Imperial Brands PLC · LSE:IMB
Imperial Brands — FY2023 Earnings Presentation
50 slides from Imperial Brands's earnings presentation, Nov 14, 2023
Slide 1: Imperial Brands 14 November 2023
IMPERIAL BRANDS 14 NOVEMBER 2023
Slide 2: Disclaimer
Disclaimer Certain statements in this announcement business or other market conditions. announcement should be interpreted to constitute or may constitute forward- These and other factors could adversely mean that the future earnings per share of looking statements. Any statement in this affect the
Slide 3: Agenda
Agenda RESULTS OVERVIEW Stefan Bomhard FINANCIAL REVIEW AND OUTLOOK Lukas Paravicini STRATEGIC AND OPERATIONAL UPDATE Stefan Bomhard Stefan Bomhard Q&A Lukas Paravicini 3 | Full Year Results | 14 November 2023
Slide 4: Strong Progress Against Our Five-Year Plan
Strong Progress Against Our Five-Year Plan DELIVERING ACCELERATION IN ADJUSTED OPERATING PROFIT GROWTH PRIORITY MARKET SHARE STRONG TOBACCO PRICING Investment in top five Strong tobacco price/mix markets has delivered c. 8%; adjusted operating market share gains margins +150 bps* BUILDING NGP MOMENT
Slide 5: 2023 – Successful Year of Delivery
2023 – Successful Year of Delivery BUSINESS PERFORMANCE SUPPORTING INCREASED CAPITAL RETURNS OPERATIONAL FINANCIAL SHAREHOLDER DELIVERY DELIVERY RETURNS TOP FIVE AGGREGATE SHARE TOBACCO & NGP NET REVENUE FY23 DIVIDEND PER SHARE +10 bps +1.4% +4.0% NGP NET REVENUE GROUP AOP FY24 BUYBACK COMMITMENT +2
Slide 6: Lukas Paravicini, CFO
Lukas Paravicini CFO 6 | Full Year Results | 14 November 2023
Slide 7: Improving Financial Delivery
Improving Financial Delivery CAPITAL ALLOCATION POLICY GENERATING STRONG SHAREHOLDER RETURNS TOBACCO & NGP NET REVENUE GROUP AOP ADJUSTED NET DEBT TO EBITDA +1.4% +3.9% 1.9x NGP NET REVENUE ADJUSTED EPS FREE CASH FLOW 26.4% +4.3% £2.4bn Europe NR growth +40.4% £2.3bn capital returns in FY23 Constant
Slide 8: Strong Tobacco Pricing Across Footprint
Strong Tobacco Pricing Across Footprint POSITIVE PRICING MORE THAN OFFSETTING VOLUME PERFORMANCE VOLUME AND PRICE/MIX Net -5% +3% +5% +1% • Strong pricing offsetting Revenue FMC +4% MMC -9% volume headwinds • FY22 volumes down -1.2% 10% 11% 11% 11% • Adverse product mix in Americas: -6% -6% -7% -8%
Slide 9: Improved Adjusted Operating Profit Growth
Improved Adjusted Operating Profit Growth GROWTH THROUGH COMBUSTIBLE PERFORMANCE +3.9% £(5)m £143m £(42)m £43m £3,833m £3,694m £3,689m FY22 AOP Russia FY22 AOP (ex- Tobacco NGP Logista* FY23 AOP Russia) performance losses/ constant investment currency Tobacco AOP margins +150 bps ex Russia * Includi
Slide 10: Operating Profit: Adjusting Items
Operating Profit: Adjusting Items MAINTAINING TRANSPARENT DISCLOSURE Adjustments to reported operating profit FY23 Reported operating profit £3,402m • Amortisation of acquired intangibles Russia, Ukraine & associated markets £4m • Charge in line with ongoing expected amortisation level Amortisation
Slide 11: EPS Delivery in Line With Plan
EPS Delivery in Line With Plan OP AND SHARE BUYBACK OFFSET BY INTEREST, MINORITIES AND TAX 4.3% 5.3% 278.8 276.3 276.4 265.2 264.8 (0.4)p +15.1p (6.6)p (1.9)p (2.0)p +7.0p +2.5p FY22 Russia FY22 Operating Interest Minorities & Tax Number of FY23 Translation FY23 Adjusted Adjusted profit JV shares Ad
Slide 12: On Track With Capital Allocation Priorities
On Track With Capital Allocation Priorities CASH GENERATION UNDERPINS OUR CAPITAL RETURNS RESILIENT CASH DELIVERY DISCIPLINED CAPITAL ALLOCATION CONTINUED HIGH FREE CASH FLOW • Continuing to invest in the business; CASH CONVERSION 1 organic initiatives and M&A in NGP 92% £2.4bn 2 • Maintain leverage
Slide 13: FY24 Outlook
FY24 Outlook IMPROVING RETURNS IN CHALLENGING MACRO ENVIRONMENT Outlook for FY24* • Low-single digit net revenue growth • Adjusted operating profit growth close to middle of mid-single digit range • Benefit of share buyback and profit growth on EPS partially offset by higher interest and tax rate •
Slide 14: Stefan Bomhard, CEO
Stefan Bomhard CEO 14 | Full Year Results | 14 November 2023
Slide 15: 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” Consumer with Purpo
Slide 16: Transforming Imperial Brands
Transforming Imperial Brands LEVERAGING THE CRITICAL ENABLERS TO DRIVE PERFORMANCE CONSUMER AT THE CENTRE PERFORMANCE-BASED SIMPLIFIED AND EFFICIENT OF THE BUSINESS CULTURE OPERATIONS Consumer tracker coverage Global Engagement Score increased 20% 1 ppt above global benchmark £150m of savings delive
Slide 17: Delivering Against Our ESG Priorities
Delivering Against Our ESG Priorities FORGING A PATH TO A HEALTHIER FUTURE Enabled Reduced our Reduced We Recognised Reduced Workforce All factories Consumer direct absolute waste supported by Lost Time Disclosure report monthly Choice emissions in operations more than CDP for a Accidents by Initiat
Slide 18: Stabilising our Priority Market Share
Stabilising our Priority Market Share ACHIEVING OUR OBJECTIVE OF STABILISING MARKET SHARE AGGREGATE WEIGHTED PRIORITY PRIORITY MARKET SHARES MARKET SHARE PERFORMANCE (12 month share Δ) Objective to stabilise +65 bps share performance +35 bps +10 bps -80 bps -2 bps -16 bps -50 bps Average +10 bps FY2
Slide 19: Americas: Delivering Further Cigarette Share Gains
Americas: Delivering Further Cigarette Share Gains STRONG PERFORMANCE IN FMC OFFSET BY MMC CHALLENGES SHARE GAINS AND PRICING IN FMC TRANSITION YEAR FOR MMC • Attractive market; balanced portfolio • Category remains attractive with across focus price segments opportunities for long-term growth • Str
Slide 20: Priority Markets: Strong Pricing Gains
Priority Markets: Strong Pricing Gains FOCUSED ON MANAGING SHARE AND VALUE DELIVERY • Market size affected by -50 bps • Return to pricing in the +10 bps inflation-linked excise increase market • Strong pricing, following strong • Maintaining market share share gains in FY20 – FY22 gains made in FY22
Slide 21: Broader Market Portfolio: Driving Value
Broader Market Portfolio: Driving Value STRATEGIC INITIATIVES ARE DELIVERING A STRONGER PERFORMANCE CENTRAL & AFRICA ASIA, MIDDLE EAST EASTERN EUROPE AND TURKEY NR: +9.9% NR: +4.0% NR: +4.4% • Strong pricing to address • Maintaining strong share • Strong brand portfolio high volume, lower margin pos
Slide 22: Building Momentum in NGP
Building Momentum in NGP ON TRACK WITH OUR FIVE-YEAR STRATEGIC PLAN FY20 FY21 FY22 FY23 FY24-25 Investment reset – Align investment behind Driving growth through Consolidating Consumer validation cutting underperforming new strategy product and market progress as supports further roll-outs investmen
Slide 23: Proving Our Differentiated NGP Approach
Proving Our Differentiated NGP Approach REBOOTED NGP STRATEGY HAS BUILT THE FOUNDATIONS KEY STRATEGIC ACHIEVEMENTS FY23: NGP as a % OF NR BY MARKET Italy 38% Greece 34% • Proving out a cost-effective market entry Austria 26% model as a challenger Portugal 24% Norway 23% • Harnessing the multi-catego
Slide 24: Vapour: Refreshed Product Portfolio
Vapour: Refreshed Product Portfolio GOOD CONSUMER UPTAKE FOLLOWING NEW MARKET LAUNCHES TO DATE FY24 • Developed and launched Blu 2.0 and France UK Spain BLU 2.0 disposable Consolidation in blu bar existing markets • Blu 2.0 Canaries Germany Greece BLU BAR US MDO vacated: launched in eight markets fo
Slide 25: Heated Tobacco: Building a European Presence
Heated Tobacco: Building a European Presence DIFFERENTIATED OFFERING PROVIDING CONSUMER CHOICE TO DATE FY24 Czech Italy Greece • Developed and Consolidation in launched Pulze existing markets 2.0 Hungary Portugal Bulgaria Further innovation • Launched in five markets in FY23 Launched iSenzia, flavou
Slide 26: Modern Oral: Developed New Flavour Range
Modern Oral: Developed New Flavour Range DELIVERING REVENUE GROWTH TO DATE FY24 • Developed and Sweden Estonia launched new flavour range for Zone X US modern oral Norway Denmark launch in calendar 2024 Modern Oral Austria Iceland Further innovation Net Revenue and flavour launches in Europe +20% Fi
Slide 27: Priorities for FY24
Priorities for FY24 STRENGTHENING OUR CULTURE, PERFORMANCE AND RESILIENCE Focus on maintaining our priority markets aggregate market share Consolidating our NGP presence in key markets Leveraging our culture change and further self-help opportunities Further improvement in profit growth and sharehol
Slide 28: FY24 Priorities Underpin Investment Case
FY24 Priorities Underpin Investment Case GLOBAL CONSUMER GOODS BUSINESS WITH ATTRACTIVE VALUATION OPERATIONAL FINANCIAL SHAREHOLDER DELIVERY DELIVERY RETURNS REVITALISED TOBACCO SUPPORTING OUR PROGRESSIVE DIVIDEND BUSINESS MEDIUM-TERM GUIDANCE • Dividend growth +4% • Dividend yield 8.2% • Low single
Slide 29: Imperial Brands
mate IMPERIAL BRANDS
Slide 30: Net Revenue
Net Revenue 1.4% +3.6% £8,012m £7,848m £7,793m £7,737m £(56)m £(538)m £594m £55m £164m FY22 Tobacco Russia FY22 Tobacco Tobacco NGP Net FY23 Translation FX FY23 & NGP Net Tobacco & Volume Price/Mix Revenue Tobacco & Tobacco & Revenue NGP NR NGP NR NGP Net (ex-Russia) Constant Revenue 30 | Full Year
Slide 31: Improved Adjusted Operating Profit Growth
Improved Adjusted Operating Profit Growth +3.9% +5.4% £(5)m £143m £(42)m £43m £54m £3,887m £3,833m £3,694m £3,689m FY22 AOP Russia FY22 AOP (ex- Tobacco NGP Logista* FY23 AOP Translation FY23 AOP Russia) performance losses/ constant currency FX investment Tobacco AOP margins +150 bps ex Russia * Inc
Slide 32: Russia Contribution
Russia Contribution H1 22 H2 22 FY 22 Tobacco volume bn SE 6.9 0.9 7.8 Total net revenue £m 54.0 2.0 56.0 Tobacco net revenue £m 54.0 2.0 56.0 NGP net revenue £m - - - Adjusted operating profit £m 7.0 (2.0) 5.0 32 | Full Year Results | 14 November 2023
Slide 33: Central and Eastern Europe Cluster
Central and Eastern Europe Cluster RESTATEMENT REFLECTING CEE TRANSFER FROM EUROPE TO AAA AAA Europe AAACE HY22 restatement Europe (existing) CEE (existing) (new) (new) Tobacco volume bn SE 57.8 42.4 11.6 46.2 54.0 Total net revenue £m 1,569 766 199 1,370 965 Tobacco net revenue £m 1,492 766 196 1,2
Slide 34: Group Adjusted Results
Group Adjusted Results Constant Constant Foreign Actual FY22 Currency FY23 Currency Exchange ∆ Growth ∆ Tobacco net revenue £m 7,585 162 - 7,747 2.1% - NGP net revenue £m 208 2 55 265 27.4% 26.4% Tobacco & NGP operating profit £m 3,441 46 96 3,583 4.1% 2.8% Tobacco & NGP profit margin % 44.2% - - 44
Slide 35: Group Adjusted Results
Group Adjusted Results FY23 FY22 Group adjusted operating profit £m 3,887 3,694 Adjusted net finance costs £m (410) (326) Share of profit of JVs £m 7 9 Adjusted profit before tax £m 3,484 3,377 Adjusted effective tax rate % 22.4% 22.4% Adjusted EPS pence 278.8 265.2 Dividend per share pence 146.8 14
Slide 36: Reconciliation: Reported to Adjusted
Reconciliation: Reported to Adjusted Fair value Net fair Russia, Amortisation Structural Adjustments adjustment Charges value and Post- Tax £m Ukraine and Loss on changes to Recognition Uncertain above Reported and related to exchange employment settlement Adjusted (unless otherwise and impairment d
Slide 37: Income Statement
Income Statement £m (unless otherwise stated) FY23 FY22 Revenue 32,475 32,551 Adjusted operating profit 3,887 3,694 Russia, Ukraine and associated markets (4) (399) Amortisation and impairment of acquired intangibles (347) (349) Restructuring costs - (197) Fair value adjustment and impairment of oth
Slide 38: Balance Sheet
Balance Sheet £m FY23 FY22 Non-current assets: tangible 3,952 4,260 intangible 16,944 17,777 Current assets: inventories 4,522 4,140 other 4,073 4,781 Current liabilities (11,899) (11,139) Non-current liabilities (10,950) (12,346) Net assets 6,642 7,473 38 | Full Year Results | 14 November 2023
Slide 39: Net Finance Costs
Net Finance Costs £m FY23 FY22 Net finance costs (298) (117) Adjusted for: - interest income on net defined benefit assets (178) (107) - interest cost on net defined benefit liabilities 165 99 - net fair value & exchange gains on financial instruments (149) (201) - tax settlement interest cost 50 -
Slide 40: Cash flow
Cash flow £m FY23 FY22 Group operating profit 3,402 2,683 Depreciation, amortisation and impairments 632 660 EBITDA 4,034 3,343 Other non-cash movements 32 484 Operating cash flows before movement in working capital 4,066 3,827 Working capital (347) 40 Tax cash flow (590) (681) Cash flows from opera
Slide 41: Net Debt Reconciliation
Net Debt Reconciliation Fair value of Accrued Adjusted £m Reported FY23 Lease liabilities interest rate interest FY23 derivatives Opening net debt (8,492) 105 248 85 (8,054) Free cash flow 2,364 - (92) - 2,272 (Acquisitions)/disposals (183) - - - (183) Dividends paid to owners of the parent (1,312)
Slide 42: Foreign Exchange
Foreign Exchange Average Closing FY22 FY23 ∆ FY22 FY23 ∆ USD $ 1.281 1.226 -4.29% 1.104 1.221 10.60% EURO € 1.181 1.149 -2.71% 1.133 1.155 1.94% AUD $ 1.796 1.843 2.62% 1.707 1.887 10.54% 42 | Full Year Results | 14 November 2023
Slide 43: Foreign Currency
Foreign Currency DIVISIONAL CURRENCY EXPOSURE Approximate weight of EUR / • €0.01 (1 cent) movement in the € currency in EUR Other Total Net Revenue GBP £ Linked USD $ AUD $ Currencies Other includes Euro has c. £21m impact on net revenue. Polish Zloty, Czech Europe 20% 75% 0% 0% 5% Koruna Americas
Slide 44: Divisional Market Share
Divisional Market Share MAT MARKET SHARE DATA FY23 FY22 Europe 19.2% 19.8%R -65 bps Americas 10.7% 10.1% +65 bps AAACE 12.7% 11.7%R +95 bps Total Group 14.4% 13.8%R +55 bps Market Share Calculation Market share is presented as a 12-month average (MAT). Aggregate market share is a weighted average
Slide 45: FY24 Guidance
FY24 Guidance OTHER FINANCIAL ITEMS Financing & Cost of Debt • Finance charge for FY24 expected to be c. £460m at current rates; all-in cost of debt of c. 4.6% for FY24 Tax Rate • Expected to be c. 23% Capex • Expect net capex to be c. £300m-350m Cash Conversion • Expect 90% to 100% range Foreign Ex
Slide 46: Imperial Brands
Me imperial AN®R BRANDS
Slide 47: Financial Profile September 2023
Financial Profile 30 September 2023 Interest Split* Currency Split (structural)** Committed Funding Split 4% Fixed EUR 23% Bonds Issues Bank (Syndicated) Floating Bank (Bilaterals) ECP 100% 72% 100% Committed Financing Outstanding (£m) 14,000 12,000 10,000 Bond Issues Bank (Syndicated) 8,000 ECP Ban
Slide 48: Committed Bank Facilities
Committed Bank Facilities 30 September 2023 Amount Description Maturity date (EUR m) £m equiv. Committed 3-year Revolving Credit Facility 30 September 2025 184 159 Committed 3-year Revolving Credit Facility 30 March 2026 184 159 Committed 3-year Revolving Credit Facility 30 September 2026 3,125 2,70
Slide 49: Bond Issues
Bond Issues 30 September 2023 Currency Amount of issue (ccy m) Issuer Coupon Issue Date Maturity Date £m equiv. Margin**** GBP 600* Imperial Brands Finance PLC 8.13% Sep-08 Mar-24 668 3.02% USD 1,000* Imperial Brands Finance PLC 3.13% Jul-19 Jul-24 778 1.20% EUR 500 Imperial Brands Finance PLC 1.38%
Slide 50: Glossary
Glossary Stick Equivalent (SE) volumes reflect our combined cigarette, fine cut tobacco, cigar and SE snus volumes. Change at constant currency removes the effect of exchange rate movements on the Constant Currency translation of the results of our overseas operations. Total Tobacco includes cigaret