Imperial Brands PLC · LSE:IMB
Imperial Brands — H1 2024 Earnings Presentation
48 slides from Imperial Brands's earnings presentation, May 15, 2024
Slide 1: Half Year Results 15 May 2024
IMPERIAL BRANDS 15 MAY 2024
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 | Half Year Results | 15 May 2024
Slide 4: Delivering the Acceleration Phase of Our Plan
Delivering the Acceleration Phase of Our Plan ON TRACK TO DELIVER FULL YEAR RESULTS IN LINE WITH GUIDANCE STRONG TOBACCO PRICING PRIORITY MARKET SHARE Price mix of +9%, more than Stable aggregate market offsetting volume decline share in our top five markets DRIVING NGP GROWTH A SUSTAINABLE NGP BUSI
Slide 5: Half Year Delivery in Line with Guidance
Half Year Delivery in Line with Guidance PERFORMANCE SUPPORTING SHAREHOLDER RETURNS OPERATIONAL FINANCIAL SHAREHOLDER DELIVERY DELIVERY RETURNS TOP FIVE AGGREGATE SHARE TOBACCO & NGP NET REVENUE INTERIM DIVIDEND PER SHARE +0 bps +2.8% +4.0% NGP NET REVENUE ADJUSTED EPS FY24 BUYBACK COMMITMENT +16.8%
Slide 6: Demonstrating Agility as a Challenger
Demonstrating Agility as a Challenger HIGHER QUALITY EARNINGS IN CHALLENGING MACRO ENVIRONMENT MACRO ENVIRONMENT INITIATIVES ACCELERATING PERFORMANCE AND BUILDING AGILITY COMBUSTIBLES NGP SUPPLY CHAIN AGILITY Consumer spending • Building consumer • Meeting evolving • Successfully managing capabiliti
Slide 7: Lukas Paravicini, CFO
Lukas Paravicini CFO 7 | Half Year Results | 15 May 2024
Slide 8: Continued Financial Delivery
Continued Financial Delivery DRIVING GROWTH IN REVENUE AND PROFIT TOBACCO & NGP NET REVENUE GROUP AOP CASH CONVERSION* +2.8% +2.8% 97% NGP NET REVENUE ADJUSTED EPS ADJUSTED NET DEBT TO EBITDA* +16.8% +7.7% 2.5x Constant currency 8 | Half Year Results | 15 May 2024 * 12-month basis
Slide 9: Strong Tobacco Price Mix Across Footprint
Strong Tobacco Price Mix Across Footprint STRONG PRICING MORE THAN OFFSETTING VOLUME DECLINES VOLUME AND PRICE MIX Net +6.3% +2.6% -3.5% +2.3% • Strong pricing more than Revenue % offsetting volume headwinds 10.8% 12.9% • US driving value from FMC 8.6% 3.8% and MMC -4.5% -7.3% -6.3% • AAACE performa
Slide 10: Strong Adjusted Operating Profit Growth
Strong Adjusted Operating Profit Growth GROWTH THROUGH COMBUSTIBLE PERFORMANCE, NGP AND LOGISTA +2.8% £1,764m £1,716m +£16m +£5m +£27m HY23 AOP Tobacco performance Reduced NGP losses Logista* HY24 AOP constant currency 10 | Half Year Results | 15 May 2024 * Including eliminations
Slide 11: Accelerating Adjusted EPS Growth
Accelerating Adjusted EPS Growth OPERATING PROFIT AND SHARE BUYBACK OFFSET BY TAX AND INTEREST 7.7% 1.4% 127.6p 120.2p 118.5p +5.1p (1.8)p +0.3p (1.8)p +7.3p (7.4)p HY23 Adjusted Interest Minorities Tax Number of HY24 Translation HY24 Adjusted operating & JV shares Adjusted FX Adjusted EPS EPS profi
Slide 12: On Track With Capital Allocation Priorities
On Track With Capital Allocation Priorities CASH GENERATION UNDERPINS OUR CAPITAL RETURNS CASH FLOW DISCIPLINED CAPITAL ALLOCATION KEY DRIVERS: Continuing to invest in the business; 1 organic initiatives and M&A in NGP • Reduction in working capital • Increased cash tax Maintain leverage at the lowe
Slide 13: On Track to Deliver Full Year Guidance
On Track to Deliver Full Year Guidance IMPROVING RETURNS IN CHALLENGING MACRO ENVIRONMENT KEY DRIVERS OF H2 PERFORMANCE Strong embedded pricing Improving NGP gross margins Operational gearing Self-help driving efficiencies FY24 OUTLOOK* – GUIDANCE UNCHANGED • Low single digit net revenue growth • EP
Slide 14: Stefan Bomhard, CEO
Stefan Bomhard CEO 14 | Half Year Results | 15 May 2024
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” 15 | Half Year Resu
Slide 16: Transforming Imperial Brands
Transforming Imperial Brands SIMPLIFIED AND EFFICIENT WAYS OF WORKING SIMPLIFIED AND EFFICIENT OPERATIONS FINANCE PROCUREMENT PEOPLE & CULTURE DATA IT GLOBAL BUSINESS SERVICES TECHNOLOGY & DATA ARCHITECTURE • Integrated across Finance, Compliance, IT, • Multi-year ERP programme, replacing 60 legacy
Slide 17: Delivering on Our People & Planet Agenda
Delivering on Our People & Planet Agenda GOOD PROGRESS TOWARDS TRIPLE ZERO TARGETS Included on CDP Climate ‘A’ Focus on root cause list for fifth year in succession Achieved zero landfill across analysis, with more than 100 our factory operations 18 leaders trained on SBTi has validated our net mont
Slide 18: Achieving Our Priority Market Share Objective
Achieving Our Priority Market Share Objective STABILISED MARKET SHARE PERFORMANCE AGGREGATE WEIGHTED PRIORITY PRIORITY MARKET SHARES MARKET SHARE PERFORMANCE (12 month share Δ) Objective to stabilise +5 bps share performance +35 bps +10 bps -25 bps +0 bps -2 bps -16 bps -40 bps Strategy has delivere
Slide 19: US: Delivering Revenue and Profit Growth
US: Delivering Revenue and Profit Growth ROBUST PERFORMANCE ACROSS THE PORTFOLIO KEY METRICS FMC – DELIVERING SHARE GAINS • Strong cigarette pricing, offsetting industry Cigarette market volume declines (-8.7%) share growth +5 bps • Growing share in an attractive market; balanced portfolio Tobacco a
Slide 20: Priority Markets: Improving Share Trends
Priority Markets: Improving Share Trends STRONG PRICING WHILE MANAGING SHARE AND VALUE DELIVERY -25 bps -40 bps +50 bps +10 bps HY23: -80 bps HY23: -75 bps HY23: +15 bps HY23: +1 bps • Improving share trend • Market size affected by • Attractive market size • Financial delivery despite above-inflati
Slide 21: Creating a Sustainable NGP Business
Creating a Sustainable NGP Business CONSOLIDATING PROGRESS AS A CHALLENGER FY21-FY23 FY24-25 PRIORITIES BUILDING THE FOUNDATIONS CONSOLIDATING OUR MARKET PRESENCE Consumer Refreshed NGP strategy co-ideation Building scale in existing markets Consumer trials and “test and learn” approach Consumer-led
Slide 22: Delivering European NGP Net Revenue Growth
Delivering European NGP Net Revenue Growth BUILDING ON OUR EXISTING MARKET FOOTPRINT HY24: NGP AS A % OF NR BY MARKET Europe HY24 7% Europe HY20 2% Portugal 46% HY24 NGP Greece 42% net revenue Estonia 38% Italy growth 32% Norway Austria Finland 22% 26% 25% +17% Sweden 22% HY24 NGP Europe NGP Poland
Slide 23: Vapour: Product Innovation Driving Growth
Vapour: Product Innovation Driving Growth BUILDING SCALE WITH GROWING NET REVENUE AND IMPROVING MARGINS VAPOUR Building scale in existing markets Launch of 1,000 puff blu bar Product and flavour innovation Improving gross margins 23 | Half Year Results | 15 May 2024
Slide 24: Heated Tobacco: Consolidating Market Launches
Heated Tobacco: Consolidating Market Launches DIFFERENTIATED OFFERING PROVIDING CONSUMER CHOICE HEATED TOBACCO Building scale in existing markets Focus on understanding the consumer Introduction of iSenzia, flavoured non-tobacco sticks 24 | Half Year Results | 15 May 2024
Slide 25: Modern Oral: Zone Launched in the US
Modern Oral: Zone Launched in the US INNOVATION AND PRODUCT LAUNCHES DELIVERING GROWTH MODERN ORAL ZONE LAUNCH Zone launched in DISTRIBUTION February 2024 12.8k stores Rolled out in 12 STRENGTHS metropolitan areas 6mg and 9mg Flavour launches in Europe SKUS 14 25 | Half Year Results | 15 May 2024
Slide 26: On Track to Deliver Our Full Year Plan
On Track to Deliver Our Full Year Plan CONTINUING OUR STRATEGIC TRANSFORMATION Focus on maintaining our priority markets aggregate market share Building scale in NGP footprint, with improving margins Leveraging new ways of working and further self-help opportunities Generating improving returns in l
Slide 27: Appendices
27 | Half Year Results | 15 May 2024
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Slide 29: Net Revenue
Net Revenue 2.8% (0.7)% £3,764m £3,663m £3,637m £(225)m £305m £21m £(127)m HY23 tobacco Tobacco Tobacco NGP net HY24 tobacco & Translation FX HY24 tobacco & NGP net volume price mix revenue NGP constant & NGP net revenue currency net revenue revenue 29 | Half Year Results | 15 May 2024
Slide 30: Adjusted Operating Profit Growth
Adjusted Operating Profit Growth +2.8% (2.7)% £1,764m £1,716m £1,669m £16m £5m £27m £(95)m HY23 Tobacco NGP losses/ Logista* HY24 Translation HY24 adjusted adjusted performance investment constant currency FX operating profit operating adjusted operating profit profit * Including eliminations 30 | H
Slide 31: Group Adjusted Results
Group Adjusted Results Constant Foreign Constant HY23 Currency HY24 Actual ∆ Exchange Currency ∆ Growth Tobacco net revenue £m 3,538 (124) 80 3,494 (1.2%) 2.3% NGP net revenue £m 125 (3) 21 143 14.4% 16.8% Tobacco & NGP operating profit £m 1,568 (91) 21 1,498 (4.5%) 1.3% Tobacco & NGP profit margin
Slide 32: Group Adjusted Results
Group Adjusted Results HY24 HY23 Group adjusted operating profit £m 1,669 1,716 Adjusted net finance costs £m (204) (199) Share of profit of JVs £m 4 3 Adjusted profit before tax £m 1,469 1,520 Adjusted effective tax rate % 23.0% 22.4% Adjusted EPS pence 120.2 118.5 Dividend per share pence 44.9 43.
Slide 33: Reconciliation: Reported to Adjusted
Reconciliation: Reported to Adjusted Net fair Amortisation Post- Adjustments value and and employment above £m Reported exchange Tax settlement Uncertain Adjusted impairment benefits net attributable to (unless otherwise stated) HY24 movements interest cost tax positions HY24 of acquired financing n
Slide 34: Income Statement
Income Statement £m (unless otherwise stated) HY24 HY23 Revenue 15,064 15,411 Adjusted operating profit 1,669 1,716 Amortisation and impairment of acquired intangibles (175) (174) Fair value adjustment and impairment of other financial assets - (7) Loss on disposal of subsidiaries - (1) Share of pro
Slide 35: Balance Sheet
Balance Sheet HY24 HY23 £m Non-current assets: tangible 3,588 3,665 intangible 16,499 17,006 Current assets: inventories 4,740 5,025 other 3,719 3,516 Current liabilities (13,261) (11,523) Non-current liabilities (10,199) (11,467) Net assets 5,086 6,222 35 | Half Year Results | 15 May 2024
Slide 36: Cash flow
Cash flow £m HY24 HY23 Group adjusted operating profit 1,669 1,716 Depreciation, amortisation and impairments 143 141 EBITDA 1,812 1,857 Other non-cash movements (16) 1 Operating cash flows before movement in working capital 1,796 1,858 Working capital (1,406) (1,626) Tax cash flow (425) (175) Cash
Slide 37: 12-month Cash Conversion
12-month Cash Conversion HY24 HY23 £m (unless otherwise stated) Net cash flow from operating activities 3,074 2,482 Tax 840 583 Net capex (249) (232) Restructuring cash spend 61 110 Cash flow post capex pre interest and tax 3,726 2,943 Adjusted operating profit 3,840 3,810 Cash conversion (%) 97% 77
Slide 38: Net Finance Costs
Net Finance Costs £m HY24 HY23 Net finance costs (354) (94) Adjusted for: - interest income on net defined benefit assets (80) (87) - interest cost on net defined benefit liabilities 85 80 - net fair value & exchange gains on financial instruments 135 (108) - tax settlement interest cost 10 10 Adjus
Slide 39: Net Debt Reconciliation
Net Debt Reconciliation Fair value of Accrued Adjusted £m Reported HY24 Lease liabilities interest rate interest HY24 derivatives Opening net debt (8,438) 76 349 9 (8,004) Free cash flow (523) - - - (523) Lease liabilities - - (52) (52) (Acquisitions)/disposals (40) - - - (40) Dividends paid to owne
Slide 40: Foreign Exchange
Foreign Exchange Average Closing HY23 HY24 ∆ HY23 HY24 ∆ USD $ 1.194 1.255 5.11% 1.237 1.263 2.10% EURO € 1.141 1.161 1.75% 1.137 1.170 2.90% AUD $ 1.782 1.917 7.58% 1.85 1.938 4.76% 40 | Half Year Results | 15 May 2024
Slide 41: 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. £10m impact on net revenue. Norwegian Krone, Europe 15% 75% 0% 0% 10% Swedish Krona Amer
Slide 42: Divisional Market Share
Divisional Market Share MAT MARKET SHARE DATA HY24 HY23 Europe 18.1% 18.5%R -40 bps Americas 10.8% 10.8% +5 bps AAACE 14.0% 15.4%R -140 bps Total Group 14.9% 15.7%R -80 bps Market Share Calculation Market share is presented as a 12-month average (MAT). Aggregate market share is a weighted average
Slide 43: FY24 Guidance
FY24 Guidance OTHER FINANCIAL ITEMS Financing & Cost of Debt Finance charge for FY24 expected to be c. £440m at current rates; all-in cost of debt of c. 4.4% for FY24 Tax Rate Expected to be c. 23% Capex Expect gross capex to be c. £300m-350m Cash Conversion Expect 90% to 100% range Foreign Exchange
Slide 44: Me impeRiaL
Me impeRiaL AN®R BRANDS
Slide 45: Financial Profile March 2024
Financial Profile 31 March 2024 Interest Split Currency Split (structural)* Committed Funding Split 4% 3% 9% Fixed Bonds Issues EUR Floating 24% Bank (Syndicated) Bank (Bilaterals) ECP 69% 91% 100% 14,000 Committed Financing Outstanding (£m) 12,000 10,000 Bond Issues Bank (Syndicated) 8,000 ECP Bank
Slide 46: Committed Bank Facilities
Committed Bank Facilities 31 March 2024 Amount Description Maturity date (EUR m) £m equiv. Committed 3-year Revolving Credit Facility 30 September 2025 184 157 Committed 3-year Revolving Credit Facility 30 March 2026 184 157 Committed 3-year Revolving Credit Facility 30 September 2026 3,125 2,669 To
Slide 47: Bond Issues
Bond Issues 31 March 2024 Currency of Amount issue (ccy m) Issuer Coupon Issue Date Maturity Date £m equiv. USD 1,000 Imperial Brands Finance PLC 3.13% Jul-19 Jul-24 767 EUR 500 Imperial Brands Finance PLC 1.38% Jan-17 Jan-25 427 USD 1,500 Imperial Brands Finance PLC 4.25% Jul-15 Jul-25 1,197 EUR 65
Slide 48: 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