Imperial Brands Plc · LSE:IMB
Imperial Brands — Imperial Tobacco Group — H1 2011 Earnings Presentation
61 slides from Imperial Brands's earnings presentation, May 10, 2011
Slide 1: Half Yearly Results 2011
Half Yearly Results 2011 Imperial Tobacco Group PLC 10 May 2011
Slide 2: Alison Cooper Chief Executive, Bob Dyrbus Finance Director
Alison Cooper Chief Executive Bob Dyrbus Finance Director
Slide 3: Disclaimer
Disclaimer Certain statements in this presentation constitute forward-looking statements. Any statement in this presentation that is not a statement of historical fact including, without limitation, those regarding the Company’s future expectations, operations, financial performance, financial condi
Slide 4: Delivering Our Strategy
Delivering Our Strategy Building sustainable sales success across international footprint driving growth through total tobacco Disciplined cost management investing for growth margins increased Effectively managing cash strong 12 month cash conversion dividend growth ahead of adjusted EPS growth sha
Slide 5: HY11 Overview
HY11 Overview +15.6% +7.0% +3.8% +2.7% -0.7% Stick equivalent Tobacco Tobacco EPS DPS volumes net revenue operating profit 88.4p 28.1p 164.9bn £3,289m £1,409m Percentage changes reflect constant currency performance and are adjusted and presented on our usual basis, see slide 60 for details. 5 The d
Slide 6: Underlying Growth
Underlying Growth ex Spain; adjusted for UK trade buying +7.2% +4.4% +3.2% +2.6% +1.0% -1.4% Stick Tobacco Tobacco Stick Tobacco Tobacco equivalent net revenue operating equivalent net revenue operating volumes profit volumes profit EU Group Percentage changes reflect underlying constant currency pe
Slide 7: Effective Cash Utilisation
Effective Cash Utilisation Cash: key component of our value creating strategy FY11 dividend payout ratio 50% Post FY11 dividends to grow ahead of adjusted EPS £500m annualised share buyback effective immediately 7
Slide 8: HY11 Key Achievements
HY11 Key Achievements Sales growth across market footprint underlying growth in EU excluding Spain +7% in non-EU markets Driving growth through Total Tobacco strong global strategic brand performance; +5% cigarette volume growth excellent JPS result; +16% cigarette volume growth +5% fine cut tobacco
Slide 9: Total Tobacco
Total Tobacco 5% global strategic cigarette brand growth +9% +5% +5% +1% Global Davidoff Gauloises West Strategic Blondes Brands 9
Slide 10: Total Tobacco
Total Tobacco JPS: 16% cigarette volume growth +151% +33% +16% +14% JPS UK Germany Australia 10
Slide 11: Total Tobacco
Total Tobacco 5% fine cut tobacco growth; strong papers and tubes +73% +10% +6% +5% FCT JPS West Route 66 Growth on a stick equivalent basis 11
Slide 12: Total Tobacco
Total Tobacco Habanos: 16% sales growth outside EU This space appears blank because we have removed the images that appear in the presentation. This is because we currently do not feature tobacco product brand imagery on our website. 12
Slide 13: Total Tobacco
Total Tobacco Snus: 19% volume growth +43% +19% +13% +5% Snus Skruf Knox Volume based on can sales 13
Slide 14: Growth in EU and Non-EU
Growth in EU and Non-EU EU seeking value a key consumer trend well placed to capitalise flexibility to respond quickly Non-EU USA: integrating sales forces RoW: growing in consumer growth segments profit growth: Eastern Europe +30%; Asia-Pacfic +20%; AME +10% significant Habanos growth 14
Slide 15: HY11 EU Stick Equivalent Volumes
HY11 EU Stick Equivalent Volumes +2.4 +0.5 -1.3 -2.0 -0.8 -3.6 UK Germany Spain RoEU Total EU Total Non-EU -4.5% +2.8% Billion stick equivalent change 15
Slide 16: Non-EU Stick Equivalent Volumes
Non-EU Stick Equivalent Volumes +2.4 +1.4 +0.7 +0.4 +0.1 -0.2 Americas Eastern Europe Africa / Asia Pacific Duty Free Total Non-EU Middle East +2.8% Billion stick equivalent change 16
Slide 17: Tobacco Net Revenue
Tobacco Net Revenue stable EU constant currency revenues +90 +36 -22 +3 -19 -2 UK Germany Spain RoEU Total EU Total Non-EU 0% +7% Net tobacco revenue change (£m) 17
Slide 18: Tobacco Net Revenue
Tobacco Net Revenue excellent non-EU constant currency growth +94 +90 -4 Americas Rest of World Total Non-EU +7% Net tobacco revenue change (£m) 18
Slide 19: Group Results
Group Results 7% constant currency EPS growth Constant Constant Foreign Currency Currency HY10 Exchange Growth HY11 Change Change Tobacco net revenue 3,262 (61) 88 3,289 0.8% 2.7% Logistics distribution fees 480 (21) (7) 452 -5.8% -1.5% Tobacco operating profit 1,374 (17) 52 1,409 2.6% 3.8% Operatin
Slide 20: EU Adjusted Operating Profit
EU Adjusted Operating Profit +62 +14 +7 -15 -16 -10 UK Germany Spain RoEU Total EU Total Non-EU -1% +15% Tobacco adjusted operating profit change on constant currency basis (£m) 20
Slide 21: Non-EU Adjusted Operating Profit
Non-EU Adjusted Operating Profit +62 +59 +3 Americas Rest of World Total Non-EU +15% Tobacco adjusted operating profit change on constant currency basis (£m) 21
Slide 22: Cost Optimisation
Cost Optimisation Constant currency tobacco margin +0.4% Maintaining cost discipline Investing for growth 22
Slide 23: Logistics
Logistics Tobacco logistics growth in cigars and fine cut tobacco Spain challenging reduced costs Other logistics transport operations performed well cost saving programme continues 23
Slide 24: H2 Operational Outlook
H2 Operational Outlook total tobacco driving growth EU UK: trade buying patterns unwind Germany: strong market; May MPI Spain: challenging environment; growth segment focus Rest of EU: driving growth across cigarette, fine cut tobacco and snus Non-EU Americas: strengthening competitive position East
Slide 25: Adjusted Net Debt
Adjusted Net Debt £0.2bn £0.6bn Closing Net Debt 31/03/11 £1.5bn £0.6bn £10.1bn Net Debt 30/09/10 £0.2bn £9.3bn £0.7bn Adjusted Working Net capex Tax and Dividends Foreign operating capital interest exchange profit and other Adjusted debt figures exclude accrued interest, fair value gains and losses
Slide 26: Financing and Cost of Debt
Financing and Cost of Debt Average net debt £10.3bn £2.5bn refinancing of bank facilities to 2015 Average all-in cost of net debt 6.1% (HY10: 5.2%) Net interest charge £280m (HY10: £302m) Interest cover* 5.6x (HY10: 4.9x) *12 months adjusted EBITDA/12 months adjusted net finance costs. Numbers are a
Slide 27: FY11 Financial Outlook
FY11 Financial Outlook FY11 average interest cost 6.1% Tax rate 24.5% Working capital c.£100m outflow 27
Slide 28: Cash Utilisation
Cash Utilisation Sustainable shareholder returns Reviewed options c.4.5% dividend yield; c.11x PE Post FY11 dividends to grow ahead of earnings Steadily increasing payout ratio £500m annualised share buyback effective immediately 28
Slide 29: HY11 Key Achievements
HY11 Key Achievements Sales growth across market footprint underlying growth in EU excluding Spain +7% in non-EU markets Driving growth through Total Tobacco strong global strategic brand performance; +5% cigarette volume growth excellent JPS result; +16% cigarette volume growth +5% fine cut tobacco
Slide 30: Our Strategy
Our Strategy Delivering sustainable shareholder returns Growth drivers Cost Sales Cash Optimisation Growth Utilisation Our key assets Market Total Brand Footprint Tobacco Equity People How we leverage our assets Consumer Execution Future Centric Excellence Foundations 30
Slide 31: Half Yearly Results 2011
Half Yearly Results 2011 Imperial Tobacco Group PLC 10 May 2011
Slide 32: Appendices
ae Appendices 32
Slide 33: Financial
ae Financial 33
Slide 34: HY11 Income Statement
HY11 Income Statement £m HY11 HY10 Change % Revenue 13,701 13,370 +2 Adjusted operating profit 1,479 1,452 +2 Acquisition accounting adjustments - (25) Amortisation of acquired intangibles (210) (231) Restructuring costs 5 (8) Net finance costs* (331) (214) Profit before tax 943 974 Tax (9) (277) Pr
Slide 35: Reconciliation: Reported to Adjusted
Reconciliation: Reported to Adjusted Amortisation Fair value Post Reported of acquired gains & losses employment Restructuring Tax Adjusted HY11 intangibles on derivatives net financing costs provisions HY11 Operating 1,274 210 - - (5) - 1,479 profit Finance (331) - 47 4 - - (280) costs Profit befor
Slide 36: Tobacco: HY11 regional net revenue analysis
Tobacco HY11 regional net revenue analysis HY11 % Change Foreign Constant Constant £m Actual(1) Exchange Currency(2) HY10 Currency UK 418 - 418 440 (5.0) Germany 402 (19) 421 418 0.7 Spain 252 (12) 264 283 (6.7) Rest of EU 752 (35) 787 751 4.8 Americas 335 1 334 338 (1.2) Rest of World 1,130 4 1,126
Slide 37: Tobacco: HY11 regional operating profit analysis
Tobacco HY11 regional operating profit analysis HY11 % Change Foreign Constant Constant £m Actual(1) Exchange Currency(2) HY10 Currency UK 281 1 280 295 (5.1) Germany 212 (10) 222 208 6.7 Spain 109 (5) 114 130 (12.3) Rest of EU 311 (15) 326 319 2.2 Americas 105 1 104 101 3.0 Rest of World 391 11 380
Slide 38: Logistics
Logistics HY11 % Change Foreign Constant Constant £m Actual(1) Exchange Currency(2) HY10 Currency Distribution fees 452 (21) 473 480 (1.5) Operating profit 80 (4) 84 87 (3.4) Distribution margin % 17.7 17.8 18.1 (1)based on average exchange rates for six months ended 31 March 2011; (2)assumes that a
Slide 39: Foreign Currencies
Foreign Currencies Average Closing £1 = HY11 HY10 HY11 HY10 Euro 1.169 1.117 1.130 1.122 US dollar 1.592 1.598 1.604 1.516 39
Slide 40: Balance Sheet
Balance Sheet 31 March 2011 £m HY11 HY10 Non-current assets: tangible 2,395 2,633 intangible 21,041 21,823 Current assets: inventories 3,588 3,426 other 3,799 4,351 Current liabilities (8,873) (10,107) Non-current liabilities (14,435) (15,394) Net assets 7,515 6,732 40
Slide 41: HY11 Cash Flow
HY11 Cash Flow £m HY11 HY10 Cash flows from operating activities pre tax 734 601 Tax paid (250) (172) Cash flows from operating activities 484 429 Net capex (includes software) (171) (109) Net acquisitions (businesses and trademarks) - 2 ESOT (19) 1 Dividends paid (inc. minority interests) (614) (53
Slide 42: Net Finance Costs
Net Finance Costs £m HY11 HY10 Net finance costs 331 214 Adjusted for: - expected return on retirement benefit assets 89 90 - interest on retirement benefit liabilities (89) (93) - unwind of discount on redundancy and social plans (4) (5) - fair value (loss)/gain on derivatives (47) 96 Adjusted net
Slide 43: 12 Month Cash Conversion
12 Month Cash Conversion 12 months 12 months 6 months to March to March to March £m 2011 2010 2011 Net cash flow from operating activities 2,914 3,423 484 Tax 443 307 250 Net capex (319) (221) (171) Cash flow post capex pre interest and tax 3,038 3,509 563 Adjusted operating profit 3,094 3,016 1,479
Slide 44: Net Debt Reconciliation
Net Debt Reconciliation Reported Accrued Fair value of Finance lease Adjusted £m HY11 interest derivatives creditors HY11 Opening net debt (10,024) 292 410 25 (9,297) Free cash flow (81) (31) (1) (113) Dividends (614) (614) Accretion of interest 101 (101) - Change in fair values (202) 179 (23) Excha
Slide 45: Tobacco Net Revenue
Tobacco Net Revenue restated per new definition HY11 FY10 HY10 FY09 New New New Reported Reported Definition Reported Definition Reported Definition UK 418 911 896 448 440 893 873 Germany 402 853 851 419 418 826 824 Spain 252 594 588 284 283 610 604 RoEU 752 1,577 1,523 782 751 1,490 1,435 Americas
Slide 46: Volumes
ae Volumes 46
Slide 47: HY11 Stick Equivalent Volumes
HY11 Stick Equivalent Volumes Billion stick equivalents HY11 HY10 UK (exc PMI(1)) 12.4 13.7 Germany 15.7 15.2 Spain 11.5 13.5 Rest of European Union 37.2 38.0 Americas 6.2 5.8 Asia-Pacific 11.3 10.6 Eastern Europe 33.5 33.7 Africa & Middle East 34.6 33.2 Duty Free 2.5 2.4 Total Rest of the World 81.
Slide 48: HY11 Cigarette Volumes
HY11 Cigarette Volumes Billion sticks HY11 HY10 UK (exc PMI(1)) 9.4 10.4 Germany 11.0 10.8 Spain 10.3 12.8 Rest of European Union 27.6 28.9 Americas 5.9 5.5 Asia-Pacific 10.4 9.7 Eastern Europe 33.5 33.7 Africa & Middle East 34.5 33.1 Duty Free 2.2 2.0 Total Rest of the World 80.6 78.5 Total Group 1
Slide 49: HY11 Fine Cut Tobacco Volumes
HY11 Fine Cut Tobacco Volumes Billion stick equivalents HY11 HY10 UK 3.0 3.3 Germany 4.7 4.4 Spain 1.2 0.7 Rest of European Union 9.6 9.1 Americas 0.3 0.3 Asia-Pacific 0.9 0.9 Africa & Middle East 0.1 0.1 Duty Free 0.3 0.4 Total Rest of the World 1.3 1.4 Total Group 20.1 19.2 49
Slide 50: HY11 Cigar Volumes & USA Net Revenues
HY11 Cigar Volumes & USA Net Revenues Millions HY11 HY10 UK 29 37 Germany 1 2 Spain 138 143 Rest of European Union 176 168 Americas 620 666 Rest of the World 101 111 Total Group 1,065 1,127 USA Cigar Net Revenues (£m) 200 200 Excludes eco-cigarillos; The definition of tobacco net revenue has been ch
Slide 51: Market Shares
ae Market Shares 51
Slide 52: Cigarette Market Shares
Cigarette Market Shares European Union 6 month average Cigarette (%) HY11 HY10 UK 45.3 45.4 Germany 26.9 26.6 Spain1 28.2 29.7 France1 22.8 23.9 Austria 17.4 16.3 Czech Republic 14.0 14.0 Greece 11.5 11.5 Hungary 12.3 12.6 2 Ireland 24.4 24.5 Netherlands 12.3 12.5 Poland 25.4 25.8 Imperial estimates
Slide 53: FCT Market Shares
FCT Market Shares European Union 6 month average Fine cut tobacco (%) HY11 HY10 UK 51.7 55.2 Germany 20.7 20.01 Spain 34.4 32.0 France 20.4 20.61 Belgium 12.4 10.91 Czech Republic 59.2 50.3 Greece 31.3 33.5 Hungary 42.0 47.71 Italy 40.0 43.1 Netherlands 47.4 49.0 Poland 53.6 16.5 Imperial estimates;
Slide 54: Cigarette Market Shares
Cigarette Market Shares Americas and Rest of the World Cigarette 6 month average % HY11 HY10 USA 3.9 3.91 Argentina 2.5 2.6 Australia 18.4 16.9 Morocco 83.9 83.7 Russia 8.5 9.21 Saudi Arabia 10.3 10.0 Taiwan 10.9 11.1 Turkey 3.4 3.91 Ukraine 22.2 20.71 Imperial estimates; 1restated due to change of
Slide 55: Miscellaneous
ae Miscellaneous 55
Slide 56: Senior Bank Facilities
Senior Bank Facilities 31 March 2011 Amount Description Maturity date £m equiv. Margin $1,629m Committed 5 Year Revolving Credit Facility Jul-12 £1,015m 0.725%* Committed 5 Year Revolving Credit Facility Dec-15 1.000%** $632m USD tranche £394m £600m GBP tranche £600m €1,785m EUR tranche £1,579m Tota
Slide 57: Bond Issues
Bond Issues 31 March 2011 Amount Issuer Coupon Issue Date Maturity Date £m equiv. Margin £350m Imperial Tobacco Finance PLC 6.875% Jun-02 Jun-12 £489m* 1.3% €1,250m Imperial Tobacco Finance PLC 5.000% Jun-09 Jun-12 £1,106m 2.7% €500m Altadis Finance BV 5.125% Oct-03 Oct-13 £442m 0.8% €1,200m Imperia
Slide 58: Financing maturity profile at March 2011
Financing maturity profile at 31 March 2011 14,000 Bank Facilities 12,000 Bond Issues £ equivalent (m) 10,000 8,000 6,000 4,000 2,000 0 Apr Apr Apr Apr Apr Apr Apr Apr Apr Apr Apr Apr Apr Apr 11 12 13 14 15 16 17 18 19 20 21 22 23 24 30% bank, 70% capital markets Headroom as at 31 March c.£1.4bn inc
Slide 59: Applying FCF Against Net Debt
Applying FCF Against Net Debt Current cost of bank financing significantly less than bond financing Free cash flow is used to repay bank debt only, therefore interest cost saving is lower than all-in cost of debt (around one-third for FY11 and around half for FY12) As absolute debt levels fall, prop
Slide 60: Basis of Results Presentation
Basis of Results Presentation Use of Adjusted Measures Management believes that reporting non-GAAP or adjusted measures provides a useful comparison of business performance and reflects the way in which the business is controlled. Accordingly, adjusted measures of operating profit, net finance costs
Slide 61: Contacts
Contacts Investor Relations department Gerry Gallagher Director of Investor Communications [email protected] Tel: +44 (0) 117 933 7014 John Nelson-Smith Grant Edmunds Investor Relations Manager Investor Relations Manager [email protected] [email protected] Tel: +4
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