REG - Imperial Brands PLC - Pre-close trading update

Imperial BrandsAnnouncement

13/04/2023 07:00

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RNS Number : 0408W  Imperial Brands PLC  13 April 2023

IMPERIAL BRANDS PLC

 

Legal Entity Identifier (LEI) No. 549300DFVPOB67JL3A42

 

13 April 2023

 

Pre-close trading update: Imperial Brands on track to meet full-year guidance

 

·      Robust tobacco pricing and stable aggregate market share across
top-five combustible markets - against a strong comparator

·      Product launches across vapour, heated tobacco and modern oral
drive NGP net revenue growth

·      First-half adjusted Group operating profit similar to H1 2022 on
constant currency basis, reflecting impact of COVID-19 unwind on volumes,
higher NGP investment, and last year's Russia exit

·      On track to meet full-year expectations and our guidance of
growing revenue and operating profit

·      Completed £523m of the FY23 £1bn share buyback, as part of
ongoing programme of capital returns

 

We continue to make good progress implementing our five-year strategy to
transform the business. We are on track to deliver full-year results in line
with expectations and our guidance of low single-digit constant currency net
revenue growth. Over the next three years, we continue to expect operating
profit growth to accelerate to a mid-single digit CAGR at constant currency.

 

Focused investment in our priority combustible markets continues to support
the stabilisation of market share.  We are consolidating the strong gains
achieved last year with aggregate share in our top-five markets at the half
year expected to be at a similar level to the prior period. The US, Spain and
Australia are expected to show growing or stable market share, offsetting
declines in Germany and the UK. This resilient performance has been achieved
while maintaining strong pricing discipline across all five markets. These
results now complete two years of stable market share delivery following
several years of decline.

 

In all categories of next generation products (NGP), we have delivered a
step-up in product and market launches. This follows the validation of our new
more agile and consumer-focused approach. Our heated tobacco proposition,
Pulze and iD, is now available in seven European markets. In vapour, we have
launched our blu 2.0 product in the UK, Spain, France, Czech Republic and
Portugal. Zone X, our modern oral product, continues to perform well,
supported by new flavour launches and marketing initiatives. First-half NGP
revenues are expected to be ahead of the prior period, driven by strong growth
in Europe, more than offsetting declines in the US, driven by uncertainty
caused by the marketing denial order for myblu.

 

Excluding the impact of our exit from Russia last year, our first-half Group
net revenue is expected to be at a similar level to last year at constant
currency, with strong combustible pricing offset by temporarily increased
volume declines against a prior period which benefited from COVID-related
changes in buying patterns.  We expect a stronger net revenue performance in
the second half, supported by a normalisation of volume trends and price
increases taken during the first half. As expected, our exit from Russia will
result in first-half Group net revenue being slightly below last year on a
constant currency basis. Details of the contribution from Russia last year are
provided below.

 

As previously guided, first-half Group adjusted operating profit is expected
to be at a similar level to last year on a constant currency basis. Tobacco
& NGP adjusted operating profit has been impacted by the planned increase
in NGP investment, the impact of our exit from Russia, and the continued
unwind of COVID-19. Growth in Distribution adjusted operating profit has
helped to mitigate these headwinds.

 

At current exchange rates, translation foreign exchange is expected to be a c.
6.5 per cent tailwind on first-half earnings per share and a c. 2.5-3.5 per
cent tailwind on full-year earnings per share.

 

Our first-half leverage (adjusted net debt to EBITDA) is expected to improve
year on year, on a 12-month basis. We expect our full-year leverage to remain
at the lower end of our 2.0-2.5 range for net debt to EBITDA.

 

To date, we have completed £523m of our £1bn share buyback for this year,
representing approximately 2.7% of the issued share capital. We remain
committed to delivering a material reduction in the share capital base. This
buyback programme represents an ongoing source of shareholder returns
alongside our progressive dividend policy.

 

The interim results for the six months ended 31 March 2023 will be announced
on 16 May 2023.

 

Central & Eastern Europe transferred to AAA to support wider market
portfolio initiatives

To provide a greater focus on 'driving value from our broader market
portfolio', which is one of our strategic pillars, we have transferred the
management of our Central and Eastern Europe cluster from our Europe region to
the Africa, Asia and Australasia (AAA) region. Under the leadership of Paola
Pocci, we have been enhancing our capabilities and expertise in managing our
smaller markets, many of which have attractive margins and the potential to
become platforms for future growth in combustible tobacco and NGP. The AAA
region will now be known as AAACE.

 

We will make the change in our regional reporting for the interim results for
the six months to 31 March 2023 and the annual results for the year to 30
September 2023 and we have provided below the key regional metrics for HY22
and FY22 restated for the new reporting basis. The affected markets are
Poland, Czech Republic, Ukraine, Slovakia, Hungary, Azerbaijan, Armenia,
Georgia, Moldova, Croatia and Slovenia. The Americas region is unaffected by
the change.

 

 HY22 restatement                  Europe (existing)  AAA (existing)  CEE   Europe  AAACE

                                                                            (new)   (new)
 Tobacco volume             bn SE  57.8               42.4            11.6  46.2    54.0
 Total net revenue          £m     1,569              766             199   1,370   965
 Tobacco net revenue        £m     1,492              766             196   1,296   962
 NGP net revenue            £m     77                 0               3     74      3
 Adjusted operating profit  £m     671                357             50    621     407

 

 FY22 restatement                  Europe (existing)  AAA (existing)  CEE   Europe  AAACE

                                                                            (new)   (new)
 Tobacco volume             bn SE  121.5              77.5            23.6  97.9    101.1
 Total net revenue          £m     3,472              1,495           433   3,039   1,928
 Tobacco net revenue        £m     3,306              1,495           423   2,883   1,918
 NGP net revenue            £m     166                0               10    156     10
 Adjusted operating profit  £m     1,562              700             115   1,447   815

 

Impact of Russia Exit

On 20 April 2022, we announced the transfer of our Russian business to local
investors.  We provide below the contribution from our Russian business in
HY22 for key metrics to assist with the modelling the year-on-year impact.

 

 HY22 Russia contribution          Russia
 Tobacco volume             bn SE  6.9
 Total net revenue          £m     54
 Tobacco net revenue        £m     54
 NGP net revenue            £m     -
 Adjusted operating profit  £m     7

 

ENDS

 

Notes:

The Group uses 'adjusted' (non-GAAP) measures as we believe they provide a
better comparison between reporting periods. The definition of our adjusted
measures is unchanged from our full-year results. We also use the term
'constant currency', which removes the effect of exchange rate movements on
the translation of the results of our overseas operations.

 

 

 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
 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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