REG - Imperial Brands PLC - Half-year Report <Origin Href="QuoteRef">IMB.L</Origin> - Part 3

Imperial BrandsAnnouncement

04/05/2016 07:05

- Part 3: For the preceding part double click  ID:nRSD1501Xb 

                     176.9                         
 
 
 Reconciliation from Reported to Adjusted Earnings and Earnings per Share                               
                                                                           Unaudited                    Unaudited                    Audited                                
                                                                           6 months ended31 March 2016  6 months ended31 March 2015  Year ended30 September 2015            
 £ million unless otherwise indicated                                      Earnings per share (pence)   Earnings                     Earnings per share (pence)   Earnings  Earnings per share (pence)  Earnings  
 Reported basic                                                            30.4                         290                          89.5                         853       177.4                       1,691     
 Acquisition costs                                                         -                            -                            1.7                          16        4.2                         40        
 Amortisation of acquired intangibles                                      40.5                         387                          25.5                         243       57.5                        548       
 Net fair value and exchange gainson financial instruments                 25.7                         245                          (30.7)                       (293)     (22.7)                      (215)     
 Post-employment benefits net financing cost                               0.6                          6                            0.8                          8         1.5                         14        
 Restructuring costs                                                       12.5                         119                          6.0                          57        24.9                        237       
 Taxation on unrecognised losses                                           4.1                          39                           1.3                          13        (28.6)                      (273)     
 Adjustments attributable to non-controlling interests                     (0.8)                        (8)                          (0.8)                        (8)       (1.7)                       (16)      
 Adjusted                                                                  113.0                        1,078                        93.3                         889       212.5                       2,026     
 Adjusted diluted                                                          112.8                        1,078                        93.1                         889       211.9                       2,026     
                                                                                                                                                                                                                        
 
 
9. Intangible Assets 
 
At the 2015 year end the impairment test for the Drive Growth CGU grouping
that includes our markets in Russia, Italy and Japan indicated headroom of £69
million and that an impairment would result in the event of relatively small
changes in an individual assumption or assumptions.  In view of this
sensitivity, we have tested the appropriateness of the carrying value of the
Drive Growth CGU grouping's intangible assets at 31 March 2016, which
indicated minimal headroom.  In doing so, we have revisited our cash flow
forecasts and other factors such as growth rates, discount rates and other
appropriate assumptions. Taking account of all of these factors, we have
concluded that the carrying value for the Drive Growth CGU grouping included
in our 31 March 2016 balance sheet is appropriate, but remains highly
sensitive to adverse movements in any individual assumption or assumptions. 
We will conduct a further test in the second half of the year in line with our
normal impairment review cycle. 
 
10. Net Debt 
 
The movements in cash and cash equivalents, borrowings, and derivative
financial instruments in the period were as follows: 
 
                                                                 Unaudited                 
 £ million                                                       Cash and cashequivalents  Currentborrowings  Non-currentborrowings  Derivativefinancialinstruments  Total     
 At 1 October 2015                                               2,042                     (1,957)            (12,250)               215                             (11,950)  
 Reallocation of current borrowings from non-current borrowings  -                         (471)              471                    -                               -         
 Cash flow                                                       (1,549)                   (96)               493                    56                              (1,096)   
 Accretion of interest                                           -                         107                42                     (21)                            128       
 Change in fair values                                           -                         -                  -                      (532)                           (532)     
 Exchange movements                                              68                        (174)              (473)                  -                               (579)     
 As at 31 March 2016                                             561                       (2,591)            (11,717)               (282)                           (14,029)  
 
 
Adjusted Net Debt 
 
Management monitors the Group's borrowing levels using adjusted net debt which
excludes interest accruals and the fair value of derivative financial
instruments providing commercial cash flow hedges. 
 
                                                        Unaudited                     Unaudited                     Audited                       
 £ million                                              6 months ended 31 March 2016  6 months ended 31 March 2015  Year ended 30 September 2015  
 Reported net debt                                      (14,029)                      (9,263)                       (11,950)                      
 Accrued interest                                       151                           162                           279                           
 Fair value of derivatives providing commercial hedges  168                           45                            25                            
 Adjusted net debt                                      (13,710)                      (9,056)                       (11,646)                      
 
 
The fair value of bonds is estimated to be £12,338 million (2015 6 months:
£10,521 million) and has been determined by reference to market prices at the
balance sheet date.  The carrying value of bonds is £11,134 million (2015 6
months: £9,216 million).  The fair value of all other borrowings is considered
to be equal to their carrying amount. 
 
11. Derivative Financial Instruments 
 
                                                                       Unaudited                     Unaudited                     Audited                       
 £ million                                                             6 months ended 31 March 2016  6 months ended 31 March 2015  Year ended 30 September 2015  
 Assets                                                                                                                                                          
 Interest rate swaps                                                   885                           794                           721                           
 Forward foreign currency contracts                                    6                             18                            13                            
 Cross currency swaps                                                  54                            338                           241                           
 Total carrying value of derivative financial assets                   945                           1,150                         975                           
 Liabilities                                                                                                                                                     
 Interest rate swaps                                                   (1,088)                       (890)                         (773)                         
 Forward foreign currency contracts                                    (11)                          (13)                          (5)                           
 Cross-currency swaps                                                  (174)                         (7)                           (23)                          
 Carrying value of derivative financial liabilities before collateral  (1,273)                       (910)                         (801)                         
 Collateral                                                            46                            84                            41                            
 Total carrying value of derivative financial liabilities              (1,227)                       (826)                         (760)                         
 Total carrying value of derivative financial instruments              (282)                         324                           215                           
                                                                                                                                                                 
 Analysed as:                                                                                                                                                    
 Interest rate swaps                                                   (203)                         (96)                          (52)                          
 Forward foreign currency contracts                                    (5)                           5                             8                             
 Cross currency swaps                                                  (120)                         331                           218                           
 Collateral                                                            46                            84                            41                            
 Total carrying value of derivative financial instruments              (282)                         324                           215                           
 
 
The Groups' derivative financial instruments are held at fair value.  Fair
values are determined based on observable market data (Level 2 classification
hierarchy) and are consistent with those applied during the year ended 30
September 2015. 
 
12. Retirement Benefit Schemes 
 
Actuarial valuations for the Group's retirement benefit plans are updated
annually as at 30 September.  An interim update is carried out at 31 March for
the main plans.  As part of this interim update, the most material plan assets
are revalued based on market data at the period end and the liabilities for
the most significant schemes are recalculated to reflect key changes in
membership data and revised actuarial assumptions. 
 
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