REG - Imperial Brands PLC - Final Results

Imperial BrandsAnnouncement

19/11/2024 07:00

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RNS Number : 7018M  Imperial Brands PLC  19 November 2024

IMPERIAL BRANDS PLC

Legal Entity Identifier (LEI) No. 549300DFVPOB67JL3A42

 

FULL YEAR RESULTS STATEMENT

19 NOVEMBER 2024

 

Delivering Growth

DRIVING RETURNS

 

Report for the year ended 30 September 2024

Business Highlights

·    Delivered a further acceleration with net revenue up 4.6% from
tobacco & next generation products

·    Aggregate market share gains (+5bps) in our five priority markets
with four out of five markets in share growth

·    Next generation product net revenue up 26% with growth from all three
regions and improved gross margins

·    Growth at Logista reflected strong tobacco pricing and benefit of
prior year acquisitions

·    Adjusted earnings per share up 10.9% driven by profit growth and
share count reduction; reported EPS up 19.1%

·    Cash generation was strong; free cash flow of £2.4bn

·    Capital returns of c. £2.8bn underway for FY25 with £1.25bn buyback
and FY24 dividend, up 4.5%

Financial Summary

 Twelve months ended                    Reported                                      Adjusted(2)

30 September 2024
                                        2024     2023     Change    2024     2023     Actual  Constant currency(3)
 Revenue                           £m   32,411   32,475   -0.2%     -        -        -       -
 Tobacco & NGP net revenue(1)      £m   -        -        -         8,157    8,012    +1.8%   +4.6%
 Operating profit                  £m   3,554    3,402    +4.5%     3,911    3,887    +0.6%   +4.6%
 Earnings per share                p    300.7    252.4    +19.1%    297.0    278.8    +6.5%   +10.9%
 Net debt                          £m   (8,340)  (8,438)  -         (7,740)  (8,026)  -       -
 Dividend per share                p    153.42   146.82   +4.5%     153.42   146.82   +4.5%   +4.5%

 

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

"As we enter the final year of our current strategy, the investment we have
made in consumer capabilities, cultural transformation and agile ways of
working has supported another year of accelerated financial delivery and
growing capital returns. These results demonstrate how we are fulfilling our
role as an effective challenger for the industry, able to deliver consistently
against operational and financial expectations.

"In tobacco, investment in our brands and sales force initiatives have
delivered aggregate market share gains across our five priority markets, while
delivering strong pricing. This was supported by an encouraging stabilisation
in German market share for the first time under our strategy.

"In next generation products (NGP), we continue to build scale across our
footprint with net revenues up 26.4% at constant currency driven by growth
from all three regions and market share growth in all three categories. Our
partnership approach to product innovation has enabled us to launch new
products across all three categories during the year. This included our
successful entry to the fast-growing modern oral category in the US with our
brand 'Zone'.

"Our operational delivery coupled with consistently strong cash flow
generation has supported enhanced shareholder returns with increases to both
our ordinary dividend and share buyback. We are on track to deliver five-year
capital returns of c. £10bn, representing 67% of our market capitalisation in
January 2021 when we launched our strategy. We look forward to presenting the
next phase of our strategy at a Capital Markets Day on 26 March 2025."

 

Delivering Against our Strategic Priorities

Gaining aggregate market share across our portfolio of five priority
combustible markets

·    Aggregate market share gains of +5bps, in our five priority markets,
while achieving strong pricing in all markets

·    Four out of five markets in share growth: gains in US (+15bps),
Germany (+2bps), Spain (+5bps), and Australia (+5bps) more than offset
declines in UK (-50bps)

·    Encouraging share stabilisation in Germany with share +2bps vs FY23
-80bps, as investment initiatives gain traction

Building a sustainable NGP business for a sustainable future

·    Challenger strategy delivering net revenue growth in all three
regions and all three categories

·    Delivering market share growth in all categories

·    NGP net revenue now represents c. 8% of tobacco and NGP net revenue
in Europe, including Central & Eastern Europe

·    In vaping, new blu formats launched to meet evolving consumer needs
across several markets

·    Heated tobacco growing share with Pulze 2.0, iD and iSenzia sticks in
Europe

·    In modern oral, encouraging share and repurchase rates following our
targeted launch of Zone in 12 US metropolitan areas

Driving value from our broader market portfolio

·    Strong pricing in our wider footprint markets has underpinned a
strong financial performance

·    AAACE performance recovered in the second half of the year, as
expected, as disruption to shipment timings abated

·    Africa delivered a net revenue growth with strong pricing in key
markets

·    Strong NGP growth across multiple European markets in our wider
market portfolio

Transforming our ways of working

·    Consumer: Significantly strengthened our consumer-facing capabilities
under our Group Consumer Office

·    Performance-based culture: Employee engagement survey scores continue
to exceed global benchmarks as we build a performance-based culture and embed
the benefits of our senior leadership coaching programme

·    Simplified and efficient operations: Good progress with new ways of
working with the further deployment of Global Business Services across several
functions and the successful go-live of our ERP pilot in the UK in October
2024

Results Overview*

Tobacco & NGP net revenue growth driven by strong tobacco pricing and NGP

·    Strong tobacco pricing across all key markets, price mix of 7.8%:
reflecting continued strong pricing across all three regions

·    Tobacco volumes declined 4.0% (to 190.0bn SE) as volume declines have
continued to normalise across our footprint

·    NGP net revenue up 26.4% to £335m driven by growth across all
regions (£329m at actual rates)

·    Distribution (Logista) gross profit increased 4.4% driven by strong
tobacco pricing and the benefit of prior year acquisitions

·    Reported revenue declined -0.2% reflecting the decline in tobacco
revenue due lower volumes in high excise markets and adverse foreign exchange
movements, largely offset by growth in NGP and Distribution revenues

Accelerating our adjusted profit growth alongside continued investment

·    Group adjusted operating profit grew +4.6%, driven by improved
profitability in tobacco and NGP and Distribution

·    Reported operating profit grew +4.5% driven by strong operating
performance, with adverse foreign exchange movements offset by the non-repeat
of prior year charges for legal provisions and fair value adjustments and
impairment of other financial assets

·    Tobacco adjusted operating profit grew +2.5%, reflecting strong
pricing while absorbing cost inflation

·    NGP adjusted losses reduced by +43.0% to £79m, with improved gross
margin while supporting continued investment in new product launches

·    Distribution adjusted operating profit increased 8.6% reflecting good
underlying growth due to tobacco price increases

·    Adjusted EPS grew +10.9% with adjusted operating profit growth
enhanced by reduced share count

·    Reported EPS grew +19.1% reflecting increased operating profit, a
lower reported tax rate and a reduced share count, which more than offset
higher interest costs and adverse foreign exchange translation

Strong free cash flow and disciplined capital allocation framework supports
growing shareholder returns

·    Adjusted operating cash conversion of 100%; free cash flow of £2.4bn

·    Investing in organic growth initiatives and targeted bolt-on
acquisitions in NGP and Distribution (Logista)

·    Adjusted net debt £7.7bn (2023: £8.0bn); adjusted net debt to
EBITDA at 1.8x and 1.9x at constant currency (2023: 1.9x)

·    Reported net debt £8.3bn (2023: £8.4bn)

·    FY24 dividend per share up 4.5% to 153.42 pence per share, in line
with our progressive dividend policy; move to four equal quarterly dividend
payments for FY25 onwards

·    Ongoing multi-year share buyback with £1.25bn underway for FY25;
13.6% increase on FY24 buyback

·    Cumulative capital returns from FY21 to FY25 of c.£10bn,
representing c. 67% of market capitalisation at January 2021

*  All measures at constant currency unless otherwise stated

Outlook

 We are now working on our strategy for the next five-year period through to
 2030, which will build on the strong foundations established under the current
 strategy. Further details will be provided at a Capital Markets Day in London
 on 26 March 2025. In the meantime, our priority is to deliver on the final 12
 months of the current five-year plan and, while we take nothing for granted,
 we remain confident in our ability to deliver on our existing operational and
 financial commitments.

 In the coming year, we expect to deliver tobacco and NGP net revenue growth at
 low single-digit constant currency and to grow our Group adjusted operating
 profit close to the middle of our mid-single-digit range at constant currency.
 This will be driven by continued profit growth from our combustible tobacco
 business and a further reduction in operating losses in our NGP portfolio.
 Given the strong momentum in our NGP business, we will continue to invest to
 drive another year of double-digit constant currency net revenue growth, while
 balancing our objective to build a sustainable and profitable business.

 In line with previous years, 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 at constant currency.

 We expect to deliver at least high-single-digit earnings per share growth at
 the full year at constant currency supported by the ongoing share buyback and
 partly offset by higher adjusted finance and tax costs. At current rates,
 foreign exchange translation is expected to be a headwind of 1-2% to net
 revenue, adjusted operating profit and earnings per share.

 We remain focused on driving sustainable growth in cash flows to underpin
 another year of shareholder returns and to support our growing role in this
 industry's transition to a healthier future.

For a Copy of the full statement

To view  a copy of the full statement please click here:
https://www.imperialbrandsplc.com/FY24
(https://eur02.safelinks.protection.outlook.com/?url=https%3A%2F%2Fwww.imperialbrandsplc.com%2FFY24&data=05%7C02%7CJennifer.Ramsey%40Impbrands.com%7Cb04f9a60059543bc7ed908dd07dcf7e4%7Cd14c9c9a6bb5430f99ff6c2815b3a95e%7C0%7C0%7C638675367807501976%7CUnknown%7CTWFpbGZsb3d8eyJFbXB0eU1hcGkiOnRydWUsIlYiOiIwLjAuMDAwMCIsIlAiOiJXaW4zMiIsIkFOIjoiTWFpbCIsIldUIjoyfQ%3D%3D%7C0%7C%7C%7C&sdata=3WkOMuBi%2F4Bg9zLrVg1pIz7DLRlzb0nTfPVFWX4MUTE%3D&reserved=0)

and it is also available
here: http://www.rns-pdf.londonstockexchange.com/rns/7018M_1-2024-11-18.pdf
(http://www.rns-pdf.londonstockexchange.com/rns/7018M_1-2024-11-18.pdf)

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 12-month average to the end of
September (MAT - moving annual 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 328 093  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

Imperial Brands PLC will be hosting a live webcast at 09:00 (GMT) on 19
November 2024 for investors and investment analysts following

the publication of our annual results at 07:00 (GMT). The webcast will be
hosted by Stefan Bomhard, Chief Executive, and Lukas Paravicini,
Chief Financial Officer. The presentation will be followed by a question and
answer session. The presentation slides will be available on
www.imperialbrandsplc.com from 07.00 (GMT). A webcast recording and the
presentation script will also be available after the live webcast
has concluded. The webcast will be available on
https://edge.media-server.com/mmc/p/emm9dnx5
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. To participate in the Q&A session, please register in advance via this
link: https://register.vevent.com/register/BI9912be35fe704fbb9ace6789f5762e54
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. You will then receive the dial-in details and your own PIN to access the
live Q&A session.

Cautionary Statement

Certain statements in this announcement constitute or may constitute
forward-looking statements. Any statement in this announcement that is not a
statement of historical fact including, without limitation, those regarding
the Company's future expectations, operations, financial performance,
financial condition and business is or may be a forward-looking statement.
Such forward-looking statements are subject to risks and uncertainties that
may cause actual results to differ materially from those projected or implied
in any forward-looking statement. These risks and uncertainties include, among
other factors, changing economic, financial, business or other market
conditions. These and other factors could adversely affect the outcome and
financial effects of the plans and events described in this announcement. As a
result, you are cautioned not to place any reliance on such forward-looking
statements. The forward-looking statements reflect knowledge and information
available at the date of this announcement and the Company undertakes no
obligation to update its view of such risks and uncertainties or to update the
forward-looking statements contained herein. Nothing in this announcement
should be construed as a profit forecast or profit estimate and no statement
in this announcement should be interpreted to mean that the future earnings
per share of the Company for current or future financial years will
necessarily match or exceed the historical or published earnings per share of
the Company. This announcement has been prepared for, and only for the members
of the Company, as a body, and no other persons. The Company, its Directors,
employees, agents or advisers do not accept or assume responsibility to any
other person to whom this announcement is shown or into whose hands it may
come, and any such responsibility or liability is expressly disclaimed.

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