REG - Imperial Brands Fin - Annual Financial Report
04/12/2024 15:30
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RNS Number : 8398O Imperial Brands Finance PLC 04 December 2024
Company Number: 03214426
IMPERIAL BRANDS FINANCE PLC
Annual Report and Financial Statements 2024
STRATEGIC REPORT
For the year ended 30 September 2024
The Directors present their Strategic Report together with the audited
financial statements of Imperial Brands Finance PLC (the "Company") for the
year ended 30 September 2024.
Principal activity and principal risks and uncertainties of the Company
The principal activity of the Company is to provide treasury services to
Imperial Brands PLC and its subsidiaries (the "Group").
The Company, as the main financing and financial risk management company for
the Group, undertakes transactions to manage the Group's financial risks,
together with its financing and liquidity requirements. Financial risks
comprise, but are not limited to, market, credit and liquidity risk. A
summary of the Company's policies in respect of foreign exchange, interest,
credit and liquidity risks is included in note 13.
The Company is a wholly owned indirect subsidiary of Imperial Brands PLC,
which is the ultimate parent company within the Group, and the Directors of
the Group manage operations at a Group level. Given the nature of the
Company's activities and that the overall management is within the Group
framework, the Company's Directors believe that analysis using key performance
indicators for the Company is not necessary or appropriate for an
understanding of the development, performance or position of the business of
the Company. The development, performance and position of the treasury
operations of the Group, which includes the Company, are discussed in note 21
of the Imperial Brands PLC Annual Report ("Imperial Brands Annual Report")
which does not form part of this report, but is published annually and will be
available at www.imperialbrandsplc.com. Financial risk management
disclosures can be found in note 13.
Global economic situation
The Company's policy is to ensure that we always have sufficient capital
markets funding and committed bank facilities in place to meet foreseeable
peak borrowing requirements of the Group. The Directors recognise that the
current environment brings uncertainty due to global economic challenges
including those caused by the situation in Russia and Ukraine, low global
economic growth and inflationary pressure. However, the Group has
effectively managed operations across the world, and has proved it has an
established mechanism to operate efficiently despite the uncertainty caused.
There is an ongoing risk that failure to maintain cash flows could impact the
Group's and therefore the Company's ability to pay down debt, impacting
covenants, credit ratings, bank, bond, and investor confidence. In addition,
a downgrade in our credit ratings would raise the cost of our existing
committed funding and is likely to raise the cost of future funding and affect
our ability to raise debt. However, the Group has a strong focus on cash
generation supported by robust governance processes. Cash flows, financing
requirements and key rating agency metrics are regularly forecasted and
updated in line with performance and expectations to manage future financing
needs and optimise cost and availability. The Company has investment grade
credit ratings from the main credit rating agencies, which supports it to
access financing in the global debt capital markets.
Climate Change
As a subsidiary of the Imperial Brands Group, the Company adheres to the
Group's climate related strategy. The ESG review and Task Force on
Climate-related Financial Disclosures (TCFD) is discussed within the Strategic
Review section of the Imperial Brands Annual Report. For this reason, the
Company's Directors consider further detail of the assessment of climate
related risks in this report is not necessary.
Review of the business
The performance of the Company is dependent on external borrowings and
intragroup loans payable and receivable and interest thereon, together with
fair value gains and losses on derivative financial instruments. While the
Company remains the principal financing entity for the Imperial Brands Group,
another Group entity, Imperial Brands Financing Netherlands BV, incorporated
in 2020, is also involved in Group financing activity.
The profit for the financial year was £525 million (2023: £393 million) and
is stated after a release of £240 million (2023: £25 million) arising on a
decrease in the expected credit loss provision against the carrying value of
certain loans made to entities within the Imperial Brands Group. The release
of £240 million was mainly due to a loan receivable exposure being settled
after the year end, reducing the Expected Credit Loss (ECL) provision
recognised as at 30 September 2024. The expected loss provision arises due
to the assessment of credit risk associated with the future repayment of the
loans. The release of the provision is not tax allowable and therefore there
is no associated tax credit.
On 15 March 2024, £600 million 8.125% notes were repaid. On 1 July 2024,
US$1,250 million (£984 million equivalent) 5.5% notes were issued. On 1 July
2024, US$750 million (£591 million equivalent) 5.875% notes were issued. On
11 July 2024, a partial repayment of the US$ 1,500 million 4.25% notes was
made; US$ 550 million (£425 million equivalent) was repaid with the remaining
US$ 950 million due July 2025. On 26 July 2024, US$1,000 million (£777
million equivalent) 3.125% notes were repaid. Borrowings disclosures can be
found in note 12.
Total equity as at 30 September 2024 was £3,202 million (2023: £2,677
million).
The aggregate dividends on the ordinary shares recognised as a charge to
shareholders' funds during the year amount to £nil million (2023: £nil
million).
UK Companies Act: Section 172 (1) statement
The Company is part of the Imperial Brands Group and is ultimately owned by
Imperial Brands PLC. As set out above the Company's principal activities
comprise undertaking transactions to manage the Group's financial risks,
together with its financing and liquidity requirements. Under Section 172
(1) of the UK Companies Act 2006 and as part of the Directors' duty to the
Company's shareholders to act as they consider most likely to promote the
success of the Company, the Directors must have regard to the long term
consequences of decisions and the desirability of maintaining a reputation for
high standards of business conduct. The Directors must also have regard for
business relationships with the Company's wider stakeholders, and the impact
of the Company's operations on the environment and communities in which it
operates. Consideration of these factors and other relevant matters is
embedded into board decision making and risk assessments throughout the year.
The Company's key stakeholders are financial institutions which it engages in
relation to the Company's financial activities and those members of the
Imperial Brands Group to which it provides finance-related services. Primary
ways in which the Company engages with financial institutions are through
meetings, ongoing dialogue and relationship management conducted by the
Imperial Brands Group Treasury and Finance teams. There is regular
engagement with Imperial Brands PLC on finance related matters, which is taken
into account in the Company's decision making. Primary ways in which the
Company engages directly or indirectly, as part of the Imperial Brands Group,
with its key stakeholders are summarised at pages 54 to 57 of the Imperial
Brands Annual Report. This enables the Directors to maintain an effective
understanding of what matters to those stakeholders and to draw on these
perspectives in Board decision making. During the decision making process
the Directors are made aware of the impact of decisions on relevant
stakeholders and engagement that has occurred with those stakeholders where
applicable.
In accordance with the Imperial Brands Group's overall governance and internal
control framework and in support of the Company's purpose as part of the
Imperial Brands Group, the Company applies and the Directors have regard to
all applicable Imperial Brands Group policies and procedures, including the
Group Statement of Delegated Authorities, standards of business conduct,
health and safety and environmental policies. Where authority for decision
making is delegated to management under the Group delegated authority rules,
appropriate regard is given to the likely long term consequences of decisions,
the imperative of maintaining high standards of business conduct, employees'
interests, business relationships with wider stakeholders, the impact of
business operations on the environment and communities, and other relevant
factors. The Imperial Brands Group Statement of Delegated Authorities is
part of the Imperial Brands Group's governance and internal control framework
through which good corporate governance, risk management and internal control
is promoted within the Imperial Brands Group and does not derogate from any
requirement for Board review, oversight or approval in relation to the
Company's activities.
On behalf of the Board
L J Paravicini
Director
28 November 2024
REPORT OF THE DIRECTORS
For the year ended 30 September 2024
The Directors submit their report together with the Strategic Report and the
audited financial statements of the Company for the year ended 30 September
2024.
Principal activity and financial risk management
As set out in the Strategic Report, the principal activity of the Company is
to provide treasury services to the Group. The principal risks and
uncertainties facing the Company are outlined in the Strategic Report, with
the management of those risks discussed in note 13 to the financial
statements.
Financial results and dividends
The financial results of the Company for the year are outlined in the
Strategic Report.
The Directors recommend the payment of a final dividend for the year of £600
million (2023: £nil million).
Responsibility statements under the Disclosure and Transparency Rules
Each of the directors confirm that to the best of their knowledge:
• The financial statements, prepared in accordance with applicable law and
United Kingdom Accounting Standards (United Kingdom Generally Accepted
Accounting Practice), including Financial Reporting Standard 101 'Reduced
Disclosure Framework' ("FRS101"), give a true and fair view of the assets,
liabilities, financial position and profit of the company, and
• The Strategic Report and Report of the Directors report includes a fair
review of the development and performance of the business and the position of
the Company together with a description of the principal risks and
uncertainties that it faces.
Corporate governance
The Company is a wholly owned indirect subsidiary of Imperial Brands PLC and
the Directors of the Group manage corporate governance at a Group level. The
Group's statement on corporate governance can be found in the corporate
governance report in the Imperial Brands Annual Report, which does not form
part of this report, but is available at www.imperialbrandsplc.com.
Consideration is given to the risk management policies of the Company included
in note 13 to the financial statements. For this reason, the Company's
Directors consider further detail of corporate governance in this report not
necessary.
Financial reporting
The Company has in place internal control and risk management systems in
relation to the Company's financial reporting process and the process for the
preparation of financial statements. These systems include clearly defined
lines of accountability and delegation of authority, policies and procedures
that cover financial planning and reporting, preparation of monthly management
accounts, review of the disclosures within the report and accounts to ensure
that the disclosures made appropriately reflect the developments within the
Company in the year and meet the requirement of being fair, balanced and
understandable.
The above disclosures are made in accordance with the United Kingdom Listing
Authority Disclosure and Transparency Rules Section 7.2.5, requiring
disclosure of internal control and risk compliance systems.
Insurance
Imperial Brands PLC has purchased Directors' and Officers' liability insurance
that has been in force throughout the financial year and is currently in
force. The Directors of the Company have the benefit of this insurance,
which is a qualifying third party indemnity provision as defined by the
Companies Act 2006.
Future outlook
The business activity is expected to continue at levels similar to the current
level. The Company will continue to manage the overall liquidity and financial
risk management requirements of the Group as they change over time. The
Company will manage the Group's financing requirement in combination with
other Group entities where it is beneficial to the Group as a whole.
Board of Directors
The Directors of the Company who were in office during the year and up to the
date of signing the financial statements are:
● L J Paravicini
● M E Slade
● C Marciniuk (appointed on 4 July 2024)
● D M Tillekeratne (resigned on 4 July 2024)
Going concern
The Company has been issued a support letter from its ultimate parent company,
Imperial Brands PLC, confirming ongoing financial support in meeting
liabilities as they fall due for a period of 12 months from the date of
approval of the financial statements. Imperial Brands PLC has undertaken its
own assessment of going concern, which it has confirmed and this is disclosed
on page 149 of the Imperial Brands Annual Report for the year ended 30
September 2024. The Directors are satisfied that no events took place after
the release of the Imperial Brands PLC Annual Report that give rise to any
uncertainties relating to going concern, and accordingly the Directors
considered it appropriate to rely upon this support in making their going
concern assessment for these financial statements. The Directors are
satisfied that the Company has adequate resources to meet its operational
needs for a period of 12 months from the date of approval of the financial
statements and concludes that it is appropriate to prepare the financial
statements on a going concern basis.
Statement of Directors' responsibilities
The Directors are responsible for preparing the Strategic Report, the Report
of the Directors and the financial statements in accordance with applicable
law and regulations.
Company law requires the Directors to prepare financial statements for each
financial year. Under that law the directors have prepared the financial
statements in accordance with United Kingdom Generally Accepted Accounting
Practice (United Kingdom Accounting Standards, comprising FRS 101 ''Reduced
Disclosure Framework'', and applicable law). Under company law, the
Directors must not approve the financial statements unless they are satisfied
that they give a true and fair view of the state of affairs of the Company and
of the profit or loss of the Company for that period.
In preparing these financial statements, the Directors are required to:
● select suitable accounting policies in accordance with IAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors and applying them
consistently;
● make judgements and accounting estimates that are reasonable and prudent;
● present information, including accounting policies, in a manner that
provides relevant, reliable, comparable and understandable information;
● provide additional disclosures when compliance with the specific
requirements in FRS 101 are insufficient to enable users to understand the
impact of particular transactions, other events and conditions on the
Company's financial position and financial performance;
● state whether applicable United Kingdom Accounting Standards, comprising
FRS 101, have been followed, subject to any material departures disclosed and
explained in the financial statements; and
● prepare the financial statements on the going concern basis unless it is
inappropriate to presume that the Company will continue in business.
The Directors are responsible for keeping adequate accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and
enable them to ensure that the financial statements comply with the Companies
Act 2006. They are also responsible for safeguarding the assets of the
Company and hence for taking reasonable steps for the prevention and detection
of fraud and other irregularities.
Disclosure of information to Auditors
Each of the Directors in office as of the date of approval of this report
confirms that:
● so far as they are aware, there is no relevant audit information of
which the Company's Auditors are unaware; and
● they have each taken all the steps that they ought to have taken as a
Director in order to make themselves aware of any relevant audit information
and to establish that the Company's Auditors are aware of that information.
On behalf of the Board
L J Paravicini
Director
28 November 2024
FINANCIAL STATEMENTS
For the year ended 30 September 2024
Income Statement
(In £ million) Notes 2024 2023
Administrative expenses (4) (4)
Impairment gain 10 240 25
Other operating income 1 1
Operating profit 4 237 22
Investment income 5 2,993 2,671
Finance costs 6 (2,613) (2,194)
Profit before tax 617 499
Tax on profit 8 (92) (106)
Profit for the financial year 525 393
The Company has no other comprehensive income other than that included above
and, therefore, a separate statement of comprehensive income has not been
presented.
Balance Sheet
As at 30 September 2024
(In £ million) Notes 2024 2023
Non-current assets
Derivative financial instruments 14 330 824
330 824
Current assets
Other receivables 10 29,604 28,624
Cash and cash equivalents 465 681
Derivative financial instruments 14 144 126
30,213 29,431
Total assets 30,543 30,255
Current liabilities
Borrowings 12 (1,161) (1,450)
Derivative financial instruments 14 (187) (174)
Other payables 11 (17,865) (17,245)
(19,213) (18,869)
Non-current liabilities
Borrowings 12 (5,774) (6,178)
Derivative financial instruments 14 (622) (829)
Other payables 11 (1,732) (1,702)
(8,128) (8,709)
Total liabilities (27,341) (27,578)
Net assets 3,202 2,677
Equity
Share capital 15 2,100 2,100
Retained earnings 1,102 577
Total equity 3,202 2,677
The financial statements were approved by the Board of Directors on 28
November 2024 and signed on its behalf by:
L J Paravicini
________________
Director
M E Slade
________________
Director
Company Number: 03214426
Statement of Changes in Equity
For the year ended 30 September 2024
Share Retained Total
(In £ million) capital earnings equity
At 1 October 2023 2,100 577 2,677
Total comprehensive income
Profit for the financial year - 525 525
Total comprehensive income for the year - 525 525
At 30 September 2024 2,100 1,102 3,202
Share Retained Total
(In £ million) capital earnings equity
At 1 October 2022 2,100 184 2,284
Total comprehensive income
Profit for the financial year - 393 393
Total comprehensive income for the year - 393 393
At 30 September 2023 2,100 577 2,677
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 30 September 2024
1. Authorisation of financial statements and statement of compliance with
FRS101
The principal activity of the Company is to provide treasury services to the
Group. The Company is a public limited company incorporated and domiciled in
England and Wales. The registered address is 121 Winterstoke Road, Bristol,
BS3 2LL. The Company is classified as a financial institution as defined by
FRS 101.
The financial statements of the Company for the year ended 30 September 2024
were authorised for issue by the Board of Directors on 28 November 2024, and
the balance sheet was signed on the Board's behalf by L J Paravicini and M E
Slade.
These financial statements have been prepared on the going concern basis and
in accordance with the United Kingdom Generally Accepted Accounting Practice
(United Kingdom Accounting Standards and applicable law) including the
Companies Act 2006 and FRS 101.
The Company has been issued a support letter from its ultimate parent company,
Imperial Brands PLC, confirming ongoing financial support in meeting
liabilities as they fall due for a period of 12 months from the date of
approval of the financial statements. Imperial Brands PLC has undertaken its
own assessment of going concern, which it has confirmed and this is disclosed
on page 149 of the Imperial Brands Annual Report for the year ended 30
September 2024. The Directors are satisfied that no events took place after
the release of the Imperial Brands PLC Annual Report that give rise to any
uncertainties relating to going concern, and accordingly the Directors
considered it appropriate to rely upon this support in making their going
concern assessment for these financial statements. The Directors are
satisfied that the Company has adequate resources to meet its operational
needs for a period of 12 months from the date of approval of the financial
statements and concludes that it is appropriate to prepare the financial
statements on a going concern basis.
The Company's financial statements are presented in pounds sterling, its
functional currency, and all values are rounded to the nearest million pounds
(£ million) except when otherwise indicated.
The principal accounting policies adopted by the Company are set out in note
2.
2. Material accounting policies
Basis of preparation of financial statements
The preparation of financial statements in conformity with FRS 101 requires
the use of certain critical accounting estimates and judgements in applying
the Company's accounting policies. The areas involving a higher degree of
judgement or complexity, or areas where assumptions and estimates are
significant to the financial statements are disclosed in note 3.
The Company has taken advantage of the following disclosure exemptions under
FRS 101 on the basis that the disclosures are available within the
consolidated financial statements of the ultimate parent company, which is
Imperial Brands Plc. The disclosures may be found via the investor relations
section of the Imperial Brands PLC website at
www.imperialbrandsplc.com/investors
(http://www.imperialbrandsplc.com/investors) .
a) the requirement in paragraph 38 of IAS 1 Presentation of Financial
Statements to present comparative information in respect of paragraph
79(a)(iv) of IAS 1 Presentation of Financial Statements.
b) the requirements of paragraphs 10(d) and 10(f) of IAS 1 Presentation
of Financial Statements.
c) the requirements of IAS 7 Statement of Cash Flows.
d) the requirements of paragraph 17 of IAS 24 Related Party Disclosures.
e) the requirements in IAS 24 Related Party Disclosures to disclose
related party transactions entered into between two or more members of a
group, provided that any subsidiary which is a party to the transaction is
wholly owned by such a member.
The financial statements have been prepared on an amortised cost or fair value
basis as described in the accounting policies on financial instruments
below. An Amendment to IAS 1 - Presentation of Financial Statements requires
the disclosure of material accounting policy information as part of the Notes
to the Financial Statements and those are set out below. Accounting policy
information is considered material if, when considered together with other
information included in an entity's financial statements, it can reasonably be
expected to influence decisions that the primary users of general purpose
financial statements make on the basis of those financial statements.
New accounting standards and interpretations
In February 2021, the IASB issued a narrow scope amendment to IAS 1 requiring
companies to disclose their material accounting policy information rather than
their significant accounting policies. This was effective for annual reporting
periods beginning on or after 1 January 2023 and is endorsed by the UKEB.
This was adopted by the Company for the financial statements for the year
ended 30 September 2024.
There have been no other changes to accounting standards that have
significantly impacted the accounting or disclosures within the financial
statements for the year ended 30 September 2024.
Accounting standards and interpretations not yet in issue
Amendment to IAS 1 - Non-current liabilities with covenants: Under the
amendments to IAS 1 Presentation of Financial Statements the classification of
certain liabilities as current or non-current may change. This is not
expected to impact the Company's results and will only require additional
disclosures for liabilities subject to covenants. The amendments will be
effective for accounting periods beginning on or after 1 January 2024.
IFRS 18 - Presentation and Disclosure in Financial Statements: This new
accounting standard is effective for the year ended 30 September 2028 and will
involve a change to the structure of the primary financial statements. This
requires entities to classify income and expenses into five categories -
operating, investing, financing, income tax and discontinued operations. The
Company is presently reviewing the impact of this standard which is expected
to change the structure of the presentation of the Income statement.
There are a number of other amendments and clarifications to IFRS, effective
in future years. None of which are expected to significantly impact the
Company's results or financial position.
Interest
Interest payable and receivable is recognised in the income statement using
the effective interest method.
The principal activity of the Company is to provide treasury services to the
Group. However, the Company has chosen to present interest receivable and
payable below operating profit, including foreign exchange gains and losses on
financing activities, in order to have a consistent treatment with the format
of the consolidated financial statements of the Group. This is considered
appropriate since the Company undertakes transactions on behalf of the Group.
Foreign currencies
Monetary assets and liabilities denominated in foreign currencies are
translated into pound sterling at the rates of exchange ruling at the balance
sheet date.
Transactions in currencies other than pound sterling are initially recorded at
the exchange rate ruling at the date of the transaction. Foreign exchange
gains and losses resulting from the settlement of such transactions are taken
to the income statement.
Taxes
The tax expense for the period comprises current and deferred tax. Tax is
recognised in the income statement, except to the extent that it relates to
items recognised in other comprehensive income or directly in shareholders'
funds. In this case, the tax is also recognised in other comprehensive
income or directly in the shareholders' funds, respectively.
Current tax is the expected tax payable on the taxable income for the period,
using tax rates enacted or substantively enacted at the balance sheet date,
and any adjustments to tax payable in respect of previous periods.
Deferred tax is recognised in respect of all timing differences that have
originated but not reversed at the balance sheet date, where transactions or
events that result in an obligation to pay more tax in the future or a right
to pay less tax in the future have occurred at the balance sheet date.
A net deferred tax asset is recognised only to the extent that it is probable
that future taxable profit will be available against which the asset can be
utilised.
Deferred tax is determined using tax rates that have been enacted or
substantively enacted by the balance sheet date and are expected to apply when
the related deferred tax asset is realised or the deferred tax liability is
settled. Deferred tax is measured on a non-discounted basis.
Dividends
Final dividends are recognised as a liability in the period in which the
dividends are approved by shareholders, whereas interim dividends are
recognised in the period in which the dividends are paid.
Financial instruments
Receivables held under a hold to collect business model are stated at
amortised cost.
The calculation of impairment provisions is subject to an expected credit loss
model, involving a prediction of future credit losses based on past loss
patterns. The approach involves the recognition of provisions relating to
potential future impairments, in addition to impairments that have already
occurred. The expected credit loss approach involves modelling of historic
loss rates (where applicable) and consideration of the level of future credit
risk. Expected loss rates are then applied to the gross receivables balance
to calculate the impairment provision.
Financial assets and financial liabilities are recognised when the Company
becomes a party to the contractual provisions of the relevant instrument.
Financial assets are de-recognised when the rights to receive benefits have
expired or been transferred, and the Company has transferred substantially all
risks and rewards of ownership. Financial liabilities are de-recognised when
the obligation is extinguished.
Non-derivative financial liabilities are initially recognised at fair value
and are subsequently stated at amortised cost using the effective interest
method under a hold to collect business model. For borrowings, the carrying
value includes accrued interest payable, as well as unamortised transaction
costs. Cash and cash equivalents include cash in hand and deposits held on
call, together with other short-term highly liquid investments.
The Company transacts both intragroup and external derivative financial
instruments to manage the Company's and the Group's underlying exposure to
foreign exchange and interest rate risks. The Company does not transact
derivative financial instruments for trading purposes. Derivative financial
instruments are initially recorded at fair value. Derivative financial assets
and liabilities are included in the balance sheet at fair value, and include
accrued interest receivable and payable where relevant. The Company has
decided (as permitted under FRS 101) not to hedge account for its derivative
financial instruments and so changes in fair values are recognised in the
income statement in the period in which they arise.
3. Critical accounting estimates and assumptions
The Company makes estimates and assumptions concerning the future. The
resulting accounting estimates will, by definition, seldom equal the related
actual results. The estimates and assumptions that have significant risk of
causing a material adjustment to the carrying amounts of assets and
liabilities within the next financial year are addressed below. There were
no critical judgements involved in the preparation of these financial
statements.
Expected credit loss on other receivables
An expected credit loss provision has been recognised against the carrying
value of certain trade and other receivables. The provision is a reduction
in the carrying value of the asset involved reflecting an assessment of the
level of risk that future repayment may default. The loans receivable
involved are all loans made to entities within the Imperial Brands Group.
The provision has been calculated based on the size of the loan, the
probability of default (measured through credit default rates or expected
future cashflows) and the loss estimated to arise if a default occurred
(considered with regard to the value of the realisable assets of the
counterparty). The probability of default rates used vary from 1% up to 100%
(2023: 1% up to 100%). The loss given default rates ranged from nil up to
100% (2023: nil up to 100%) for certain entities where the counterparty has
insufficient assets that could be realised to repay the loan. All intergroup
loans continue to perform at present, are not in default and operate within
their loan limits.
There may be circumstances where intragroup guarantees are in place where a
Group company accepts the credit risk associated with an intergroup loan
between the Company and a further third Group entity. These guarantees are
evaluated in terms of their effect on the level of credit risk retained by the
Company and therefore the total amount of the expected credit loss
provision. Further information as to the sensitivity of expected credit loss
risk is disclosed in note 13, B) credit risk.
Derivatives
The fair value of derivatives are determined based on observable market data
such as yield curves, foreign exchange rates and credit default swap prices to
calculate the present value of future cash flows associated with each
derivative at the balance sheet date. Those techniques are significantly
affected by the assumptions used, including discount rates, estimates of
future cash flows, exchange rates and interest rates. The valuation of
derivatives is subject to changes in the underlying assumptions used by
financial markets in valuing financial instruments. The impact of changes
in these assumptions can be significant resulting in volatility in
valuations. Further information as to the sensitivity of valuations is
disclosed in note 13.
The categorisation within the fair value hierarchy (i.e. level 1, 2 or 3) of
the inputs to the fair value measurements of derivatives carried at fair value
is set out in note 13.
4. Operating profit
The operating profit includes a release of an expected credit loss allowance
on loans receivable of £240 million (2023: £25 million), arising mainly due
to a loan receivable exposure being settled after the year end, reducing the
Expected Credit Loss (ECL) allowance recognised as at 30 September 2024. It
is stated after charging auditors' fees of £207,028 (2023: £194,913) which
were met by Imperial Tobacco Limited ("ITL"), a wholly owned indirect
subsidiary of Imperial Brands PLC. There were non-audit fees of £13,000
paid during the year (2023: £29,000). The Company has also been recharged
office rental costs from another Group company of £30,960 (2023: £30,960).
5. Investment income
(In £ million) 2024 2023
Interest receivable from Group undertakings 1,657 1,328
Interest on bank deposits 4 6
Exchange gains on monetary assets and liabilities 819 630
Fair value gains on external derivative financial instruments 513 707
2,993 2,671
6. Finance costs
(In £ million) 2024 2023
Interest payable to Group undertakings 895 607
Interest on bank loans and other loans 290 349
Fair value losses on external derivative financial instruments 632 568
Fair value losses on intragroup derivative financial instruments 796 670
2,613 2,194
7. Directors' emoluments and pensions
Employment costs
Employment costs, which do not include pension costs, are paid by ITL and
subsequently recharged to the Company. The total salary costs recharged in
the year of £755,831 (2023: £766,603) and social security costs of £80,210
(2023: £77,059) are recognised within administrative expenses in the income
statement. The average monthly number of employees during the year was 9
(2023: 11).
The emoluments of the Directors are paid by ITL. The Directors' services to
the Company and to a number of fellow subsidiaries below the ultimate parent
company are of a non-executive nature and their emoluments and retirement
benefits are deemed to be wholly attributable to their services to ITL and the
Group. Services directly attributable to the Company are a negligible
proportion of those provided to the Group, accordingly no emoluments or
retirement benefits are disclosed in these financial statements.
8. Tax on profit
Analysis of charge in the year:
(In £ million) 2024 2023
UK Corporation tax on profit for the year 94 106
Withholding tax 1 1
Double taxation relief (1) (2)
Adjustments in respect of prior years (2) 1
Current tax 92 106
Total tax charge 92 106
The differences are explained as follows:
(In £ million) 2024 2023
Profit before taxation 617 499
Profit before taxation multiplied by standard rate of corporation
tax in the UK of 25% (2023: 22%) 154 110
Effects of:
Non-deductible expected credit loss provision credit (60) (6)
Adjustments to tax charge in respect of prior years (current tax) (2) 1
Transfer pricing adjustment - 1
Total tax charge 92 106
Movement on current tax account
(In £ million) 2024 2023
At 1 October 105 111
Charged to the income statement - current year 92 106
Cash paid (105) (112)
At 30 September 92 105
Factors that may affect future tax charges
The current year tax rate of 25% arises from profits being taxed at 25% for
the year to 30 September 2024.
9. Dividends
Dividend per share in respect of financial year
(In pence) 2024 2023
Final 29 -
A dividend in respect of the year ended 30 September 2024 of £0.29 per share,
amounting to a total dividend of £600 million (2023: nil), is to be proposed
at the annual general meeting on 28 November 2024. These financial
statements do not reflect this dividend payable.
10. Other receivables
2024 2023
(In £ million) Current Current
Amounts owed by Group undertakings 29,575 28,610
Other receivables and prepayments 29 14
29,604 28,624
Amounts owed by Group undertakings are unsecured, both interest bearing and
non-interest bearing and can be either repayable on a future date to be
mutually agreed between the Company and the counterparty borrower or have
fixed repayment dates. At 30 September 2024 £26,531 million (2023:
£25,450 million) of the amounts owed by Group undertakings were repayable on
a mutually agreed future date (treated as a current receivable) and £3,044
million (2023: £3,160 million) were term loans treated as current receivables
and £nil million (2023: £nil million) were term loans treated as non-current
receivables. There were £29,549 million (2023: £28,584 million) of
interest bearing loans and £26 million (2023: £26 million) of non-interest
bearing loans. Where loans were subject to interest the rates charged varied
from 0.53% to 9.985% (2023: 0.53% to 10.335%).
The Directors have assessed the extent to which amounts owed by the Group
companies are impaired. For those balances that are neither overdue nor
impaired the Directors have concluded that the expected credit losses (ECL)
that are possible from default events over the next 12 months are immaterial
and consequently no allowance for impairment has been recognised. For those
balances assessed to be impaired, an expected credit loss adjustment of £343
million (2023: £583 million) has been recognised to reflect the credit risk
inherent within a number of the current intercompany loans receivable, as
follows:
2024
Gross amount ECL allowance Net balance
Loan receivable balances that are not impaired 29,109 - 29,109
Loan receivable balances that are impaired 809 343 466
29,918 343 29,575
2023
Gross amount ECL allowance Net balance
Loan receivable balances that are not impaired 28,401 - 28,401
Loan receivable balances that are impaired 792 583 209
29,193 583 28,610
Set out below is the movement in the allowance for expected credit losses of
intercompany loan receivables:
(In £ million) 2024 2023
As at 1 October 583 608
Release of expected credit loss allowance (240) (25)
At 30 September 343 583
The release of £240 million was mainly due to a loan receivable exposure
being settled after the year end, reducing the Expected Credit Loss (ECL)
allowance recognised as at 30 September 2024.
11. Other payables
2024 2023
(In £ million) Current Non-current Current Non-current
Amounts owed to Group undertakings 17,773 1,732 17,140 1,702
Corporation tax payable 92 - 105 -
17,865 1,732 17,245 1,702
Amounts owed to Group undertakings are unsecured, both interest bearing and
non-interest bearing and repayable on a future date to be mutually agreed
between the Company and the counterparty lender (treated as a current
liability). There were £19,504 million (2023: £18,841 million) of interest
bearing loans and £1 million (2023: £1 million) of non-interest bearing
loans. Where loans were subject to interest the rates charged varied from
0.53% to 6.750% (2023: 0.245% to 13.750%).
Amounts owed to Group undertakings are not included in the borrowings analysis
in note 12 of the financial statements which only includes borrowings with
external counterparties.
12. Borrowings
The Company's borrowings are held at amortised cost as follows:
(In £ million) 2024 2023
Current borrowings
Bank loans and overdrafts 4 -
Capital market issuance:
European commercial paper (ECP) 21 -
£600m 8.125% notes due March 2024 - 627
$1,000m 3.125% notes due July 2024 - 823
€500m 1.375% notes due January 2025 421 -
$950m (2023: $1,500m) 4.25% notes due July 2025 715 -
Total current borrowings 1,161 1,450
Non-current borrowings
Bank loans 6 8
Capital market issuance:
€500m 1.375% notes due January 2025 - 437
$1,500m 4.25% notes due July 2025 - 1,236
€650m 3.375% notes due February 2026 553 574
$750m 3.5% notes due July 2026 563 617
£500m 5.5% notes due September 2026 500 500
€750m 2.125% notes due February 2027 634 657
$1,000m 6.125% notes due July 2027 752 822
$1,000m 3.875% notes due July 2029 751 822
$1,250m 5.5% notes due February 2030 944 -
£500m 4.875% notes due June 2032 505 505
$750m 5.875% notes due July 2034 566 -
Total non-current borrowings 5,774 6,178
Total borrowings 6,935 7,628
Analysed as:
Capital market issuance 6,925 7,620
Bank loans and overdrafts 10 8
Current and non-current borrowings include interest payable of £10 million
(2023: £31 million) and £102 million (2023: £61 million) respectively as at
30 September 2024.
Interest payable on capital market issuances are at fixed rates of interest
and interest payable on bank loans and overdrafts are at floating rates of
interest. All capital market issuances are listed on the London Stock
Exchange.
On 15 March 2024, £600 million 8.125% notes were repaid. On 1 July 2024,
US$1,250 million (£984 million equivalent) 5.5% notes were issued. On 1 July
2024, US$750 million (£591 million equivalent) 5.875% notes were issued. On
11 July 2024, a partial repayment of the US$ 1,500 million 4.25% notes was
made; US$ 550 million (£425 million equivalent) was repaid with the remaining
US$ 950 million due July 2025. On 26 July 2024, US$1,000 million (£777
million equivalent) 3.125% notes were repaid.
All borrowings are unsecured and the Company has not defaulted on any during
the year (2023: no defaults).
Fair value of borrowings
The fair value of borrowings as at 30 September 2024 is estimated to be
£6,895 million (2023: £7,203 million). £6,885 million (2023: £7,194
million) relates to capital market issuance and has been determined by
reference to market prices as at the balance sheet date. A comparison of the
carrying amount and fair value of capital market issuance by currency is
provided below. The fair value of all other borrowings is considered to
equal their carrying amount.
2024 2023
(In £ million) Balance sheet amount Fair value Balance sheet amount Fair value
GBP 1,006 985 1,632 1,524
EUR 1,629 1,597 1,668 1,573
USD 4,290 4,303 4,320 4,097
Total bonds 6,925 6,885 7,620 7,194
Undrawn borrowing facilities
At 30 September the Company had the following undrawn committed facilities:
(In £ million) 2024 2023
Amounts expiring:
In less than one year 853 550
Between one and two years 153 159
Between two and five years 2,608 2,866
3,614 3,575
During the year the maturity of €3,125 million of the Group's syndicated
multicurrency facility of €3,493 million (2023 €3,493 million) was
extended to 30 September 2027. One existing syndicate member's participation
of €184 million has a maturity date of 30 September 2025. At 30 September
another syndicate member's participation of €184 million had a maturity date
of 30 March 2026; in October 2024 this participation was sold to a new
financial institution, who therefore became a syndicate member, and the
maturity date was extended to 30 September 2027.
During the year six new bilateral facilities for a total £700 million were
arranged, all maturing in September 2025.
13. Financial risk management
Overview
The Company, as the main financing and financial risk management company for
the Group, undertakes transactions to manage the Group's financial risks,
together with its financing and liquidity requirements. As a result, the
Company is exposed to risks including, but not limited to, market, credit and
liquidity risk. This note explains the Company's exposure to these risks,
how they are measured and assessed, and summarises the policies and processes
used to manage them, including those related to the management of capital.
The Group's treasury activities are overseen by the Treasury Committee, which
meets four times a year and comprises the Chief Financial Officer, the
Director of Treasury, the Group Finance Director, the Group General Counsel,
the Chief Strategy and Development Officer and three Group Regional Finance
Directors. The Treasury Committee operates in accordance with the terms of
reference set out by the Board and a policy (the Treasury Operations policy)
which sets out the expectations and boundaries to assist in the effective
oversight of treasury activities.
The Board of Directors of Imperial Brands PLC reviews and approves all major
Treasury decisions. The treasury function does not operate as a profit
centre, nor does it enter into speculative transactions.
The Company's management of financial risks cover the following:
(a) Market risk
Price risk
The Company is not exposed to equity securities price risk.
Foreign exchange risk
The Company is exposed to movements in foreign exchange rates due to the
translation of balance sheet items held in non-functional currencies. The
Company's financial results are principally exposed to fluctuations in euro
and US dollar exchange rates.
Management of the Company's foreign exchange translation risk is addressed
below.
Translation risk
The Company has translation risk on cash, borrowings, derivatives and
intragroup loans held in non-functional currencies. The Company enters into
intragroup derivative contracts to manage some of the Company's exposure to
exchange rate movements.
The Company issues debt in the most appropriate market or markets at the time
of raising new finance and has a policy of using derivative financial
instruments, cross currency swaps, to change the currency of debt as required.
Foreign exchange sensitivity analysis
The Company's sensitivity to foreign exchange rate movements, which impacts
the translation of monetary items held by the Company in currencies other than
its functional currency, is illustrated on an indicative basis below. The
sensitivity analysis has been prepared on the basis that the proportion of
cash, borrowings, derivatives and intragroup loans held in non-functional
currencies remains constant.
The Company manages its sensitivity to foreign exchange rates through the use
of intragroup derivative contracts to reduce foreign exchange gains or losses
on the translation of financial instruments. The sensitivity analysis does
not reflect any change to non-finance costs that may result from changing
exchange rates and ignores any taxation implications and offsetting effects of
movements in the fair value of derivative financial instruments.
2024 2023
(In £ million) Increase/ Increase/
(decrease) (decrease)
in income in income
Income Statement impact on non-functional currency foreign exchange exposures:
10% appreciation of Sterling against Euro (2023: 10%) 7 (14)
10% appreciation of Sterling against US dollar (2023: 10%) (36) (15)
10% depreciation of Sterling against Euro (2023: 10%) (8) 18
10% depreciation of Sterling against US dollar (2023: 10%) 44 19
There is no direct net impact on equity (2023: £nil).
Interest rate risk
The Company's interest rate risk arises from its borrowings net of cash and
cash equivalents, with the primary exposures arising from fluctuations in euro
and US dollar interest rates. Borrowings at variable rates expose the
Company to cash flow interest rate risk. Borrowings at fixed rates expose
the Company to fair value interest rate risk.
The Company manages its exposure to interest rate risk on its borrowings by
entering into derivative financial instruments, interest rate swaps, to
achieve an appropriate mix of fixed and floating interest rate debt in
accordance with the Treasury Operations Policy and Treasury Committee
decisions.
As at 30 September 2024, after adjusting for the effect of derivative
financial instruments detailed in note 14, approximately 109% (2023: 107%) of
the Company's borrowings were at fixed rates of interest. This ratio is a
result of a high level of fixed rate debt exposures combined with substantial
financial assets such as cash which earn interest at floating rates.
Interest rate sensitivity analysis
The Company's sensitivity to interest rates on its euro and US dollar monetary
items which are primarily external borrowings, cash and cash equivalents, is
illustrated on an indicative basis below. The impact in the Company's Income
Statement reflects the effect on net finance costs in respect of the Company's
net debt and the fixed to floating rate debt ratio prevailing at 30 September
2024, ignoring any taxation implications and offsetting effects of movements
in the fair value of derivative financial instruments.
The sensitivity analysis has been prepared on the basis that net debt and the
derivatives portfolio remain constant and that there is no direct net impact
on equity (2023: £nil).
The movement in interest rates is considered reasonable for the purposes of
this analysis and the estimated effect assumes a lower limit of zero for
interest rates where relevant.
(In £ million) 2024 2023
Change in income Change in income
gain/(loss) gain/(loss)
Income Statement impact of interest rate movements:
1% increase in euro interest rates (2023: 1%) (1) (12)
1% increase in US dollar interest rates (2023: 1%) 2 9
1% decrease in euro interest rates (2023: 1%) 1 12
1% decrease in US dollar interest rates (2023: 1%) (2) (9)
(b) Credit risk
IFRS 9 requires an expected credit loss (ECL) model to be applied to financial
assets. The ECL model requires the Company to account for expected losses as
a result of credit risk on initial recognition of financial assets and to
recognise changes in those expected credit losses at each reporting date.
Allowances are measured at an amount equal to the lifetime expected credit
losses where the credit risk on the receivables increases significantly after
initial recognition. The Company is exposed to credit risk arising from
loans to entities within the Imperial Brands Group, cash deposits, derivatives
and other amounts due from external financial counterparties arising on other
financial instruments. The maximum credit risk relating to intergroup loans
was £29,575 million (2023: £28,610 million). The maximum aggregate
credit risk to parties external to the Imperial Brands Group was considered to
be £939 million at 30 September 2024 (2023: £1,631 million). Intragroup
counterparty credit risk may be mitigated where there is control of a
counterparty within the Group, allowing the Group to facilitate repayment
through realising counterparty assets or through refinancing. At 30
September 2024 an ECL provision of £343 million was recognised relating to
the risk of intergroup loans not being repaid (2023: £583 million).
As discussed in the accounting policies note the calculation of the expected
credit loss provision is based on management's assessment of the probability
of default (PoD) and the percentage loss expected to arise in the event of
default (LGD), multiplied by the current size of the loan receivable. The PoD
and LGD rates are estimated on a loan by loan basis. Most of the intragroup
loan receivables have very low PoD and LGD due to their low credit risk and do
not contribute significantly to the overall ECL provision. However, there are
a small group of intragroup loan with higher credit risk that contribute most
towards the ECL provision and these loans have an average PoD of 75% and LGD
of 100%. Management estimates of these rates is judgemental and any changes in
estimates would change the amount of ECL recognised. For the higher credit
risk loans a 1% increase in the PoD would increase the ECL by approximately
£5 million (2023: approximately £8 million). In regards to the LGD estimate
a 1% reduction would reduce the ECL by approximately £3 million (2023:
approximately £6 million). It is not possible to increase the LGD and
therefore there is no risk of the ECL increasing due to this factor.
Trade and other receivables
Policies are in place to manage the risk associated with the extension of
credit to third parties, including companies within the Group, to ensure that
commercial intent is balanced effectively with credit risk management.
Credit is extended with consideration to financial risk and
creditworthiness. Analysis of trade and other receivables is provided in
note 10.
Financial instruments
In order to manage its credit risk to any one counterparty, the Company places
cash deposits and enters into derivative financial instruments with a
diversified group of financial institutions carrying suitable credit ratings
in line with the Treasury Operations Policy. Utilisation of counterparty
credit limits is regularly monitored by Treasury and ISDA agreements are in
place to permit the net settlement of assets and liabilities in certain
circumstances.
The table below summarises the Company's largest exposures to financial
counterparties as at 30 September 2024. At the balance sheet date management
does not expect these counterparties to default on their current obligations.
2024 2023
Counterparty Exposure Maximum exposure to credit risk Maximum exposure to credit risk
£ million £ million
Highest 253 311
2(nd) highest 133 104
3(rd) highest 11 84
4(th) highest 10 83
5(th) highest 5 80
These exposures are held with counterparties with investment grade credit
ratings or in money market funds with a AAA rating.
(c) Liquidity risk
The Company is exposed to liquidity risk, which represents the risk of having
insufficient funds to meet its financing needs. To manage this risk the
Company has a policy of actively maintaining a mixture of short, medium and
long-term committed facilities that are structured to ensure that the Company
has sufficient available funds to meet the forecast requirements of the Group
over the short to medium term. To prevent over-reliance on individual
sources of liquidity, funding is provided across a range of instruments
including debt capital market issuance, bank bilateral agreements, bank
revolving credit facilities and European commercial paper.
Certain of these borrowings contain cross default provisions and negative
pledges. The core committed bank facilities are subject to two financial
covenants, these being minimum interest cover ratio of four times and maximum
gearing of four times (per the definition within the agreement) and are
subject to pari passu ranking and negative pledge covenants. Any
non-compliance with covenants underlying the Company's financing arrangements
could, if not waived, constitute an event of default with respect to any such
arrangements, and any non-compliance with covenants may, in particular
circumstances, lead to an acceleration of maturity on certain borrowings and
the inability to access committed facilities.
We remain fully compliant with all our banking covenants (2023: fully
compliant).
The Group primarily borrows centrally in order to meet forecast funding
requirements, and the treasury function is in regular dialogue with
subsidiaries in the Group to ensure their liquidity needs are met.
Subsidiaries in the Group are funded by a combination of share capital and
retained earnings, intercompany loans, and in very limited cases through
external local borrowings. Cash pooling processes are used to centralise
surplus cash held by subsidiaries in the Group where possible in order to
minimise external borrowing requirements and interest costs. Treasury
invests surplus cash in bank deposits and money market funds and uses foreign
exchange contracts to manage short term liquidity requirements in line with
short term cash flow forecasts. As at 30 September 2024, the Company held
liquid assets of £465 million (2023: £681 million).
The table below summarises the Company's non derivative financial liabilities
by maturity based on their remaining contractual cash flows as at 30 September
2024. The amounts disclosed are undiscounted cash flows calculated using
interest rates and spot rates of exchange prevailing at the relevant balance
sheet date. Contractual cash flows in respect of the Company's derivative
financial instruments are detailed in note 14.
At 30 September 2024
(In £ million) Balance sheet amount Contractual cash flows Between 1 and 2 years Between 2 and 5 years
Total
< 1 year > 5 years
Non-derivative financial liabilities
Bank loans 10 - - - - -
Capital market issuance 6,925 10,218 1,497 1,911 2,752 4,058
Amounts owed to group undertakings 19,505 19,497 17,808 - - 1,689
Total non-derivative financial liabilities 26,440 29,715 19,305 1,911 2,752 5,747
At 30 September 2023
(In £ million) Balance sheet amount Contractual cash flows Between 1 and 2 years Between 2 and 5 years
Total
< 1 year > 5 years
Non-derivative financial liabilities
Bank loans 8 - - - - -
Capital market issuance 7,620 10,663 1,767 1,951 3,651 3,294
Amounts owed to group undertakings 18,842 18,030 17,147 - - 883
Total non-derivative financial liabilities 26,470 28,693 18,914 1,951 3,651 4,177
Amounts owed to the Company by Group undertakings of £29,575 million (2023:
£28,610 million) are excluded from the above tables, as disclosure of
contractual cash flows is only required for liabilities.
Capital management
The management of the Company's capital structure forms part of the Group's
capital risk management, details of which can be found in note 21 of the
Imperial Brands Annual Report which does not form part of this report, but is
available at www.imperialbrandsplc.com (http://www.imperialbrandsplc.com) .
Fair value estimation and hierarchy
All financial assets and liabilities are carried on the balance sheet at
amortised cost, other than derivative financial instruments which are carried
at fair value. Derivative financial instruments are valued using techniques
based significantly on observable market data such as yield curves, foreign
exchange rates and credit default swap prices for the Imperial Brands PLC
Group as at the balance sheet date (Level 2 classification hierarchy per IFRS
7) as detailed in note 14. There were no changes to the valuation methods or
transfers between hierarchies during the year. With the exception of capital
market issuance, the fair value of all financial assets and financial
liabilities is considered approximate to their carrying amount as outlined in
note 14.
Netting arrangements of financial instruments
The following tables set out the Company's financial assets and financial
liabilities that are subject to netting and set-off arrangements.
2024
(In £ million) Gross financial assets / (liabilities) Net financial assets /liabilities per balance sheet Related amounts not set off in the balance sheet Net
Assets
Derivative financial instruments 474 474 (462) 12
474 474 (462) 12
Liabilities
Derivative financial instruments (809) (809) 462 (347)
(809) (809) 462 (347)
2023
(In £ million) Gross financial assets / (liabilities) Net financial assets /liabilities per balance sheet Related amounts not set off in the balance sheet Net
Assets
Derivative financial instruments 950 950 (817) 133
950 950 (817) 133
Liabilities
Derivative financial instruments (1,003) (1,003) 817 (186)
(1,003) (1,003) 817 (186)
Classification of financial instruments
The following table sets out the Company's accounting classification of each
class of financial assets and liabilities:
2024
Fair value through income statement Assets and liabilities at amortised cost Total Current Non-current
Other receivables - 29,604 29,604 29,604 -
Cash and cash equivalents - 465 465 465 -
Derivatives 474 - 474 144 330
Total financial assets 474 30,069 30,543 30,213 330
Borrowings - (6,935) (6,935) (1,161) (5,774)
Other payables - (19,597) (19,597) (17,865) (1,732)
Derivatives (809) - (809) (187) (622)
Total financial liabilities (809) (26,532) (27,341) (19,213) (8,128)
Net financial (liabilities)/assets (335) 3,537 3,202 11,000 (7,798)
2023
Fair value through income statement Assets and liabilities at amortised cost Total Current Non-current
Other receivables - 28,624 28,624 28,624 -
Cash and cash equivalents - 681 681 681 -
Derivatives 950 - 950 126 824
Total financial assets 950 29,305 30,255 29,431 824
Borrowings - (7,628) (7,628) (1,450) (6,178)
Other payables - (18,947) (18,947) (17,245) (1,702)
Derivatives (1,003) - (1,003) (174) (829)
Total financial liabilities (1,003) (26,575) (27,578) (18,869) (8,709)
Net financial (liabilities)/assets (53) 2,730 2,677 10,562 (7,885)
14. Derivative financial instruments
The Company has the following derivative financial instruments measured at
fair value through profit and loss:
Current derivative financial instruments 2024 2023
(In £ million) Assets Liabilities Assets Liabilities
Interest rate swaps 65 (54) 30 (66)
Foreign exchange contracts 1 (4) 12 (5)
Cross currency swaps 78 (129) 84 (103)
Total current derivatives 144 (187) 126 (174)
Non-current derivative financial instruments
(In £ million) Assets Liabilities Assets Liabilities
Interest rate swaps 240 (365) 745 (652)
Cross currency swaps 90 (257) 79 (177)
Total non-current derivatives 330 (622) 824 (829)
Total carrying value of derivative financial instruments 474 (809) 950 (1,003)
Net liability (335) (53)
Analysed as:
Interest rate swaps 305 (419) 775 (718)
Foreign exchange contracts 1 (4) 12 (5)
Cross currency swaps 168 (386) 163 (280)
Total carrying value of derivative financial instruments 474 (809) 950 (1,003)
Net liability (335) (53)
Fair values are determined based on observable market data such as yield
curves, foreign exchange rates and credit default swap prices to calculate the
present value of future cash flows associated with each derivative at the
balance sheet date. Market data is sourced from a reputable financial data
provider and valuations are validated by comparison to counterparty valuations
where appropriate. Some of the Group's derivative financial instruments
contain early termination options and these have been considered when
assessing the element of the fair value related to credit risk. On this basis
the reduction in reported net derivative liabilities due to credit risk is
£12 million (2023: £2 million) and would have been a £15 million (2023: £5
million) reduction without considering the early termination options. All
derivative assets and liabilities are classified under the FRS 101 fair value
hierarchy as being level 2.
Maturity of obligations under derivative financial instruments
Derivative financial instruments have been classified in the balance sheet as
current or non-current on an undiscounted contractual basis based on spot
rates as at the balance sheet date. For the purposes of the above and
following analysis, maturity dates have been based on the likelihood of any
early termination options being exercised with consideration to counterparty
expectations and market conditions prevailing as at 30 September 2024.
The table below summarises the Company's derivative financial instruments by
maturity based on their remaining contractual cash flows as at 30 September
2024. The amounts disclosed are the undiscounted cash flows calculated using
interest rates and spot rates of exchange prevailing at the relevant balance
sheet date. Contractual cash flows in respect of the Company's non
derivative financial instruments are detailed in note 13.
At 30 September 2024
(In £ million) Balance sheet amount Contractual cash flows Between 1 and 2 years Between 2 and 5 years
Total
< 1 year > 5 years
Net settled derivatives (114) 194 10 1 117 66
Gross settled derivatives (221) - - - - -
Receipts - 20,719 6,490 2,730 5,762 5,737
Payments - (20,770) (6,497) (2,719) (5,772) (5,782)
(335) 143 3 12 107 21
At 30 September 2023
(In £ million) Balance sheet amount Contractual cash flows Between 1 and 2 years Between 2 and 5 years
Total
< 1 year > 5 years
Net settled derivatives 57 200 (3) 34 143 26
Gross settled derivatives (110) - - - - -
Receipts - 17,822 5,429 4,010 5,283 3,100
Payments - (17,675) (5,374) (3,941) (5,247) (3,113)
(53) 347 52 103 179 13
Derivatives as hedging instruments
As outlined in note 13, the Company hedges its underlying interest rate
exposure and foreign currency translation exposure in an efficient, commercial
and structured manner, primarily using interest rate swaps and cross currency
swaps. Foreign exchange contracts are used to manage the Company's short
term liquidity requirements in line with short term cash flow forecasts as
appropriate. The Company does not apply cash flow or fair value hedge
accounting as permitted under IFRS 9, which results in fair value gains and
losses attributable to derivative financial instruments being recognised in
net finance costs.
Interest rate swaps
To manage interest rate risk on its borrowings, the Company issues debt in the
market or markets that are most appropriate at the time of raising new finance
with regard to currency, interest denomination and duration, and then uses
interest rate swaps and/or cross currency swaps to re-base the debt into the
appropriate proportions of fixed and floating interest rates where
necessary. Interest rate swaps are also transacted to manage and re-profile
the Company's interest rate risk over the short, medium and long term in
accordance with the Treasury Operations Policy and Treasury Committee
decisions. Fair value movements are recognised in investment income and
finance costs in the relevant reporting period.
As at 30 September 2024, the notional amount of interest rate swaps
outstanding that were entered into to convert fixed rate borrowings into
floating rates of interest at the time of raising new finance was £6,349
million equivalent (2023: £8,111 million equivalent) with a fair value of
£339 million liability (2023: £714 million liability). The fixed interest
rates vary from 1.3% to 5.4% (2023: 1.3% to 7.9%), and the floating rates are
based on EURIBOR, SONIA and SOFR.
As at 30 September 2024, the notional amount of interest rate swaps
outstanding that were entered into to convert the Group's debt into the
appropriate proportion of fixed and floating rates to manage and re-profile
the Group's interest rate risk was £12,119 million equivalent (2023: £11,622
million equivalent) with a fair value of £225 million asset (2023: £771
million asset). The fixed interest rates vary from 3.1% receivable to 4.0%
payable (2023: 3.1% receivable to 4.0% payable), and the floating receivable
rates reference EURIBOR and SOFR. This includes forward starting interest
rate swaps with a total notional amount of £4,719 million equivalent (2023:
£4,055 million equivalent) with tenors between 1 and 10 years, starting
between October 2024 and May 2032.
Cross currency swaps
The Company enters into cross currency swaps to covert the currency of debt
into the appropriate currency with consideration to the underlying assets of
the Group as appropriate. Fair value movements are recognised in investment
income and finance costs in the relevant reporting period.
As at 30 September 2024, the notional amount of cross currency swaps entered
into to convert sterling debt into the desired currency was £1,000 million
(2023: £1,600 million) and the fair value of these swaps was £76 million net
liability (2023: £111 million net liability); the notional amount of cross
currency swaps entered into to convert US Dollar debt into the desired
currency was $6,950 million (2023: $5,250 million) and the fair value of these
swaps was £142 million net liability (2023: £6 million net liability). This
includes forward starting cross currency swaps with a total notional amount of
$1,250 million equivalent (2023: no forward starting cross currency swaps)
with tenors of 4.5 years, starting in July 2025.
Foreign exchange contracts
The Company enters into foreign exchange contracts to manage short term
liquidity requirements in line with cash flow forecasts. As at 30 September
2024, the notional amount of these contracts was £842 million equivalent
(2023: £2,020 million equivalent) and the fair value of these contracts was a
net liability of £3 million (2023: £7 million net asset).
15. Share capital
(In £ million) 2024 2023
Issued and fully paid
2,100,000,000 ordinary shares of £1 each (2023: 2,100,000,000) 2,100 2,100
16. Related party transactions
The Company has taken advantage of the Group exemption under the terms of FRS
101 from disclosing related party transactions with entities that are part of
the Group since the Company is a wholly owned indirect subsidiary of Imperial
Brands PLC and is included in the consolidated financial statements of the
Group, which are publicly available.
17. Guarantees
The Company is party to a cross guarantee of its bank accounts held at HSBC
Bank plc against accounts of Imperial Brands PLC and some of its subsidiary
companies. At 30 September 2024, the amount drawn under this cross guarantee
was £nil million (2023: £nil million). Together with other Group
undertakings, the Company guarantees various borrowings and liabilities of
other subsidiary companies under this arrangement with HSBC Bank plc.
The Company is party to three counter-indemnity deeds, each dated April 2023,
made on substantially the same terms under which certain insurance companies
have made available to Imperial Brands PLC, Imperial Tobacco Limited and the
Company, a surety bond. In each case issued on a standalone basis but in
aggregate forming an amount of £120 million, until December 2028. These
surety bonds provide support to the Imperial Tobacco Pension Trustees Ltd, the
main UK pension scheme. The Directors have assessed the fair value of the
above guarantees and do not consider them to be material. They have,
therefore, not been recognised on the balance sheet.
At 30 September 2024, the contingent liability totalled £nil million (2023:
£nil million).
18. Number of employees
The average monthly number of employees during the year was 9 (2023: 11).
19. Immediate and ultimate parent undertakings
The ultimate parent undertaking and controlling party of the Company at 30
September 2024 was Imperial Brands PLC, a company incorporated and registered
in England and Wales. The smallest and largest group in which the results of
the Company are consolidated is that headed by Imperial Brands PLC, whose
consolidated financial statements may be obtained from The Company Secretary,
Imperial Brands PLC, 121 Winterstoke Road, Bristol, BS3 2LL and will be
available in the investors section of the Group website at
www.imperialbrandsplc.com (http://www.imperialbrandsplc.com) .
The immediate parent undertaking of the Company at 30 September 2024 was
Imperial Tobacco Holdings Limited, a company incorporated and registered in
England and Wales.
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