Imperial Brands PLC · LSE:IMB
Imperial Brands — Imperial Tobacco Group — H1 2007 Earnings Presentation
35 slides from Imperial Brands's earnings presentation, May 1, 2007
Slide 1: Interim Results 1 May 2007
Interim Results 1 May 2007 Imperial Tobacco Group PLC
Slide 2: Presenters
Iain Napier Chairman Gareth G th D Davis i Chief Executive Bob Dyrbus Finance Director
Slide 3: Results Summary
Results Summary Cigarette volumes up 5% Revenue (less duty) up 1% to £1,514m Profit from operations up 7% to £663m EPS up 13% to 61.4p DPS up 14% to 21.0p Note: results are adjusted and are reported before restructuring costs, retirement benefit net finance income and certain fair value ch
Slide 4: Building on Our Growth Record
Building on Our Growth Record HY07 EPS+13% PFO CAGR +15% 1600 120 EPS CAGR +15% adjusted profit ffrom operations (£m) DPS CAGR +15% 1400 100 1200 PS & DPS r share) 80 1000 adjusted EP (pence per 60 800 600 40 400 20 200 0 0 97 98 99 00 01 02 03 04 05 06 EPS DPS PFO Note: 1997-2004 stated under UK GA
Slide 5: Operational Summary
Operational Summary Continued cigarette volume growth Strong brand performances Expanding geographic footprint - Commonwealth Brands - Davidoff launches Increased Group margin Adjusted tax rate reduction 5
Slide 6: Approach to Altadis
Approach to Altadis €47 per share; full and fair value Continue to seek limited information Wish to progress constructive dialogue Seeking a recommendation Recent engagement on Altadis’ new financial targets - still require further information to potentially reassess value Disciplined ap
Slide 7: Building on our Successes
Building on our Successes cigarette volume development FY96: 39bn sticks FY06: proforma 201bn sticks* 7% 12% 21% 10% 79% 10% 2% 8% 3% 7% 9% 6% 4% 11% 11% UK International UK Germany Spain Other RoWE Poland Russia Ukraine Caucasus Africa/ME Asia Pacific Aus/NZ Other RoW Americas Note: *including Comm
Slide 8: Bob Dyrbus, Finance Director
Bob Dyrbus Finance Director 8
Slide 9: Group Results
Group Results £m *Adjusted % As Reported HY07 HY06 Change HY07 Revenue less duty 1,514 1,496 +1 1,514 Profit from operations 663 618 +7 658 Operating margin % 43.8 41.3 43.5 Profit before tax 557 529 +5 566 Tax rate % 25.0 26.8 24.9 EPS 61.4p 54.4p +13 62.4 DPS 21.0p 18.5p +14 Note: *results are adj
Slide 10: Foreign Exchange Impact
Foreign Exchange Impact € and US$ weakness Adjusted profit from operations impact c.£16m - Germany -£2m - Rest R t off Western W t Europe E -£4m £4 - Rest of the World -£10m Interest £1m benefit Adjusted EPS reduced by 1.6p 10
Slide 11: Regional Results: UK and Germany
Regional Results UK and Germany UK Germany Revenue *Profit from Revenue *Profit from £m less Duty Operations less Duty Operations HY07 442 279 255 117 HY06 395 233 280** 129** Market Dynamics Market Dynamics - stable cigarette volumes - Singles migration ongoing - growing fine cut tobacco - growing
Slide 12: Regional Results: Rest of W Europe & Rest of World
Regional Results Rest of W Europe & Rest of World Rest of Western Europe Rest of the World Revenue *Profit from Revenue *Profit from £m less Duty Operations less Duty Operations HY07 286 142 531 125 HY06 298 148 523** 108** Market Dynamics Market Dynamics - improving pricing - growth in developing m
Slide 13: Net Cash Flow (1)
Net Cash Flow (1) HY07 HY06 Net cash flow from operating activities 253 358 Tax 151 110 Net capex (includes software) (46) (22) Cash flow after capex before interest & tax 358 446 Adjusted profit from operations 663 618 Cash conversion 54% 72% Working capital outflow of £278m - higher stocks and d
Slide 14: Net Cash Flow (2)
Net Cash Flow (2) Gross capex £47m (HY06: £34m) Net interest paid £46m (HY06: £33m) Tax paid £151m (HY06: £110m) Share buybacks £105m* (HY06: £296m*) - 7.1% of issued shares held in treasury - programme suspended on 8 Feb ‘07 Note: *including transaction costs 14
Slide 15: Net Debt and Finance Costs
Net Debt and Finance Costs Adjusted closing net debt £4.1bn (HY06: £3.7bn) - Davidoff acquisition, share buybacks Adjusted average net debt £3.9bn (HY06: 3.4bn) Average all in cost of debt 5 5.4% 4% (HY06: 5.3%) 5 3%) Adjusted net interest cost £106m (HY06: £89m) Other finance costs: net b
Slide 16: Financial Summary
Financial Summary strong financial performance Increasing revenues, profits & margins Effective cash management - adjusted tax rate down to 25% - share buybacks - value creating acquisitions 16
Slide 17: Gareth Davis, Chief Executive
Gareth Davis Chief Executive 17
Slide 18: Operational Highlights
Operational Highlights Cigarette volumes up 5% Strong growth of key brands - Davidoff up 10% - West up 14% - JPS up 25% Cigarette share gains in most markets Group operating margin improved to 43.8% Productivity gains and reduced unit costs 18
Slide 19: Rest of the World: Regional Volume Growth
Rest of the World regional volume growth Rest of the World cigarette volumes up 7% - Asia up 10% - Central Europe up 15% - Eastern Europe up 8% - Africa down 2% - impacted by manufacturing contracts - Davidoff up 12% 19
Slide 20: Rest of the World: Asia and Australasia
Rest of the World Asia and Australasia Asia: growth in developing markets Taiwan share at 12.7%; West growing Vietnam share up to 10.7% 20% volume growth in Laos Australasia: resilience in regulated markets Cigarette shares broadly stable Brandon share growth in Australia Note: Imperial es
Slide 21: Rest of the World: Central and Eastern Europe
Rest of the World Central and Eastern Europe Central Europe: success of value brands Slovakia: Golden Gate share almost doubled to 21.7% Poland: West grown to 4.3% Czech: strong performance from Moon 63.2 Austria: JPS driving growth %c cigarette market share Eastern Europe: premium & value b
Slide 22: Rest of the World: Africa & Middle East
Rest of the World Africa & Middle East Africa: share gains in key markets Strong local brands: Mustang, Good Look and Fine Ongoing expansion into neighbouring markets Co-operation agreement with JTI in Senegal Middle East: gains across region Davidoff volumes up 25% 92.9 * 89.2 11.9 83.7 * %
Slide 23: Focus on the Americas
Focus on the Americas Commonwealth Brands acquired for US$1.9bn - completion on 2 April 2007 US update - Commonwealth HY07 US GAAP EBITDA up 11% - launch of Tuscany in May - MSA application progressing Davidoff launches - Mexico: encouraging early performance - Canada: launched in April 23
Slide 24: Rest of Western Europe: Regional Dynamics
Rest of Western Europe regional dynamics Cigarette market volumes down 1% Fine cut tobacco market volumes up 2% Improved pricing Travel retail volume weaker Challenging regulatory environment - SiPPs and PHWs Note: Imperial estimates 24
Slide 25: Rest of Western Europe: Further Cigarette Share Gains
Rest of Western Europe further cigarette share gains Volumes impacted by NL trade stocks & travel retail - underlying growth +4% Ireland: John Player family share up to 19.2% JPS driving share gains 26.6 - Netherlands, France & Portugal Belgium: recent JPS family launch % market share Gree
Slide 26: Rest of Western Europe: Fine Cut Tobacco Highlights
Rest of Western Europe fine cut tobacco highlights Competitive environment - value and “cigarette” branded growth - strong premium brand positions Continuing brand initiatives - Belgium: Bastos & JPS - Spain: JPS Halfzware - Italy: Peter Stuyvesant make your own Netherlands: 50.6% share; Zilve
Slide 27: Germany: Market Dynamics
Germany market dynamics Annual Market Size 160 Overall market decline 7% 135 140 bn cigarette equivalents 126 - cigarette up 2% 9 13 120 36 34 - fine cut tobacco down 31% 27 100 12 12 2 80 - eco-cigarillos up 72% to 4.6bn 60 Value FMC up at 17.9% 90 78 40 76 PL FMC down to 13.8% 20 0 MPI of
Slide 28: Germany: Managing Singles Migration
Germany managing Singles migration Cigarette share up to 21.2% (HY06: 20.5%) - JPS continued growth to 6.0% - West at 7.4% - Davidoff broadly stable at 1.0% OTP share at 18.9% (HY06: 20.6%) - traditional fine cut tobacco share up at 19.1% - Single Tobacco at 35.2% of segment - Quickies XL launch
Slide 29: Singles Migration
Singles Migration ongoing transition Duty Paid Duty Paid OTP Cigarette 55% 20% Low Price Make Your Own Branded Traditional Single Tobacco Private Label Roll Your Own Non-Duty Traditional Paid Eco Cigarillos Cigarette Quickies XL 25% Note: Imperial estimates and definitions; *six months to 31 March 2
Slide 30: UK: Market Dynamics
UK market dynamics Cigarette market broadly stable at 48.2bn Cigarette downtrading continues Fine cut tobacco market up 8% at 3,350t Manufacturer’s price increase of 10p in January Tax increase of 11p in March Introduction of SiPPs bans in 2007 - Wales (2 Apr), N.I. (30 Apr), England (1
Slide 31: UK: Strong Cigarette Performance
UK strong cigarette performance Cigarette share up to 46.4% (HY06: 45.2%) - L&B: increased market leadership to 16.7% - Richmond: stable No.2 at 15.5% - Windsor Blue: 2.4% share since 2006 national launch Fine cut tobacco share at 64.0% (HY06: 65.5%) - Golden Virginia at 48.4% - Drum broadly sta
Slide 32: Manufacturing
Manufacturing Productivity up 7% Unit costs down - cigarette -4%; fine cut tobacco -11% Reduction in blends of 4% Taiwan factory - cost £45m; annual savings c.£20m from 2010 Liverpool and Lahr factory closures Ongoing annual savings of c.£30m 32
Slide 33: Second Half Outlook
Second Half Outlook UK Continue to benefit from strong portfolio Germany Capitalise on Singles migration Rest of Western Europe Further cigarette share gains Building on fine cut tobacco initiatives Rest of the World Ongoing market development Integration of Commonwealth Brands 33
Slide 34: Focused on Sustainable Growth
Focused on Sustainable Growth Sales Cash Cost focus development management Brands and products Optimising cost base Working capital focus Trade marketing excellence Business simplification Tax efficiency Pricing potential Efficiency improvements Liquidity management Effective cash allocation Acquisi
Slide 35: Interim Results 1 May 2007
Interim Results 1 May 2007 www.imperial-tobacco.com
Imperial Tobacco Group — H1 2007 Earnings Presentation on 6ix