IMPERIAL BRANDS PLC
LEGAL ENTITY IDENTIFIER (LEI) NO.
549300DFVPOB67JL3A42
HALF
YEAR RESULTS STATEMENT
15
MAY 2024
delivering
accelerated
performance
Report for the six months ended 31 March
2024
Business Highlights
• Strong tobacco
pricing up 8.6% more than offsetting volume declines
• Delivering stable
aggregate market share in our five priority markets in line with
our strategic objective
• Next Generation
Product net revenue up 16.8% by building scale in our market
footprint and product innovation
• Adjusted earnings per
share benefited from adjusted operating profit growth and share
count reduction
• Cash conversion was
strong on 12-month basis supported by improved working capital
• Delivering the £1.1bn
share buyback this year, alongside an increased interim dividend up
4.0%
• Continued confidence
in successful delivery of full-year results in line with guidance,
with returns improving in line with five-year strategy
Financial Summary
Six
months ended
31 March 2024
|
|
Reported
|
|
|
Adjusted2
|
|
2024
|
2023
|
Change
|
|
2024
|
2023
|
Actual
|
Constant
currency3
|
Revenue
|
£m
|
15,064
|
15,411
|
-2.3%
|
|
-
|
-
|
-
|
-
|
Tobacco & NGP net
revenue1
|
£m
|
-
|
-
|
-
|
|
3,637
|
3,663
|
-0.7%
|
+2.8%
|
Operating profit
|
£m
|
1,494
|
1,534
|
-2.6%
|
|
1,669
|
1,716
|
-2.7%
|
+2.8%
|
Earnings per share
|
p
|
96.0
|
117.0
|
-18.0%
|
|
120.2
|
118.5
|
+1.4%
|
+7.7%
|
Net debt
|
£m
|
(10,585)
|
(10,239)
|
-
|
|
(10,085)
|
(9,799)
|
-
|
-
|
Dividend per share
|
p
|
44.90
|
43.18
|
+4.0%
|
|
44.90
|
43.18
|
+4.0%
|
+4.0%
|
1. Tobacco & NGP net revenue is
reported revenue less duty and similar items, sale of peripheral
products and Distribution (Logista) gross profit.
2. See page 3 for the basis of
presentation and the supplementary section at the end of the
financial statements for the reconciliation between reported and
adjusted measures.
3. Constant currency removes effect of
exchange rate movements on the translation of the results of our
overseas operations.
Stefan Bomhard Chief Executive
"Investment in consumer capabilities, more agile ways
of working and further progress with our performance culture have
made Imperial Brands a stronger business better able to deliver an
acceleration in financial delivery. This is demonstrated in the
first half with the strongest organic top-line growth in more than
ten years, amid a challenging external environment.
"In tobacco, stronger brands and improved sales
execution have enabled us both to consolidate the market share
gains in our priority markets achieved in recent years and to
deliver a strong price mix of 8.6%.
"In Next Generation Products (NGP), we are steadily
building scale within our footprint and these efforts have resulted
in net revenue growth of 16.8% on a constant currency basis. In the
past six months, we have launched new products in all categories,
including our entry into the US oral nicotine market with the new
'zone' brand. Our improved innovation capabilities, which now
include three 'Sense Hubs' in Liverpool, Hamburg and Shenzhen, mean
we are well set up to adapt to changing consumer preferences and
regulatory requirements.
"Operational progress has translated into strong
financial results and improving capital returns to shareholders.
Alongside our progressive dividend, we are on track to complete our
ongoing £1.1 billion share buyback programme and to deliver
three-year cumulative returns of £6.0 billion including buybacks
and our dividend.
"Pricing actions in tobacco taken in the first half
and good momentum in NGP gives us confidence in our ability to
deliver full-year results in line with our guidance."
Delivering Against our Strategic Priorities
Delivering strong pricing across our portfolio of five
priority combustible markets
·
Maintaining aggregate market share in our
five priority markets in line with our strategic
objective
· Share positions supported by continued investment in brand
equity and sales force initiatives
·
Three out of five markets growing market share: gains in USA (+5 bps), Spain (+50 bps) and Australia (+10 bps)
offsetting declines in Germany (-25 bps) and UK (-40
bps)
· Encouraging improvement in German share trend -25 bps vs HY23
and FY23 -80 bps
·
Strong pricing supporting financial delivery while managing overall
market share delivery
Building a sustainable NGP business for a healthier
future
·
Delivering improved scale in our existing footprint and a further
step-up in innovation across all NGP categories
· NGP
net revenue now represents c. 7% of total tobacco and NGP net
revenue in Europe, including Central & Eastern
Europe
· New
blu bar vape launch with 1,000 puff capacity, removable battery and
reduced plastic content
· Expanding our heated product offering for Pulze 2.0 with
iSenzia flavoured herbal sticks in Europe
· Entered the fast-growing modern oral category in the USA with
the targeted launch of 'zone' in 12 US cities
Driving value from our broader market
portfolio
·
Strong pricing in our wider footprint, mitigating volume declines
· Good
progress in broader geographies, e.g. Africa, Central and Eastern
Europe, Southeast Europe and Scandinavia
· Disruption in the Middle East affecting shipment timings and
results in the AAACE region
· Strong NGP growth as we build momentum in our broader market
portfolio
Transforming our ways of working
· Consumer capabilities: strengthened
with all three Sense Hub innovation centres now fully
operational
· Simplified and efficient operations: Continued progress in adopting new ways of working and driving
self-help initiatives, e.g. further scale up of our Global Business
Services
· Good
progress with implementation of ERP
roll-out; the programme will replace 60 legacy systems with a
single platform over time
Results Overview*
Tobacco & NGP net revenue growth driven by resilient
tobacco pricing
· Tobacco and NGP net revenue up +2.8%; the strongest organic revenue growth in more than ten
years
· Strong tobacco pricing of +8.6% driven by a broad base of
markets; tobacco net revenue up
+2.3%
· Tobacco volumes down -6.3% (to 89.9bn SE) reflecting wider
industry market size declines across our footprint
· NGP
revenue up +16.8% as strong growth in
Europe and AAACE more than offset declines in USA
· Reported revenue declined -2.3%; reflecting the decline in tobacco and NGP revenue due to
adverse foreign exchange movements, partly offset by growth in
Distribution revenue
Delivering improved profitability and increased
investment
· Group adjusted operating profit grew +2.8%,
driven by improved profitability in tobacco and
NGP and growth in Distribution
· Reported operating profit declined -2.6% as the decline in tobacco operating profit due to foreign
exchange translation movements was partially offset by reduced
losses in NGP and increased Distribution operating
profit
· Tobacco adjusted operating profit increased +1.0%,
reflecting strong pricing offsetting volume
declines
· NGP
adjusted losses reduced by +8.9% to £50m as
expected, with improved gross margin and volume growth supporting
continued investment in new product launches
· Distribution adjusted operating profit up +18.2%
reflecting good underlying growth due to tobacco
price increases
· Adjusted EPS grew +7.7% with adjusted
operating profit growth enhanced by reduced share count due to the
ongoing share buyback more than offsetting higher finance costs and
a higher tax rate
· Reported EPS declined -18.0% reflecting mark-to-market movements on financial instruments
and adverse foreign exchange translation
Free cash flow supporting investment and shareholder
returns
· Adjusted operating cash conversion of c. 97% on a 12-month
basis, reflecting working capital improvements
· Adjusted net debt £10.1bn; adjusted net debt to EBITDA on a
12-month basis broadly flat at 2.5x; reported net debt
£10.6bn
· On
track to deliver adjusted net debt to EBITDA of around 2.0 times at
the year end
· Interim dividend per share up 4.0% to
44.90 pence, in line with our progressive dividend
policy
· £604m buyback completed in period; on
track to complete £1.1bn this year
· Since starting the buyback in October 2022,
we have repurchased 9% of share capital
· On
track to return at least £2.4bn to
shareholders in FY24; and cumulative three-year returns of
£6.0bn
* All measures at constant
currency unless otherwise stated
Outlook
Our five-year strategy is continuing
to drive the operational and cultural benefits which, despite a
challenging external environment, are strengthening performance and
our financial delivery. This underpins our confidence in delivering
against the final two years of our plan with a further improvement
in adjusted operating profit growth to support a mid-single-digit
constant currency CAGR over FY23-FY25, in line with our medium-term
guidance.
We remain firmly on track to deliver
against the guidance and expectations for the current year and
expect to deliver low-single-digit constant currency tobacco and
NGP net revenue growth, while growing our constant currency
adjusted operating profit close to the middle of our mid-single
digit range. Strong tobacco pricing already taken in the first half
of the year and lower NGP losses will support a stronger second
half delivery.
Earnings per share growth will
benefit additionally from the continued reduction in share count as
a result of our ongoing share buyback programme, although this will
be offset slightly by increased adjusted finance and tax
costs.
At current exchange rates,
translation foreign exchange is expected to be a c. 2% headwind to
full year tobacco and NGP net revenue and a c. 3.0-3.5% headwind on
full-year adjusted operating profit and adjusted earnings per
share.
We look forward to building on our
growing operational track record to deliver shareholder returns
through an ongoing buyback and progressive dividend, and to play a
positive, distinctive role in this industry's transition to a
healthier future.
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Basis of Presentation
· To aid understanding
of our results, we use 'adjusted' (non-GAAP) measures to provide a
consistent comparison of performance from one period to the next.
Reconciliations between adjusted and reported (GAAP) measures and
further definitions of adjusted measures are provided in the
supplementary information section. Change at constant currency
removes the effect of exchange rate movements on the translation of
the results of our overseas operations. References in this document
to percentage growth and increases or decreases in our adjusted
results are on a constant currency basis unless stated otherwise.
These are calculated by translating current year results at prior
year exchange rates.
· Stick Equivalent (SE)
volumes reflect our combined cigarette, fine cut tobacco, cigar and
snus volumes but exclude any NGP volume such as heated tobacco,
modern oral nicotine and vapour.
· Market share is
presented as a six-month average to the end of March (MHT - moving
half-year trend), unless otherwise stated. Aggregate market share
is a weighted average across markets within our footprint.
Other Information
Investor Contacts
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Media
Contacts
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Peter Durman
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+44 (0)7970 328 903
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Jonathan Oliver
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+44 (0)7740 096 018
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Jennifer Ramsey
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+44 (0)7974 615 739
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Simon Evans
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+44 (0)7967 467 684
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Henry Dodd
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+44 (0)7941 648 421
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Analyst Presentation Webcast
· Stefan
Bomhard, Chief Executive, and Lukas Paravicini, Chief Financial
Officer, will present the results to investors and investment
analysts via a webcast at 08:30 (BST) on 15 May 2024. It will be
followed by a live question and answer session.
The presentation slides will be available on
www.imperialbrandsplc.com from 07.00 (BST). A webcast recording and
the presentation script will also be available after the webcast
has concluded.
· The
webcast will be available on
https://edge.media-server.com/mmc/p/dyhu43t6. To participate in the Q&A session, please register in
advance via this link:
https://register.vevent.com/register/BI5a84680374a54342bf327e3d2fc3f310.
You will then receive the dial-in details and your own PIN to
access the live Q&A session.
Cautionary Statement
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
performance, financial condition and business is or may be a
forward-looking statement. Such forward-looking statements are
subject to risks and uncertainties that may cause actual results to
differ materially from those projected or implied in any
forward-looking statement. These risks and uncertainties include,
among other factors, changing economic, financial, business or
other market conditions. These and other factors could adversely
affect the outcome and financial effects of the plans and events
described in this announcement. As a result, you are cautioned not
to place any reliance on such forward-looking statements. The
forward-looking statements reflect knowledge and information
available at the date of this announcement and the Company
undertakes no obligation to update its view of such risks and
uncertainties or to update the forward-looking statements contained
herein. Nothing in this announcement should be construed as a
profit forecast or profit estimate and no statement in this
announcement should be interpreted to mean that the future earnings
per share of the Company for current or future financial years will
necessarily match or exceed the historical or published earnings
per share of the Company. This announcement has been prepared for,
and only for the members of the Company, as a body, and no other
persons. The Company, its Directors, employees, agents or advisers
do not accept or assume responsibility to any other person to whom
this announcement is shown or into whose hands it may come, and any
such responsibility or liability is expressly
disclaimed.
For
a Copy of the full statement
To view a copy of the full statement please click
here: https://www.imperialbrandsplc.com/HY24
and is also available here: http://www.rns-pdf.londonstockexchange.com/rns/4423O_1-2024-5-14.pdf