REG - Imperial Brands PLC - Half-year Report <Origin Href="QuoteRef">IMB.L</Origin> - Part 3
03/05/2017 07:05
- Part 3: For the preceding part double click ID:nRSC0055Eb
(9) (80)
Unused amounts reversed (2) (20) (22)
Exchange movements (1) - (1)
At 31 March 2017 450 158 608
Analysed as:
Unaudited Unaudited Audited
£ million 6 months ended 31 March 2017 6 months ended 31 March 2016 Year ended 30 September 2016
Current 206 185 188
Non-current 402 264 287
608 449 475
5. NET FINANCE COSTS AND RECONCILIATION TO ADJUSTED NET FINANCE COSTS
RECONCILIATION FROM REPORTED NET FINANCE COSTS TO ADJUSTED NET FINANCE COSTS
Unaudited Unaudited Audited
£ million 6 months ended 31 March 2017 6 months ended 31 March 2016 Year ended 30 September 2016
Reported net finance costs 115 562 1,350
Fair value gains on derivative financial instruments 670 216 484
Fair value losses on derivative financial instruments (503) (429) (825)
Exchange gains/(losses) on financing activities 2 (74) (466)
Net fair value and exchange gains/(losses) on financial instruments 169 (287) (807)
Interest income on net defined benefit assets 54 71 143
Interest cost on net defined benefit liabilities (66) (80) (162)
Post-employment benefits net financing cost (12) (9) (19)
Adjusted net finance costs 272 266 524
Comprising:
Interest on bank deposits (4) (3) (7)
Interest on bank loans and other loans 276 269 531
Adjusted net finance costs 272 266 524
6. TAXATION
RECONCILIATION FROM REPORTED TAX TO ADJUSTED TAX
Reported tax for the six months ended 31 March 2017 has been calculated on the
basis of an estimated effective rate for the year ended 30 September 2017.
The table below shows the taxation impact of the adjustments made to reported
profit before tax in order to arrive at the adjusted measure of earnings
disclosed in note 8.
Unaudited Unaudited Audited
£ million 6 months ended 31 March 2017 6 months ended 31 March 2016 Year ended 30 September 2016
Reported tax 114 142 238
Deferred tax on amortisation of acquired intangibles 160 86 261
Tax on net fair value and exchange movements on financial instruments (36) 42 80
Tax on post-employment benefits net financing cost 3 3 7
Tax on restructuring costs 88 43 79
Tax on unrecognised losses (31) (39) (56)
Adjusted tax charge 298 277 609
UNCERTAIN TAX POSITIONS
On 29 March 2017 the UK notified the European Council in accordance with
Article 50(2) of the Treaty on European Union of the UK's intention to
withdraw from the European Union. As an international business the Group is
monitoring developments but does not currently consider any provision is
required.
In November 2015 the Group received a challenge from the French tax
authorities that could lead to additional tax liabilities of up to £246
million (31 March 2016: £253 million). The challenge concerns the valuation
placed on the shares of Altadis Distribution France (now known as Logista
France) following an intra group transfer of the shares in October 2012 and
the tax consequences flowing from a potentially higher value that is argued
for by the tax authorities. Based on professional advice, an amount of £41
million (31 March 2016: £41 million) is included in the provision for
uncertain tax positions.
7. DIVIDENDS
DISTRIBUTIONS TO ORDINARY EQUITY HOLDERS
Unaudited Audited Audited
£ million 2017 2016 2015
Paid interim of nil pence per share (2016: 101.1 pence, 2015: 91.9 pence)
- Paid June 2015 - - 204
- Paid September 2015 - - 204
- Paid December 2015 - - 468
- Paid June 2016 - 225 -
- Paid September 2016 - 225 -
- Paid December 2016 - 517 -
Interim dividend paid - 967 876
Proposed interim of 51.7 pence per share (2016: nil, 2015: nil)
- To be paid June 2017 247 - -
- To be paid September 2017 247 - -
Interim dividend proposed 494 - -
Paid final of nil pence per share (2016: 54.1 pence, 2015: 49.1 pence)
- Paid March 2016 - - 468
- Paid March 2017 - 517 -
Final dividend - 517 468
Total ordinary share dividends of 51.7 pence per share (2016: 155.2 pence, 2015: 141.0 pence) 494 1,484 1,344
The declared interim dividend for 2017 amounts to a total dividend of £494
million based on the number of shares ranking for dividend at 31 March 2017.
This will be paid in two stages, one in June 2017 and one in September 2017.
The dividend paid during the half year to 31 March 2017 is £1,034 million
(2016: £936 million).
8. EARNINGS PER SHARE
Unaudited Unaudited Audited
£ million 6 months ended 31 March 2017 6 months ended 31 March 2016 Year ended 30 September 2016
Earnings: basic and diluted - attributable to owners of the Parent Company 675 290 631
Millions of shares
Weighted average number of shares:
Shares for basic earnings per share 954.3 953.7 954.0
Potentially dilutive share options 2.2 1.8 2.7
Shares for diluted earnings per share 956.5 955.5 956.7
Pence
Basic earnings per share 70.7 30.4 66.1
Diluted earnings per share 70.6 30.4 66.0
RECONCILIATION FROM REPORTED TO ADJUSTED EARNINGS AND EARNINGS PER SHARE
Unaudited Unaudited Audited
6 months ended31 March 2017 6 months ended31 March 2016 Year ended30 September 2016
£ million unless otherwise indicated Earnings per share (pence) Earningsnet of tax Earnings per share (pence) Earningsnet of tax Earnings per share (pence) Earnings net of tax
Reported basic 70.7 675 30.4 290 66.1 631
Amortisation of acquired intangibles 41.3 394 40.5 387 78.0 744
Net fair value and exchange gainson financial instruments (13.8) (133) 25.7 245 76.2 727
Post-employment benefits net financing cost 0.9 9 0.6 6 1.3 12
Restructuring costs 20.5 196 12.5 119 23.9 228
Taxation on unrecognised losses 3.2 31 4.1 39 5.9 56
Adjustments attributable to non-controlling interests (0.9) (9) (0.8) (8) (1.8) (17)
Adjusted 121.9 1,163 113.0 1,078 249.6 2,381
Adjusted diluted 121.6 1,163 112.8 1,078 248.9 2,381
9. INTANGIBLE ASSETS
At the 2016 year end the impairment test for the Drive Growth CGU grouping
that includes our markets in Russia, Italy and Japan indicated headroom of
£210 million and that an impairment would result in the event of relatively
small changes in an individual assumption or assumptions.
During the period a strategic investment programme was initiated in the Russia
CGU, in order to grow our business footprint. This investment included
initiatives to build long-term improvement in our market share and support a
consistent pricing strategy. The actions involved in this programme reflect
our confidence in the ongoing opportunity for growth offered by the Russian
market despite it being a very competitive market. The consequence of these
actions is expected to reduce net cash flows in both the current and
subsequent period, but deliver significantly higher growth and profitability
in future years. We have consequently tested the goodwill and intangible
assets for impairment.
The assumptions used in our impairment testing remain consistent with the
assessment conducted at 30 September 2016 with the exception of the initial
cash flow growth rate for the Russia CGU, which has increased from 5% to 34%.
The increase in the Russia CGU cash flow growth rate is primarily explained by
the short term impact of our investment strategy in the Russian market
preceding a return to historical levels of profitability as revenues steadily
grow.
Our impairment test for this CGU grouping indicated headroom had reduced to
£203 million. A reduction in the initial growth rate for these markets of 6%
or a 1.75% increase in the discount rate would cause the carrying value to
fall below the recoverable amount. The assessment confirms that there are
sufficient future cash flows to support the current carrying values. 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 2017 balance sheet is
appropriate, but remains highly sensitive to adverse movements in any
individual assumption or assumptions.
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 2016 1,274 (1,544) (12,394) (655) (13,319)
Reallocation of current borrowings from non-current borrowings - (966) 966 - -
Cash flow (618) (248) (134) 74 (926)
Accretion of interest - 24 46 (1) 69
Change in fair values - - - 191 191
Exchange movements (3) (26) (178) - (207)
As at 31 March 2017 653 (2,760) (11,694) (391) (14,192)
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 2017 6 months ended 31 March 2016 Year ended 30 September 2016
Reported net debt (14,192) (14,029) (13,319)
Accrued interest 152 151 221
Fair value of derivatives providing commercial hedges 113 168 216
Adjusted net debt (13,927) (13,710) (12,882)
The fair value of bonds is estimated to be £13,621 million (2016 6 months:
£12,338 million) and has been determined by reference to market prices at the
balance sheet date. The carrying value of bonds is £12,456 million (2016 6
months: £11,134 million). The fair value of all other borrowings is
considered to be equal to their carrying amount.
11. DERIVATIVE FINANCIAL INSTRUMENTS
The Group's derivative financial instruments are held at fair value, are as
follows.
Unaudited Unaudited Audited
£ million 6 months ended 31 March 2017 6 months ended 31 March 2016 Year ended 30 September 2016
Assets
Interest rate swaps 732 885 1,095
Forward foreign currency contracts 4 6 9
Cross-currency swaps 2 54 5
Total carrying value of derivative financial assets 738 945 1,109
Liabilities
Interest rate swaps (846) (1,088) (1,339)
Forward foreign currency contracts (18) (11) (11)
Cross-currency swaps (331) (174) (548)
Carrying value of derivative financial liabilities before collateral (1,195) (1,273) (1,898)
Collateral 1 66 46 134
Total carrying value of derivative financial liabilities (1,129) (1,227) (1,764)
Total carrying value of derivative financial instruments (391) (282) (655)
Analysed as:
Interest rate swaps (114) (203) (244)
Forward foreign currency contracts (14) (5) (2)
Cross-currency swaps (329) (120) (543)
Collateral 1 66 46 134
Total carrying value of derivative financial instruments (391) (282) (655)
¹ Collateral deposited against derivative financial liabilities under the
terms and conditions of an ISDA Credit Support Annex
Fair values are determined based on observable market data such as yield
curves and foreign exchange rates to calculate the present value of future
cash flows associated with each derivative at the balance sheet date, and are
consistent with those applied during the year ended 30 September 2016.
This information is provided by RNS
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