Imperial Brands Plc · LSE:IMB
Imperial Brands — Imperial Tobacco Group — H1 2015 Earnings Presentation
56 slides from Imperial Brands's earnings presentation, May 6, 2015
Slide 1: Half Year Results 2015
Half Year Results 2015 Imperial Tobacco Group PLC 6 May 2015
Slide 2: Alison Cooper, Chief Executive
Alison Cooper Chief Executive
Slide 3: Disclaimer
Disclaimer Certain statements in this announcement constitute or may constitute forward-looking statements. Any statement in this announcement that is not a statement of historical fact including, without limitation, those regarding the Company’s future expectations, operations, financial performanc
Slide 4: Our Priorities for 2015
Our Priorities for 2015 a reminder of what we said in November Target of at least 10% increase in dividend Strengthen Develop Cost Capital Portfolio Footprint Optimisation Discipline Enhance brand equity Building momentum Deliver further savings Embedding cash to build sustainability across
Slide 5: Good First Half Performance
Good First Half Performance on track for full year Interim dividend up 10% to 42.8p Strengthen Develop Cost Capital Portfolio Footprint Optimisation Discipline Increasing share of Positive momentum in On track to generate Cash conversion 102% revenue from Growth Growth Markets: net (MAT) fur
Slide 6: Oliver Tant, Chief Financial Officer
Oliver Tant Chief Financial Officer
Slide 7: Underlying Performance
Underlying Performance improving market share HY15 ∆ Excluding Iraq ∆ Volume (bn SE) -5% -3% Tobacco net revenue (£m) 0% +1% Growth Brand volume (bn SE) +12% +16% Growth Brand tobacco net revenue +15% +16% Specialist Brand tobacco net revenue +2% +4% Growth Market volume (bn SE) -11% -7% Growth Mark
Slide 8: HY15 Adjusted EPS Growth
HY15 Adjusted EPS Growth +0.6p +0.3p -1.8p +0.7p +0.8p +7% -2.4p +5.5p +4% 95.7p 93.3p 89.6p Adjusted Profit Net Profit from Taxation Minority Share Constant Foreign Adjusted EPS HY14 performance finance Joint interest buy-back* currency exchange EPS HY15 costs Venture EPS HY15 * On 15 July 2014, in
Slide 9: Growth and Specialist Brands
Growth and Specialist Brands strengthening our portfolio Constant Underlying Growth Brands HY15 HY14 Actual ∆ FX ∆ ∆ Volume (bn SE) 70.5 60.2 +17% +12% Market share (%) 6.1 5.2R +90 bps Tobacco net revenue (£m) 1,401 1,252 +12% +20% +15% Growth Brands % Group volume 51 43 +810 bps Growth Brands % Gr
Slide 10: Growth Markets
Growth Markets developing our footprint Constant Underlying HY15 HY14 Actual ∆ FX ∆ ∆ Volume (bn SE) 48.2 49.4 -3% -11% Growth Brands volume (bn SE) 25.7 25.3 +1% -7% Growth Brands % tobacco net revenue 43 40R +330 bps Tobacco net revenue (£m) 895 865R +3% +8% +1% Adjusted operating profit (£m) 266
Slide 11: Returns Markets
Returns Markets developing our footprint Constant Underlying HY15 HY14 Actual ∆ FX ∆ ∆ Volume (bn SE) 90.0 90.7 -1% -1% Growth Brands volume (bn SE) 44.9 35.0 +28% +26% Growth Brands % tobacco net revenue 49 41 +810 bps Tobacco net revenue (£m) 2,050 2,189 -6% +1% 0% Tobacco net revenue per ‘000 SE
Slide 12: Logistics
Logistics encouraging performance Actual Constant HY15 HY14 ∆ FX ∆ Distribution fees (£m) 378 427R -11% -3% Adjusted operating profit (£m) 73 73 0% +10% Margin (%) ∆ 19.3 17.1R +220 bps Price increases and cost efficiency offset lower tobacco volumes Growth continuing in non tobacco R Restated f
Slide 13: Adjusted Net Debt and Cash
Adjusted Net Debt and Cash driving further improvements 12 month 12 month Adjusted Net Debt Cash Conversion £3.1bn £1.4bn £0.4bn £0.9bn 102% £1.0bn £0.3bn 90%* £0.4bn £0.2bn 78% R £11.0bn 63% £9.1bn HY13 HY14 HY15 FY15 Est* Opening EBITDA Working Net Tax and Restructuring Dividends Logista FX and Cl
Slide 14: Foreign Exchange
Foreign Exchange 3% impact on half year profit +5% -3% +1% -1% +2% 1,413 1,367 1,345 Constant currency Euro US Dollar Other Adjusted operating Adjusted operating operating profit currencies profit HY15 profit HY14 HY15 14
Slide 15: Good First Half Performance
Good First Half Performance on track for full year Interim dividend up 10% to 42.8p Strengthen Develop Cost Capital Portfolio Footprint Optimisation Discipline Increasing share of Positive momentum in On track to generate Cash conversion 102% revenue from Growth Growth Markets: net (MAT) fur
Slide 16: Strengthening our Portfolio
Strengthening our Portfolio improving net revenue quality Growth Brands Growth & Portfolio Specialist Brands Brands 41% 59% Specialist Brands +7% in 12 months 16
Slide 17: Strengthening our Portfolio: Successful Brand Migrations
Strengthening our Portfolio successful brand migrations 5 migrations completed in HY15 UK: Gold Leaf to JPS Poland: 4 local brands to Parker & Simpson 19 other migrations in progress Consumer retention post migration c.100% New brand campaigns Growth Brand market share up in 12 of top
Slide 18: Video
Imperial Tobacco Video 18
Slide 19: Improving In-Market Focus and Delivery
Improving In-Market Focus and Delivery Customer Engagement Activation Advocacy Availability Customer Service Proposition 3FT & iServe – Connected, Empowered, Engaged Field Force Structure People Technology 19
Slide 20: Market Environment
Market Environment industry volumes down c.4% in HY15 UK Germany Australia Ukraine Spain France Morocco Russia Italy USA Returns Growth Total 0% -2% +0.6% -0.1% -4% -0.4% +0.6% +0.8% -0.3% -6% +2.6% +1.6% -0.9% +1.5% -8% +1.7% -10% FY14 +3.5% HY15 -12% -2.4% Note: markets shown represent c.50% of H1
Slide 21: Developing our Footprint: USA
Developing our Footprint USA Continued focus on target states USA Gold increased cigarette share Results held back by lower sales of MMC US deal still awaiting approval by the FTC Deal completion expected spring 2015 21
Slide 22: Developing our Footprint: Growth Markets
Developing our Footprint Growth Markets Italy Taiwan Volumes and market share up Strong first half performance Further good growth from JPS Davidoff gains are driving results Davidoff success in key cities Share, revenue and profit growth Iraq Russia -2% of Group volume decline Marke
Slide 23: Developing our Footprint: Returns Markets
Developing our Footprint Returns Markets UK Germany Delivered good brand performances Strong results in stable market Cigarette: further gains from L&B Blue Continued growth from JPS Fine Cut Tobacco: gv growth Improving Growth Brand share Spain Australia Market volume declines slowed
Slide 24: Fontem Ventures
Fontem Ventures building presence in Europe Extending brand availability: Widening distribution of Puritane in UK Launched JAI e-vapour brand in France and Italy Other product launches being evaluated 24
Slide 25: Video
Imperial Tobacco Video 25
Slide 26: On Track for 2015
On Track for 2015 10% increase in dividend Strengthen Develop Cost Capital Portfolio Footprint Optimisation Discipline Enhance brand equity Building momentum Deliver further savings Embedding cash to build sustainability across Growth as part of £300m pa conversion discipline Build on succ
Slide 27: Half Year Results 2015
Half Year Results 2015 Imperial Tobacco Group PLC 6 May 2015
Slide 28: Appendices
a Appendices
Slide 29: Group Financials
a Group Financials
Slide 30: Group Adjusted Results
Group Adjusted Results Constant Constant Foreign Currency Currency HY14 Exchange Growth HY15 ∆ ∆ Tobacco net revenue (£m) 3,054R (197) 88 2,945 -4% +3% Logistics distribution fees (£m) 427R (34) (15) 378 -11% -3% Tobacco operating profit (£m) 1,275R (39) 59 1,295 +2% +5% Tobacco margin (%) 41.7R 44.
Slide 31: Group Adjusted Results
Group Adjusted Results £m HY 2015 HY 2014 Group adjusted operating profit 1,367 1,346R Interest (231) (254)R Share of profit of JVs 17 11R Profit before tax 1,153 1,103R Tax rate % 20.9 21.2R Adjusted EPS (p) 93.3 89.6 DPS (p) 42.8 38.8 Cash conversion (%) 102 78 Adjusted net debt (£m) (9,056) (8,11
Slide 32: Reconciliation: Reported to Adjusted
Reconciliation: Reported to Adjusted Fair value Adjustments Amortisation gains / losses Post Acquisition Tax on non- Reported of acquired on financial employment Restructuring accounting unrecognised controlling Adjusted £m HY 2015 intangibles instruments net financing costs adjustments losses inter
Slide 33: Income Statement
Income Statement £m HY 2015 HY 2014 Revenue 12,129 12,634R Adjusted operating profit 1,367 1,346R Amortisation of acquired intangibles (312) (326) Restructuring costs (76) (42) Acquisition costs (20) - Share of profit of investments accounted for using the equity method 17 11 * Net finance income/(c
Slide 34: Balance Sheet
Balance Sheet £m HY 2015 HY 2014 Non-current assets: tangible 3,823 3,089 intangible 14,515 16,365 Current assets: inventories 3,442 3,945 other 3,596 3,999 Current liabilities (9,180) (9,394) Non-current liabilities (10,907) (13,217) Net assets 5,289 4,787 34
Slide 35: Cash Flow
Cash Flow £m HY 2015 HY 2014 Cash flows from operating activities pre tax 77 (255) Tax paid (235) (226) Cash flows from operating activities (158) (481) Net capex (87) (140) Employee Share Ownership Trust 1 (1) Share buy backs - (237) Dividends paid (inc. minority interests) (883) (790) Net interest
Slide 36: 12 Month Cash Conversion
12 Month Cash Conversion 12 months to 12 months to £m March 2015 March 2014 Net cash flow from operating activities 2,825 2,209 Tax 460 449 Net capex (213) (216) Cash flow post capex pre interest and tax 3,072 2,442 Adjusted operating profit 3,002 3,122 Cash conversion (%) 102 78 Working capital (ou
Slide 37: Net Finance (Income)/Costs
Net Finance (Income)/Costs £m HY 2015 HY 2014 Net finance (income)/costs (72) 350 Adjusted for: - interest income on net defined benefit assets 67 69 - interest cost on net defined benefit liabilities (77) (88) - unwind of discount on redundancy and long term provisions (1) (2) - exchange gains/(los
Slide 38: Net Debt Reconciliation
Net Debt Reconciliation Reported Accrued Fair value of Adjusted £m HY 2015 interest derivatives HY 2015 Opening net debt (8,526) 280 134 (8,112) Free cash flow (582) - - (582) Dividends (883) - - (883) Accretion of interest 118 (118) - - Change in fair values 470 - (89) 381 Exchange movements 140 -
Slide 39: Divisional Financials
Divisional Financials
Slide 40: Total Tobacco Volume
Total Tobacco Volume bn SE HY 2015 HY 2014 Actual ∆ Growth Markets 48.2 49.4R -3% Returns Markets North 49.2 48.5 +2% Returns Markets South 40.8 42.2R -3% Total Returns Markets 90.0 90.7R -1% Total Group 138.2 140.1 -1% bn SE is billion stick equivalent; Total Tobacco includes cigarettes, fine cut t
Slide 41: Tobacco Net Revenue
Tobacco Net Revenue HY 2015 % Change Foreign Constant Constant £m Actual1 Exchange Currency2 HY 2014 Currency Growth Markets 895 (42) 72 865R +8% Returns Markets North 1,320 (95) 47 1,368 +3% Returns Markets South 730 (60) (31) 821R -4% Total Returns Markets 2,050 (155) 16 2,189R +1% Total Tobacco 2
Slide 42: Tobacco Adjusted Operating Profit
Tobacco Adjusted Operating Profit HY 2015 % Change Foreign Constant Constant £m Actual1 Exchange Currency2 HY 2014 Currency Growth Markets 266 21 50 195R +26% Returns Markets North 719 (36) 27 728 +4% Returns Markets South 310 (24) (18) 352R -5% Total Returns Markets 1,029 (60) 9 1,080R +1% Total To
Slide 43: Returns Markets North
Returns Markets North UK, Germany, Australia, Netherlands, Poland, Ukraine etc Constant HY 2015 HY 2014 Actual ∆ FX ∆ Market share (%) 25.0 25.0 0 bps Net revenue per ‘000 SE (£) 26.81 28.22 -5% +2% Adjusted operating profit (£m) 719 728 -1% +4% Growth Brands % tobacco net revenue 52 45 +700 bps SE
Slide 44: Returns Markets South
Returns Markets South France, Spain, Morocco, Algeria, Central Europe, C. Africa etc Constant HY 2015 HY 2014 Actual ∆ FX ∆ Market share (%) 28.7 28.9R -20 bps Net revenue per ‘000 SE (£) 17.89 19.46R -8% -1% Adjusted operating profit (£m) 310 352R -12% -5% Growth Brands % tobacco net revenue 44 35
Slide 45: Financing
a Financing
Slide 46: Committed Bank Facilities
Committed Bank Facilities 31 March 2015 Description Maturity date Amount £m equiv. USD Committed 2 Year A Term Loan Acquisition Facility1,2 Jul-17 $4,100m £2,772m USD Committed 3 Year B Term Loan Acquisition Facility1 Jul-18 $1,500m £1,014m USD Committed 5 Year C Term Loan Acquisition Facility1 Jul-
Slide 47: Bond Issues
Bond Issues 31 March 2015 Amount Issuer Coupon Issue Date Maturity Date £m equiv. Margin €500m Altadis Emisiones Financieras SAU 4.000% Dec-05 Dec-15 £364m 1.1% €1,500m Imperial Tobacco Finance PLC 8.375% Feb-09 Feb-16 £1,091m 5.0% £450m Imperial Tobacco Finance PLC 5.500% Nov-06 Nov-16 £487m1 0.6%1
Slide 48: Core Financing maturity profile at March 2015
Core Financing maturity profile at 31 March 2015 14,000 Facilities in place as at 31 March c.£12.8bn1 12,000 69% bond issues, 26% bank facilities, 5% ECP 10,000 Headroom as at 31 March c.£3.2bn £m equivalent 8,000 6,000 ECP Bank Facilities 4,000 Bond Issues2 2,000 - Mar Mar Mar Mar Mar Mar Mar
Slide 49: Other Information
ge — Other Information
Slide 50: Foreign Exchange
Foreign Exchange Average Closing £1 = HY 2015 HY 2014 HY 2015 HY 2014 Euro 1.307 1.199 1.375 1.207 US Dollar 1.549 1.637 1.479 1.665 Australian Dollar 1.890 1.796 1.946 1.804 Russia Rouble 85.80 55.39 85.85 58.90 HY impact negative -3% on adjusted operating profit and adjusted earnings per share
Slide 51: Financing, Tax, JVs and Minorities
Financing, Tax, JVs and Minorities Average cost of debt c.4.9% in FY14: expect to maintain in FY15 US acquisition facilities currently not drawn FY14 adjusted rate of 21%: expect to maintain in FY15 IFRS 11 adopted – restatement of Joint Arrangements Logista pro forma minority interest for
Slide 52: Dividend
Dividend Interim dividend announced today 42.8p Quarterly dividend payments commence in FY15; 1: 50% of Interim announced today, (21.4p) paid 30 June 2: 50% of Interim announced today, (21.4p) paid 30 September 3: 50% of Final announced at our preliminary results, paid December 4: 50% of
Slide 53: Glossary
Glossary SE Stick Equivalent (SE) volumes reflect our combined cigarette, fine cut tobacco, cigar and snus volumes. Change at constant currency removes the effect of exchange rate movements on the translation of the results of our Constant Currency overseas operations. Underlying additionally (to co
Slide 54: Main Market Classifications
Main Market Classifications Growth Markets Returns Markets North Returns Markets South Cambodia Australia Algeria China Azerbaijan Austria Iraq Belux Czech Republic Italy Germany France Japan Ireland Hungary Russia Netherlands Morocco Saudi Arabia New Zealand Portugal Taiwan Poland Spain Turkey UK T
Slide 55: Basis of Results Presentation
Basis of Results Presentation The financial information comprises the unaudited results for the six months ended 31 March 2015 and 31 March 2014, together with the audited results for the year ended 30 September 2014. The information shown for the year ended 30 September 2014 does not constitute sta
Slide 56: Contacts
Contacts Investor Relations Matt Sharff Jo Brewin Investor Relations Manager Investor Relations Manager [email protected] [email protected] Tel: +44 (0) 117 933 7396 Tel: +44 (0) 117 933 7549 56
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