Rights – Modern Slavery Waste 15 | Capital Markets Day | 27 January 2021
Slide 16: ESG Focus for FY21
ESG Focus for FY21 1 Greater transparency on performance measurement 2 Additional KPIs for priority ESG issues 3 Consumer Health KPIs in FY22 following business reset 4 Diversity and Inclusion underpins new culture 5 ESG webinars: climate and energy later this year 16 |
Slide 17: Climate and Energy
Climate and Energy 1 Long-term Science Based Targets 2 Implementing TFCD recommendations 3 CDP A rating retained for focus on climate change 4 CDP A- rating for water security 5 New KPI: renewable as % of total direct energy use 17 |
Slide 18: Combustibles: Driving Value from our Core Business
Combustibles Driving Value from our Core Business 18 |
Slide 19: Combustibles: value creation model remains strong
Combustibles: value creation model remains strong with reliable profit growth and high cash returns • Tobacco value creation model still robust • Affordability is good supporting continued pricing power • Strong brand loyalty • Regulatory risks ongoing but are manageable • Transition to NGP is happe
Slide 20: Combustibles remain attractive going forward
Combustibles remain attractive going forward 2020-25 Combustibles Outlook for Key Geographies* Volume Outlook* Pricing Outlook* Value Outlook* USA - 3-4% + 4-5% + 0-1% Europe¹ - 2-3% + 3-4% + 0-1% Australia - 4-5% 0% - 4-5% Africa² + 1-2% + 1-2% + 2-3% * 2020-25 Forecasted CAGR for FMC, FCT and Ciga
Slide 21: High combustible affordability supports continued pricing
High combustible affordability across Imperial markets supports continued pricing Imperial significant presence Affordability for 20 largest countries¹ (>5% volume share - 2019) (# Packs earned per hour of work at average salary) Imperial top 5 markets 4.6 3.9 3.9 3.5 3.3 3.0 2.8 2.6 2.5 2.2 2.2 2.0
Slide 22: Disappointing historic performance: marginal revenue and profit growth
But disappointing historic performance: marginal revenue and profit growth Historically achieved marginal revenue and profit growth in combustibles… …whilst losing share to competitors …and with limited investment in our key markets and brands …driven by a lack of active performance management and a
Slide 23: Market share losses across nearly all larger markets
Market share losses across nearly all larger markets IMB’s FMC Market Share Change, Top 5 Markets, FY17-20 Share Change (%pts) + 0.1%pts - 2.3%pts - 1.0%pts - 1.3%pts - 0.9%pts Source: Imperial Internal Estimate Volume market share 23 | Capital Markets Day | 27 January 2021
Slide 24: Multiple reasons for historic share losses
Multiple reasons for historic share losses: examples • Under-investment has limited top 3 brand building (JPS, West, Gauloises) • Limited penetration in growing channels and regions • Excessive pricing ahead of competition • Limited brand investment across the portfolio • Prioritised profit growth o
Slide 25: Detailed review informed our new strategy
Detailed review informed our new strategy Reviewed all markets with a deep-dive on our largest markets Looked at evolution and performance of all major brands and price tiers Analysed different channels and regions within markets Assessed consumer trends and our competitive position within markets E
Slide 26: Summary: combustibles approach and ambition
Summary: combustibles approach and ambition Our new approach Clarity on strategic choices Improved Operational Excellence Increased focus on priority markets Upgraded competitor and consumer insights Consumer-centric and data-led investment in brands Disciplined investment in key operational levers
Slide 27: New approach to brand portfolio management
New approach to brand portfolio management Move away from investment focus on international brands towards a more holistic brand portfolio approach… … with a reinforced focus on serving consumers with our full portfolio – a mixture of global and local brands… … better leveraging our strong and margi
Slide 28: Increase focus on priority markets; driving value from others
Summary: increase focus on priority markets; driving value from others Manage Broader Market Portfolio to Focus on Priority Combustible Markets Optimise Value Creation Other Rest of European Africa World Markets Profit c. 72% c. 15% c. 8% c. 5% contribution* * % of FY20 Tobacco operating profit, exc
Slide 29: Five priority markets account for 72% of operating profit
Five priority markets account for 72% of operating profit % of FY20 Market Gross Margin/’000 SE Imperial Share3 Combustible OP Market Size¹ Value Outlook² (Relative to Imperial Average) USA £26.1bn + 0-1% c.9% High c.49% Germany £4.7bn + 1-2% c.22% High UK £1.9bn - 2-3% c.41% High Spain c.23% £1.2bn
Slide 30: Priority markets: six operational levers
Priority markets: six operational levers to improve combustibles performance Operational levers to improve combustible performance 1 Increase participation in sub-premium FMC 2 Drive and rejuvenate local jewel brands We identified 25+ growth initiatives 3 Optimise our approach to the value segment a
Slide 31: US deep dive: attractive market environment
US deep dive: attractive market environment with strong Imperial positioning Strong Imperial portfolio across all products and Attractive market environment price tiers FMC (c.80% OP) MMC (c.20% OP) • 2nd largest combustibles market Traditional • High affordability, strong Premium headroom for conti
Slide 32: US deep dive: growth strategy
US deep dive: growth strategy focused on key brands and route to market Example Levers Grow share in MMC with Backwoods Increase participation in 1 sub-premium • Step up proven advertising approach • Multiply trial opportunities (e.g., smaller pack sizes) Drive and rejuvenate local jewel 2 brands
Slide 33: US deep dive: Backwoods to expand availability
US deep dive: Backwoods to expand availability by region and channel Regional expansion Planned Activation Booths at age-verified Festivals, festivals and music events music, and Co-branded comedy concerts events Brand Referenced by major music artists Apparel influencers featured by and product cel
Slide 34: US deep dive: driving salesforce coverage and effectiveness
US deep dive: driving salesforce coverage and effectiveness Current salesforce vs. competition Market share strongly correlated with no. of sales reps visits Size of Field Sales Force by Company (# reps) IMB Market Share by Frequency of Salesforce Visits (% FMC Share in Segment, visit frequency per
Slide 35: Australia deep dive: growth initiatives
Australia deep dive: growth initiatives to somewhat reduce structural market decline Example Levers #2 position in challenging market environment 4 Maximise the potential of FCT category Drive Growth in FCT • Highly regulated and heavily taxed • Review pricing and positioning of FCT portfolio • Lo
Slide 36: Germany deep dive: attractive market environment
Germany deep dive: attractive market environment with strong Imperial position Strong Imperial Positioning across Attractive market environment FMC and FCT FMC (c.85% OP) FCT (c.15% OP) • Large profit pool with relatively light regulation • High affordability and stable consumer base • Attractive ma
Slide 37: Germany deep dive: brand equity and sales excellence
Germany deep dive: growth focused on brand equity and sales excellence Example Levers Increase participation in Invest in Key Growth Brands 1 sub-premium • Invest in driving target-relevant awareness for key growth brands like JPS 2 Drive and rejuvenate local jewel brands • Rejuvenate JPS as leading
Slide 38: Germany deep dive: rejuvenate JPS
Germany deep dive: rejuvenate JPS as leading brand to recruit attractive demographics JPS Poorly Positioned today Select Examples of Planned Changes Aided Brand Awareness, Enhance • Older age groups with Optimise logo re-design and increase communication to FY19 Q4 (%) limited growth potential Aware
Slide 39: Germany deep dive: enhance retailer partnerships
Germany deep dive: enhance retailer partnerships to gain efficiency National roll-out over Enhanced partnerships with retailers drove share gains next six months Imperial Market Share in Test Area – Before vs. After Initiative (%) Engaging retailer staff to 16% connect with adult smokers PoS 1 +39%
Slide 40: Germany deep dive: improve performance in East Germany
Germany deep dive: improve performance in East Germany - historically under-developed region … while East is showing share Recent share gain suggests further Low Share in East Germany… growth… uplift is possible Imperial Share by Nielsen Region Market Split by Region Share change FY20 FMC Activation
Slide 41: UK deep dive: strategic initiatives offset headwind
UK deep dive: strategic initiatives expected to offset market headwind Example Levers Strong #2 in challenging market Drive performance in under environment 5 -penetrated channels & regions • Slight market value decline expected as price Unlock further share in the South increases only partially o
Slide 42: Spain deep dive: drive growth in a stable market
Spain deep dive: drive growth in a stable market environment Example Levers #2 position in stable market Drive and rejuvenate local 2 jewel brands environment Invest behind local jewels • Increase focus on local brands, e.g., Nobel, • Stable market – tax driven price increases going which has sign
Slide 43: Priority markets: six operational levers
Priority markets: six operational levers to improve combustibles performance 1 Increase participation in sub-premium FMC 2 Drive and rejuvenate local jewel brands We will 3 Optimise our approach to the value segment share frequent performance updates on FCT 4 Maximise the potential of FCT category p
Slide 44: Broader market portfolio: opportunities for attractive returns
Broader market portfolio: opportunities to deliver attractive returns Small compared to top five priority markets but with attractive margins Limited investment and resource requirements Benefit from leveraging scale in manufacturing and distribution Selective attractive leadership positions (e.g.,
Slide 45: Africa: strong platform for future growth
Africa: strong platform for future growth Reappraised as a platform for IMB #1 in several Our new approach future growth sizeable markets* • Accounts c. 8% of operating profit • Leverage strong local and Algeria 29% • Some further pricing potential global brands to drive Morocco 57% pricing • Strong
Slide 46: Other European markets: clear plans to optimise value
Other European markets: clear plans to optimise value creation Imperial Market Market Outlook Position (Value)* Our new approach • Define clear role for individual Eastern Europe (Top 5 markets)¹ #4 + 3-4% markets, based on our starting point and market outlook • Adopt focused approach, with targete
Slide 47: Potential to selectively trim our tail
Potential to selectively trim our tail Tail Markets Today : Future Value Optimisation An Attractive Part of our Business c. 80 markets with operating profit less than £25m¹ per market Drive to run more efficiently whilst still Attractive gross margins realising significant value for Imperial Account
Slide 48: Summary: combustibles approach and ambition
Summary: combustibles approach and ambition Our new approach Clarity on strategic choices Improved Operational Excellence Increased focus on priority markets Upgraded competitor and consumer insights Consumer-centric and data-led investment in brands Disciplined investment in key operational levers
Slide 49: Break
Me IMPERIAL Alf BRANDS -
Slide 50: Next Generation Products
Next Generation Products Resetting Our Strategy Through Focus & Consumer Understanding
Slide 51: Growing demand across all NGP categories
Growing demand across all NGP categories Market Size (NSV) & CAGR, Share of Total, Gross Margin, (%) 2020-25 (£bn, %) 2025 (%) 78 Cigarettes +2% 80% 60 – 65% 87 6 Heated tobacco +15% 11% 70 – 80% 12 3 Closed vapour 5 +13% 4% 45 – 55% 2 Open vapour 4 +8% 3% 20 – 25% 0 Modern oral nicotine 2 +33% 2% 5
Slide 52: High historic NGP growth rates but low penetration
High historic NGP growth rates although with relatively low penetration Historical NGP category growth Mixed category growth Global NGP Market Size (RSV £bn) 25.0 • Whilst high global NGP growth: Open EVP +43% 21.0 5.2 • Historical category penetration has been Closed EVP 4.6 mixed within Imperial’s
Slide 53: Significant uptake of NGP across our major markets
Significant uptake of NGP across our major markets Major Markets by Product Type, 2025F1 (RSV, £bn) EVP HTP FMC 58 23 13 10 3 427 1% 2% 4% 14% 14% 17% 7% 1% 18% <1% 100% 86% 85% 82% 79% 89% USA Germany UK Spain Australia Global NGP Penetration 9% 3% 9% 4% - 7% 2020 (%) Illicit trade NGP NGP Penetrat
Slide 54: Fast growing NGP profit pools
Fast growing NGP profit pools Vapour concentrated in the US Heated Tobacco growing in Europe Closed Vapour GM Potential by Region (£bn, %) Heated Tobacco GM Potential by Region (£bn, %) 2.7 9.4 1.5 4.6 5% Other1 1% Other2 20% 25% Europe 34% APAC 57% 76% North 70% America 63% Europe 43% North 2% Amer
Slide 55: Clear consumer needs for potentially less harmful alternatives
Clear consumer needs for potentially less harmful alternatives Despite clear consumer demand for …there still remains a lack of full potentially less harmful products… consumer satisfaction Top 3 reasons to choose NGPs Top 3 reasons to churn from NGP (% of NGP consumers1, N=919) (% of consumers who
Slide 56: NGP: a growth opportunity for Imperial Brands
NGP: a growth opportunity for Imperial Brands Leveraging our Existing Assets and Capabilities • Growing segment within nicotine consumption • Meeting consumer need for potentially less harmful products • No NGP product fully meets needs of adult smokers today • Opportunity to leverage: – our deep un
Slide 57: Imperial NGP starting point
Imperial NGP starting point Disappointing market performance with primary focus on vapour • Vapour: Historic focus almost entirely on vapour – Good position in Europe, losing share in the US – Product and proposition challenges – Poor return on investments – However, good brand equity and engagement
Slide 58: Detailed review of NGP strategy
Detailed review of NGP strategy Defined clear In-depth analysis ambition to be …and a realistic of consumer the NGP assessment of needs, category challenger with our NGP drivers and increased focus capabilities economics… on heated tobacco Measured and realistic approach to reset our chosen NGP offe
Slide 59: A new approach: realistic ambition with a challenger mindset
A new approach: realistic ambition with a challenger mindset Challenger Mindset Focused category Disciplined and more A differentiated Right ways of working market combinations effective investment fast follower • Significantly increase • Modest investment levels • Invest in markets where • Refine w
Slide 60: Rationale for increasing focus on heated tobacco
Rationale for increasing focus on heated tobacco Market Tailwinds Internal Capabilities Fast-growing, sizeable markets Plays to our strengths • Heated tobacco as single largest NGP category • Leverages existing tobacco expertise, including currently… manufacturing cost efficiency experience and rout
Slide 61: Heated tobacco: positive initial consumer feedback
Heated tobacco: positive initial consumer feedback Promising product Specific target segment • Pulze device Purchase Intent “The device is better, much easier to carry one piece ✓ 20 Consecutive smokes and not having to wait for the battery to recharge. ” 25-30% of existing heated ✓ All-in-one ‘pock
Slide 62: Heated tobacco: our new, focused approach
Heated tobacco: our new, focused approach Realistic approach for our heated tobacco Our Ambition business in our stronghold markets in Reaching a fair market share 1 positioning Re-focus our Europe, where we have a heated tobacco strong combustibles efforts business and good route to market/ retail
Slide 63: Vapour: US expected to remain single largest market
Vapour: US is expected to remain single largest market Closed Vapour Market Size, NSV, in bn GBP Forecast +13% 4.8 7% Other -10% 2020 decline due to EVALI 3.9 and regulatory changes 6% 28% Europe +90% 2.9 3.0 2.6 26% 4% 6% 16% 6% 24% 22% 65% USA 0.8 80% 67% 72% 70% 35% 6% 58% 2017 2019 2020 2021 202
Slide 64: Vapour: clear plan to improve performance in the US
Vapour: clear plan to improve performance in the US Historically disappointing returns Clear ambition to return to share growth • Ineffective, untargeted A&P Spend • Improved product proposition – Lacked clear consumer target • Clearer targeting – Promotions not linked to brand, positioning or – Foc
Slide 65: Vapour: good blu brand foundations in the US
Vapour: good blu brand foundations in the US Considered Awareness Preferred for purchase Bought of brand brand or bought 94% 92% 51% Competitor 1 86% 81% 74% 38% Better ‘early’ conversion – but drop 94% 85% 29% in brand preference, 81% 76% 64% 19% reflecting marginally lower scores on key 93% 80% 31
Slide 66: Vapour: clear strategic market choices globally
Vapour: clear strategic market choices globally • Turnaround our vapour business in the US – Maintain levels of investment at significantly improved returns – Stage-gated approach, with future scale-up dependent on FY22 • Maintain our presence and good share position in core European markets – Learn
Slide 67: Oral nicotine: strong position in Europe
Oral nicotine: strong position in Europe Imperial is well-positioned to maintain Traditional OND is c.90% of oral category category share in Europe c.10 bn • We are the #2 player in traditional OND in c.1-1.3 Modern OND Europe – 20% market share in Sweden – 40% market share in Norway c.9 Traditional
Slide 68: Significant future growth potential from modern oral
Significant future growth potential from modern oral Nordics and Europe comprise half of Strategy for Modern OND focussed on Modern OND market today Europe Imperial Market Share (%) • Continue to drive our OND business in Strong position in selected c.12% Others markets (i.e. c.16% in existing Nordi
Slide 69: Summary: clear plan to enhance our NGP delivery
Summary: clear plan to enhance our NGP delivery • Significantly increasing our focus on heated tobacco Revised category prioritisation • More concentrated market approach to vapour and oral nicotine Limited category market • Selective choice of NGP offering per market based on local combinations con
Slide 70: Ways of Working and Culture
Ways of Working and Culture Transforming our Business
Slide 71: Our three strategic pillars
Our three strategic pillars Drive Value Focus on From Our Build a Priority Broader Targeted NGP Combustible Market Business Markets Portfolio 71 | Capital Markets Day | 27 January 2021
Slide 72: New ways of working build on three critical enablers
New ways of working build on three critical enablers Consumer at the Performance- Simplified and centre of the based culture and efficient operations business capabilities 72 | Capital Markets Day | 27 January 2021
Slide 73: Placing the consumer at the centre of our business
Placing the consumer at the centre of our business From: historical lack of consumer … To: our decisions are consumer centricity… centric • Investment in consumer insight brand • Siloed brand or market-led approach and portfolio management marketing and across our combustibles business innovation ca
Slide 74: Chief Consumer Officer to drive the new agenda
Chief Consumer Officer to drive the new agenda across both combustibles and NGP Consumer and Competitor Marketing, Brand & Portfolio Innovation for Combustibles Insight Management and NGP Enabling markets to make Enhancing our marketing and Delivering a focused pipeline of better, faster decisions b
Slide 75: Examples of culture change underway
Examples of culture change underway 300 CEO Meetings 6,000 Employees 75 | Capital Markets Day | 27 January 2021
Slide 76: Embedding performance-based culture and capabilities
Embedding performance-based culture and capabilities … to embed a performance-based culture Building on current strengths… and capabilities • Manufacturing and Supply Chain • Co-create clear vision and purpose • Customer engagement • Build a challenger mindset • Energised and passionate employees •
Slide 77: Simplified and efficient ways of working
Simplified and efficient ways of working Greater focus on our priority • Ensuring the right level of resource and capabilities across our footprint combustibles markets • Investing behind our most attractive assets Unifying our NGP • Bringing our NGP operations together into a unified, entrepreneuri
Slide 78: Integrated NGP organisation to ensure focus
Integrated NGP organisation to ensure focus Different Business – managed with a clear focus, to drive a new and distinct NGP business within the broader Imperial group Establish Faster Innovation – driving growth with a start-up mindset, enabling integrated agile innovation and development processes
Slide 79: NGP: Leveraging the strengths of wider Imperial set-up
NGP: Leveraging the strengths of wider Imperial set-up Consumer Supply Chain/ Marketing/ Route to R&D Insights Logistics Advertising Market • Will integrate • Combustibles • Clear scale • Will require • In-market across experience and benefits in dedicated digital execution by combustibles and exper
Slide 80: Invest in organisation and capabilities through efficiency
Invest in organisation and capabilities through efficiency Investing in Organisation Funded Through Efficiency and Capabilities • Investing in core capabilities • Through leaner, more agile operations – Sales force: Key Account Annualised net savings Management • Global processes underpinned by of c
Slide 81: Financial Framework
Financial Framework Strengthening the balance sheet and delivering enhanced returns
Slide 82: Investments to support new strategy
Investments to support new strategy Tobacco Investment NGP Investment • Strategic levers in top five markets • Resetting and refocusing investment • Selective increase in brand investment • Market trials for heated tobacco and innovation • Targeted investment in vapour and oral • Targeted expansion
Slide 83: Investment to support new ways of working: savings
Investment to support new ways of working: savings • Simplify organisation to remove duplication • Clarification of accountability and decision rights Cost • Flattened reporting structure to speed up decision making Savings • Creating a leaner, more agile business • Delivering sustainable cost savin
Slide 84: Investment to support new ways of working: restructuring costs
Investment to support new ways of working: restructuring costs • Specific, time-bound restructuring programme to deliver the new ways of working and efficiencies Restructuring • One-off costs of reshaping business to support the new strategy Cash Costs • Programme excludes factory closures • Treated
Slide 85: Delivering a stronger financial outlook
Delivering a stronger financial outlook Phase 1 - Strengthening Phase 2 – Improving Returns FY21 to FY22 FY23 to FY25 • Increased investment in operational • Investment and operational growth drivers improvements enhance financial delivery Strategic • New ways of working deliver efficiencies • Refin
Slide 86: FY21 guidance remains unchanged
FY21 guidance remains unchanged Tobacco • Strong underlying pricing though continued mix headwind; lower stock profits NGP • Action to stabilise business; expect moderated losses will continue • Expect unwind of temporary consumption benefit; more normal tobacco declines COVID-19 • Not expecting sig
Slide 87: Continued strong cash outlook: capital discipline
Continued strong cash outlook: capital discipline will be a key priority Strong cash fundamentals High cash conversion • Business remains highly cash generative • Working capital focus • Low capital intensity • Disciplined capex; net capex below depreciation • Growing adjusted operating cash flow (>
Slide 88: Logista: valuable contribution to Group cash performance
Logista: continuing to deliver valuable contribution to Group cash performance Logista contribution to the Group £0.2bn Operating profit contribution p.a. • 2008: acquired as part of Altadis FY20 daily average working capital £1.9bn benefit • Distributes for the tobacco industry in Spain, France and
Slide 89: Deleverage priority to strengthen investment grade credit rating
Deleverage priority to strengthen investment grade credit rating Historical net debt/EBITDA progress Debt repayment to strengthen balance sheet 3.3x • Accelerate pace of deleverage following limited 3.0x 2.9x 2.9x 2.9x progress in recent years 2.7x • Increase headroom within financial credit metrics
Slide 90: Committed to an investment grade credit rating
Committed to an investment grade credit rating Current credit ratings Benefits of maintaining investment grade Short-term Long-term Better access to capital markets Baa3 - (stable outlook) Established debt investor base A-2 BBB (stable outlook) Lower coupon / interest cost F3 BBB Lower financing fee
Slide 91: Clear capital allocation framework: priorities
Clear capital allocation framework: priorities Strong cash generation Investing in the strategy Strong and efficient balance sheet • Targeted investment in operational levers • Committed to investment grade credit rating • New ways of working to deliver efficiencies • Priority to reduce debt to lowe
Slide 92: Summary
Summary
Slide 93: Our new strategy
Our new strategy Drive value from our broader market Focus portfolio Build a on priority targeted combustible NGP business markets Transforming Imperial Brands Consumer at the centre Simplified and of the efficient business operations Performance -based culture and capabilities 93 | Capital Markets
Slide 94: What our strategy will deliver
What our strategy will deliver Clearly defined New ways of Stronger A targeted and role for the working and business in our more disciplined broader market culture that five priority NGP business portfolio to reinforce focus on combustible committed to optimise value consumer and markets harm reduct
Slide 95: Imperial Brands: an attractive investment case
Imperial Brands: an attractive investment case Clear strategy to rebuild credibility and create value Revitalised tobacco business will be key driver of value creation A disciplined NGP business committed to harm reduction and providing options for growth Self-help initiatives deliver operational im
Slide 96: Questions & Answers
Questions & Answers Capital Markets Event 27 January 2021
Slide 97: Glossary
Glossary AOP Adjusted operating profit which excludes the effects of adjusting items. Further details are provided in note 1 to the Annual Report & Accounts. Constant currency Change at constant currency removes the effect of exchange rate movements on the translation of the results of our overseas