REG - Imperial Brands PLC - Capital Markets Day and Trading Update

Imperial BrandsAnnouncement

26/03/2025 11:30

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RNS Number : 3322C  Imperial Brands PLC  26 March 2025

IMPERIAL BRANDS PLC

 

Legal Entity Identifier (LEI) No. 549300DFVPOB67JL3A42

 

26 March 2025 - Capital Markets Day: 2030 Strategy to Drive Shareholder
Returns

 

·      2030 strategy builds on strong foundations of current five-year
plan by:

·      Driving sustainable value through continued focus on five
priority combustible markets

·      Building a meaningful next generation products business to
support profitable growth

·      Developing differentiated brands, a high-performance culture and
a data-led, efficient organisation

·      This plan will deliver another five years of growth in net
revenue, EPS and free cash flow

·      Disciplined capital allocation framework maintained

·      Announcement of annual, "evergreen" share buyback for the five
years up to 2030

·      All these elements support an attractive investment case for
shareholder returns

·      On track to meet full-year expectations in FY25

 

Imperial Brands plc today hosts a Capital Markets Day in London for analysts
and investors. Chief Executive Stefan Bomhard and members of the executive
leadership team will provide details of the 2030 strategy to drive sustainable
growth and long-term value creation.

 

Stefan Bomhard said: "Our 2030 strategy articulates the choices we will make
to further strengthen our combustible and next generation product (NGP)
businesses, generating sustainable growth and long-term value for
shareholders. This strategy builds on the firm foundations of our current
plan, which has created a better business delivering a stronger, more
consistent operational and financial performance, and excellent returns for
shareholders. This underpins my confidence that, during the next five years,
we will unlock further value creation opportunities.

 

"We will maintain our distinctive challenger approach, which is about
developing a deep understanding of our consumers, equipping our people to
perform with agility and choosing to focus on our biggest levers of growth. We
will continue to upgrade our capabilities, creating differentiated brands, a
high-performance culture and a more efficient organisation led by data. This
will support growth in combustibles, where we will continue to focus on the
five largest markets accounting for c. 70% of adjusted operating profit, and
NGP, where we will retain our disciplined investment and market entry
criteria.

 

"We are maintaining our rigorous capital allocation framework, which has both
supported investment in growth and delivered substantial, growing capital
returns for shareholders. We are committed to a progressive dividend per share
and today announce an 'evergreen' share buyback each year over the next five
years. We believe this combination of sustainable growth and capital returns
reinforces a compelling investment case for shareholders."

 

Unlocking further value through our strategic priorities:

The 2030 strategy has two focused objectives:

 

Drive sustainable value in combustibles

We have chosen to continue focusing on our five largest markets. The United
States, Germany, United Kingdom, Spain and Australia represent c. 70% of
adjusted tobacco operating profit - and over the next five years they will
continue to contribute most of our earnings.  Within these markets, we have
identified specific areas for further investment by category, brand and sales
channel. Our objective going forwards will be to continue to maintain our
aggregate market share across these five markets with the aim of driving
sustainable growth and cash delivery. By applying this same
performance-driven, consumer-led approach to our wider portfolio of tobacco
markets, we expect them to make a greater contribution to our overall
performance over the next five years.

 

Build scale in next generation products

We have now built a platform for a fast growing and agile NGP business, which
is founded on a clear understanding of our consumers, credible brands in all
three categories, and differentiated products available in all material
markets where we have distribution routes. Our goal is to build scale by
further sharpening our consumer insights, leveraging our differentiated brands
and developing our sales capabilities. This will build a meaningful NGP
business which provides additional growth opportunities and supports our
profit and cash performance.

 

Successful delivery of these objectives will be underpinned by three strategic
enablers - key organisational capabilities and ways of working.

 

Differentiated consumer & brand capabilities

Under the current strategy, we established a Global Consumer Organisation,
hired talented people with global FMCG backgrounds, and became stronger in
insights, brand building and innovation. Over the next five years, we will
create further value by refining and focusing our approach. This will include
deeper insights into specific target groups, the development of more
differentiated "challenger" brands, and innovation targeted to address the
most important needs of our consumers.

 

High-performance culture

Responding to a legacy of global acquisitions which had been imperfectly
integrated, we have been creating a culture where accountabilities are clear,
deep collaboration across geographies is fostered and long-term thinking is
enabled. Our data shows this emerging performance culture has been a key
driver of commercial success. Looking ahead, we see opportunities to unlock
higher performance by further investing selectively in leadership skills,
improving business planning and introducing more connected ways of working.

 

Simplified, efficient, and data-led organisation

We have already begun to improve our systems, data and processes through the
implementation of a new global enterprise resource planning platform and
through global business services. We have now identified further opportunities
to create a simpler, leaner and more agile organisation. We will leverage our
scale through global business services, drive efficiencies in our supply chain
through manufacturing excellence and enable our people to make more informed
decisions through better use of data.

 

To support the delivery of our strategy, we will invest behind these strategic
enablers, which will reshape our ways of working and reinforce our role as an
agile challenger better able to capture growth opportunities. These
initiatives will also bring efficiencies with expected annualised savings of
c. £320m by the end of 2030, the majority of which will be reinvested to
support our growth initiatives. The anticipated cash costs of these
initiatives are c. £600m, with the majority of the spend, c. £500m, split
between FY27 and FY28.  In addition, we expect to incur associated non-cash
charges of around £140m. This is a one-off and time-bound programme, and we
intend to treat the costs as an adjusting item to aid comparison of
performance over time.

 

Delivering sustainable growth in net revenue, profit and cash

Our strategy will support our medium-term guidance with the following CAGR
expectations on a constant currency basis:

·      Tobacco & NGP revenue: We expect to deliver low-single digit
tobacco net revenue growth and double-digit NGP net revenue growth.

·      Group adjusted operating profit is expected to grow at around
3-5% annually.

·      Adjusted EPS is expected to grow at a high-single digit rate,
supported by a continued reduction in share count through the share buyback.

·      Cash generation: We expect to generate free cash flow of between
£2.2bn and £3.0bn per annum.

 

Capital allocation framework

We are retaining the same capital allocation framework, which will provide
clarity on our use of cash and deliver growing returns for shareholders. Our
priorities are therefore unchanged:

 

1.     Investment to support our strategic delivery through organic growth
initiatives in combustibles and NGP.  This will include investment to create
an even more streamlined, agile, data-led business. We will continue to
evaluate opportunities for small bolt-on acquisitions, which will be focused
on enhancing our NGP capabilities.

2.     A strong and efficient balance sheet to support our investment
grade credit rating. We will maintain our current leverage target at the lower
end of our net debt to EBITDA range of 2-2.5 times.

3.     A progressive dividend policy to provide a reliable, consistent
cash return to shareholders. Dividends per share will grow annually taking
into account underlying business performance.

4.     Surplus capital returns to shareholders via an ongoing, "evergreen"
share buyback over the next five years FY26-30.  The Board will determine the
quantum of future buybacks on an annual basis, in line with current practice.

 

On track to deliver full year expectations in FY25

For the coming year, with all our guidance at constant currency, we are on
track to deliver tobacco and NGP net revenue growth at low single-digit and to
grow our Group adjusted operating profit close to the middle of our
mid-single-digit range, i.e. at a similar growth rate as last year. We expect
continued momentum in our NGP business to deliver double-digit net revenue
growth for the full year.

We expect to deliver at least high-single-digit adjusted earnings per share
growth for the full year supported by the ongoing share buyback and partly
offset by higher adjusted finance and tax costs.

As previously guided, performance will be weighted to the second half of the
year driven by the phasing of combustible pricing and investment. As a result,
first half Group adjusted operating profit is expected to grow at low single
digits, i.e. about 1-2%. Adjusted earnings per share is expected to grow
around mid-single digits at the half year.

In the first half, our combustible performance will continue to be driven by
strong pricing while we expect to maintain our aggregate share in our five
priority markets in line with our strategic objective. In NGP, we expect to
grow net revenue in the range of 10-15% as we continue to build scale in our
existing footprint.

 

We remain confident of meeting our full year guidance with our second half
delivery underpinned by embedded tobacco pricing already taken in the first
half and further NGP growth as we build scale, and their associated margin
benefits.

 

At current exchange rates, foreign exchange translation is expected to be a c.
2-3% headwind to first half net revenue and adjusted operating profit and a c.
1-2 per cent headwind on full-year net revenue and adjusted operating profit.

 

Presentation and webcast details

Stefan Bomhard, Chief Executive, and members of the executive leadership team
will outline further detail at a Capital Markets Day presentation in London at
13:30 GMT today. A live webcast of the presentation including Q&A for
investors and analysts will be available via our website at
www.imperialbrandsplc.com (http://www.imperialbrandsplc.com) or on
https://brrmedia.news/IMB_CMD_2025 (https://brrmedia.news/IMB_CMD_2025) . This
will be available for playback after the event.

 

Analysts and investors can ask questions in the Q&A session by registering
in advance via this link: https://brrmedia.news/IMB_CMD2025_callreg
(https://eur02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fbrrmedia.news%2FIMB_CMD2025_callreg&data=05%7C02%7Cpeter.durman%40impbrands.com%7C3a5db114b83f429e7e1008dd67143cfc%7Cd14c9c9a6bb5430f99ff6c2815b3a95e%7C0%7C0%7C638780059321235490%7CUnknown%7CTWFpbGZsb3d8eyJFbXB0eU1hcGkiOnRydWUsIlYiOiIwLjAuMDAwMCIsIlAiOiJXaW4zMiIsIkFOIjoiTWFpbCIsIldUIjoyfQ%3D%3D%7C0%7C%7C%7C&sdata=sjyPJKl%2F%2F097mB%2BM7ruO%2FfBkYmFWrFV5d%2B7xq9fQtE8%3D&reserved=0)
. You will then receive the dial-in details and your own PIN to be able to ask
a question in the live Q&A session.

 

ENDS

 

 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

 

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.

 

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