REG - Imperial Brands PLC - Half-year Report

Imperial BrandsAnnouncement

15/05/2024 07:00

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RNS Number : 4423O  Imperial Brands PLC  15 May 2024

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                       Reported                                         Adjusted(2)

31 March 2024
                                        2024      2023      Change    2024      2023     Actual  Constant currency(3)
 Revenue                           £m   15,064    15,411    -2.3%     -         -        -       -
 Tobacco & NGP net revenue(1)      £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.

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                       Media Contacts
 Peter Durman       +44 (0)7970 328 903  Jonathan Oliver             +44 (0)7740 096 018
 Jennifer Ramsey    +44 (0)7974 615 739  Simon Evans                 +44 (0)7967 467 684
 Henry Dodd         +44 (0)7941 648 421

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
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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
(https://www.imperialbrandsplc.com/HY24)

and is also available here:
http://www.rns-pdf.londonstockexchange.com/rns/4423O_1-2024-5-14.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/4423O_1-2024-5-14.pdf)

 

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