Reynolds American — FY2016 Earnings Presentation
41 slides from Reynolds American's earnings presentation, Feb 23, 2017
Slide 1: British American Tobacco
why BRITISH AMERICAN TOBACCO
Slide 2: Preliminary Results 2016, 23 February 2017
PRELIMINARY RESULTS 2016 23 February 2017
Slide 3: Nicandro Durante, Chief Executive
Nicandro Durante Chief Executive
Slide 4: Disclaimer
This presentation in relation to British American Tobacco p.l.c. (“BAT”) and its subsidiaries (collectively, the “BAT Group”) and Reynolds American Inc. (“Reynolds”) and its subsidiaries (collectively, the “Reynolds Group”, and together with the BAT Group, the “Group”) has been prepared solely for u
Slide 5: Additional information and where to find it
Additional information and where to find itThis communication is neither a solicitation of a proxy nor a substitute for any proxy statement or other filings that may be made with the SEC in connection with the Proposed Transaction. Any solicitation will only be made through materials filed with the
Slide 6: An exceptionally good year
PRELIMINARY RESULTS 2016 An exceptionally good year A strong organic performance Growth opportunity in NGPs Long-term benefits from M&A
Slide 7: Ben Stevens, Finance Director
Ben Stevens Finance Director
Slide 8: A strong organic performance: Financials summary
+12.6% A strong organic performance Cigarettes665bn GDBs324bn Revenue£14,751m Profit£5,480m Margin37.2% Financials Summary PRELIMINARY RESULTS 2016 Volume EPS247.5p +6.9% Constant Total Tobacco689bn Total IBs425bn Current +9.8% +4.1% -90bps -100bps +18.8% +10.4% +0.2% +0.1% +7.5% +3.1%
Slide 9: Currency impact on operating profit
Translational FX tailwindTransactional FX headwinds abating Translational -6% Currency impact on Operating Profit PRELIMINARY RESULTS 2016 FY 2016 FY 2017 estimate H1 2016 -6% -4% +6% -2% +9% -6% H2 2016 +15% Transactionalat constant FX
Slide 10: Operating margin
PRELIMINARY RESULTS 2016 Operating margin
Slide 11: Asia Pacific – Regional Performance
Asia Pacific – Regional Performance PRELIMINARY RESULTS 2016 Cigarettes196bn GDBs85bn Revenue£3,770m Profit£1,488m Financials Volume Constant -0.1% Current +13.1% -0.1% +1.3% +11.0% -0.9% +0.9%
Slide 12: Americas – Regional Performance
Americas – Regional Performance PRELIMINARY RESULTS 2016 Cigarettes113bn GDBs41bn Revenue£3,014m Profit£1,202m Financials Volume Constant Current +10.8% +5.4% +2.8% +0.3% -8.8% +7.7%
Slide 13: Western Europe – Regional Performance
Western Europe – Regional Performance PRELIMINARY RESULTS 2016 Cigarettes120bn GDBs75bn Revenue£3,471m Profit£1,236m Financials Volume Constant Current +8.4% +20.7% +7.8% +21.2% +6.7% +8.3%
Slide 14: EEMEA – Regional Performance
EEMEA – Regional Performance PRELIMINARY RESULTS 2016 Cigarettes236bn GDBs123bn Revenue£3,753m Profit£1,271m Financials Volume Constant Current +10.1% +10.0% +5.3% +6.7% +3.0% +12.0%
Slide 15: Drivers of adjusted EPS growth
PRELIMINARY RESULTS 2016 Drivers of adjusted EPS growth
Slide 16: Cash flow
PRELIMINARY RESULTS 2016 Cash flow
Slide 17: Financing/Shareholder returns
PRELIMINARY RESULTS 2016 Financing/Shareholder returns Net Debt up £2bn to £16.8bn, mainly driven by FXCredit ratings confirmed at BBB+/Baa2 stable by S&P and Moody’s post announcement of RAI recommended offerSeeking medium-term recovery to BBB+/Baa1 Targeting Net Debt/EBITDA of around 3.0x by end 2
Slide 18: Nicandro Durante, Chief Executive
Nicandro Durante Chief Executive
Slide 19: BAT Share
BAT Share Consistent strong share growth powered by GDBs Source: Independent Nielsen retail audit data GDB Share PRELIMINARY RESULTS 2016
Slide 20: Global drive brands performance
Turkey – fastest growing brandStrong performance in EEMEA, Western Europe and AustraliaDemi slims driving growth Fastest growing cigarette brand in JapanStrong volume and share growth in TurkeyKent Spark – new brand imagery showing encouraging results Volume impacted by industry contraction in Pakis
Slide 21: Vapour
Vapour PRELIMINARY RESULTS 2016 Nielsen Retail Audit*, 6MMA Share 35% Internal estimates, retail channel*share, 6MMA 7% Internal estimates, retail channel*share, 6MMA 4% All Market 50% Internal estimates, retail channel* 2% *Retail excludes specialist vape stores and online sales.
Slide 22: THP: Glo launch in Sendai
THP: Glo launch in Sendai PRELIMINARY RESULTS 2016
Slide 23: 2016 – An exceptionally good year
GDBVOLUME +7.5% VOLUME +0.2% GDBSHARE +100bps CORPORATESHARE +50bps 2016 – AN EXCEPTIONALLY GOOD YEAR +7% Revenue constant currency +10% Profit constant currencyex transactional fx +16% EPS constant currencyex transactional fx Financials Volume Share Confident of another good year of constant curren
Slide 24: Supplementary Slides
23 February 2017 SUPPLEMENTARY SLIDES
Slide 25: Cigarette volumes by region FY 2016
Cigarette volumes by region FY 2016 Region Billions 2016 2015 % change Asia Pacific 196 198 -0.9% Americas 113 124 -8.8% Western Europe 120 112 +6.7% Eastern Europe, Middle East and Africa 236 229 +3.0% Group 665 663 +0.2% PRELIMINARY RESULTS 2016 Volume as reported
Slide 26: Cigarette volumes by region H2 2016
Cigarette volumes by region H2 2016 Region Billions 2016 2015 % change Asia Pacific 91 95 -4.0% Americas 56 63 -11.0% Western Europe 63 61 +3.0% Eastern Europe, Middle East and Africa 123 123 -0.2% Group 333 341 -2.7% PRELIMINARY RESULTS 2016 Volume as reported
Slide 27: Cigarette volumes by region Q4 2016
Cigarette volumes by region Q4 2016 Region Billions 2016 2015 % change Asia Pacific 47 50 -5.2% Americas 29 33 -12.6% Western Europe 31 31 -2.2% Eastern Europe, Middle East and Africa 61 63 -2.8% Group 168 177 -5.2% PRELIMINARY RESULTS 2016 Volume as reported
Slide 28: Revenue by region FY 2016
Revenue by region FY 2016 Region £m 2016 2015 % change Asia Pacific 4,266 3,773 +13.1% Americas 2,868 2,720 +5.4% Western Europe 3,867 3,203 +20.7% Eastern Europe, Middle East and Africa 3,750 3,408 +10.0% Group 14,751 13,104 +12.6% All numbers as reported PRELIMINARY RESULTS 2016
Slide 29: Revenue by region H2 2016
Revenue by region H2 2016 Region £m 2016 2015 % change Asia Pacific 2,279 1,880 +21.2% Americas 1,571 1,336 +17.6% Western Europe 2,138 1,740 +22.9% Eastern Europe, Middle East and Africa 2,094 1,750 +19.7% Group 8,082 6,706 +20.5% All numbers as reported PRELIMINARY RESULTS 2016
Slide 30: Adjusted profit from operations FY 2016
Adjusted profit from operations FY 2016 Region £m 2016 2015 % change Asia Pacific 1,630 1,469 +11.0% Americas 1,172 1,169 +0.3% Western Europe 1,389 1,146 +21.2% Eastern Europe, Middle East and Africa 1,289 1,208 +6.7% Group 5,480 4,992 +9.8% All numbers as reported PRELIMINARY RESULTS 2016
Slide 31: Adjusted profit from operations H2 2016
Adjusted profit from operations H2 2016 Region £m 2016 2015 % change Asia Pacific 869 693 +25.4% Americas 636 547 +16.3% Western Europe 799 627 +27.4% Eastern Europe, Middle East and Africa 724 618 +17.2% Group 3,028 2,485 +21.9% All numbers as reported PRELIMINARY RESULTS 2016
Slide 32: Top 40 market share movements (1)
Market SOM FY16 (%) Movement (ppt) Market SOM FY16 (%) Movement (ppt) Argentina 23.7 (0.1) France 17.7 0.3 Australia 39.8 0.1 GCC 28.6 (1.8) Bangladesh 61.8 2.6 Germany 19.4 0.0 Belgium* 30.7 (0.3) Indonesia 6.9 0.2 Brazil 76.2 (1.8) Italy 18.8 (0.4) Canada 48.2 (0.9) Japan 13.0 0.3 Chile 95.4 0.8 K
Slide 33: Top 40 market share movements (2)
Market SOM FY16 (%) Movement (ppt) Market SOM FY16 (%) Movement (ppt) New Zealand 70.2 0.2 Spain 10.7 0.0 Pakistan 70.6 1.8 Switzerland 37.9 (0.5) Philippines 0.9 0.1 Taiwan 10.0 (0.2) Poland 28.3 1.2 Turkey 21.7 1.0 Romania 54.4 1.3 UK 9.6 (0.4) Russia 22.5 1.4 Ukraine 25.8 4.3 South Africa 80.0 (1
Slide 34: Foreign currencies
Foreign currencies Average Closing 2016 2015 2016 2015 Australian dollar 1.824 2.036 1.707 2.026 Brazilian real 4.740 5.101 4.022 5.831 Canadian dollar 1.795 1.954 1.657 2.047 Euro 1.224 1.378 1.172 1.357 Indian rupee 91.022 98.070 83.864 97.508 Japanese yen 147.466 185.012 144.120 177.303 Russian r
Slide 35: February 2017
PRELIMINARY RESULTS 2016 23 February 2017
Slide 36: Preliminary Results 2016 call transcript
British American Tobacco p.l.c. Preliminary Results 2016 February 23, 2017 CORPORATE PARTICIPANTS Nicandro Durante Chief Executive Ben Stevens Finance Director CONFERENCE CALL PARTICIPANTS Fulvio Cazzol, Goldmans - Analyst Adam Spielman, Citi - Analyst Owen Bennett, Jefferies - Analyst Jonathan Lein
Slide 37: Chief Executive's review of the preliminary results
Chief Executive's review of the preliminary results for the year ended 31 December 2016 Nicandro Durante comments on our performance in 2016 The Group delivered a great set of results in 2016, with excellent growth seen across all key business metrics. This was achieved despite a challenging backdro
Slide 38: Agreement to acquire Reynolds American Inc.
Agreement to acquire Reynolds American Inc. I am very pleased that we reached an agreement with the Board of Reynolds American in relation to the acquisition of the remaining 57.8% of Reynolds American that the Group does not currently own. This is a significant step towards the completion of this t
Slide 39: Vapour and tobacco heating products update
In the UK, our category retail share, as independently measured by AC Nielsen, has reached nearly 40% through the growth of Vype™ and the acquisition of Ten Motives. We also have an estimated market share of around 50% in Poland as well as category retail share of over 7% in Germany, over 4% in Fran
Slide 40: Forward looking statements
Forward looking statements Certain statements in this communication regarding the proposed merger of Reynolds American and BAT (the “Proposed Transaction”), the expected timetable for completing the Proposed Transaction, the benefits and synergies of the Proposed Transaction, future opportunities fo
Slide 41: Additional information and where to find it
Additional information and where to find it This communication is neither a solicitation of a proxy nor a substitute for any proxy statement or other filings that may be made with the SEC in connection with the Proposed Transaction. Any solicitation will only be made through materials filed with the