REG - Imperial Brands PLC - Trading Statement

Imperial BrandsAnnouncement

05/10/2023 07:00

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RNS Number : 7432O  Imperial Brands PLC  05 October 2023

IMPERIAL BRANDS PLC

 

Legal Entity Identifier (LEI) No. 549300DFVPOB67JL3A42

 

5 October 2023

 

Imperial Brands on track to deliver full-year guidance and announces further
£1.1bn share buyback

 

·      FY23 trading in line with guidance, with growth in aggregate
market share of top-five priority markets

·      Strong tobacco pricing driving constant currency net revenue and
adjusted operating profit growth

·      Momentum building behind next generation product (NGP) net
revenue growth across all categories

·      Further £1.1bn share buyback announced for FY24, a 10% increase
on the £1.0bn buyback in FY23

·      Total capital returns in FY24, including ordinary dividends and
share buyback, expected to exceed £2.4bn

 

Pre-close trading update

The implementation of our five-year strategy is driving further improvements
in operational and financial performance, and we are on track to deliver in
line with our previous full-year guidance. On a constant currency basis and
including Russia in the prior-year comparator, tobacco and NGP net revenue is
expected to grow in the low single digits and Group adjusted operating profit
growth to accelerate to the lower end of our mid-single digit range. At
current rates, we expect foreign exchange to be a c. 2% tailwind to full-year
net revenue and adjusted operating profit.

 

Focused investment in our priority combustible markets is expected to deliver
a further modest gain in the aggregate share for our top-five markets at the
full year. This will complete three consecutive years of improved market share
performance following several years of decline. Like the first half, the US,
Spain and Australia are expected to show market share growth, more than
offsetting declines in Germany and the UK. This positive aggregate share
performance has been achieved while delivering strong pricing across all five
markets, and reflects the strengthened equity of our brands and our improved
resilience as a result of our recent targeted investments.

 

As anticipated, at constant currency our tobacco net revenue growth improved
in the second half of the year, as continued strong pricing helped to offset
the relatively higher volume declines against historic averages. Tobacco net
revenue growth has remained strong in Europe and the AAACE region, more than
offsetting declines in the US. Our US cigarette business has outperformed with
continued growth in cigarette net revenue although, as expected, this has been
more than offset by a decline in mass market cigar net revenue against a
strong comparator period. This headwind, which we reported at the half-year,
has eased during the second half. Excluding Russia, our tobacco net revenue at
full year is anticipated to be ahead of last year on a constant currency
basis. Details of the contribution from Russia last year are provided at the
end of this statement.

 

Full-year NGP revenue growth has accelerated in the second half of the year,
driven by strong growth in Europe. In all categories of next generation
products - vape, heated tobacco and oral nicotine - we delivered a step-up in
product and market launches during the year. In the US, we welcomed the
unanimous decision on 29 August 2023 by United States Court of Appeals for the
District of Columbia Circuit to vacate the Food and Drug Administration's
Marketing Denial Order for our myblu pod-based vapour product, and we are on
track to launch our new modern oral product early in 2024.

 

As previously signalled, over the period FY23 to FY25, we expect operating
profit to accelerate to a mid-single-digit CAGR at constant currency.

 

Consistent capital allocation supporting shareholder returns

We expect net debt to EBITDA leverage at 30 September 2023 to be at around 2.0
times. We plan to maintain this level of gearing going forward and reiterate
our commitment to our investment grade credit rating.

 

In line with our capital allocation policy and reflecting our confidence in
our strategy and cash generation, we are today announcing a further buyback of
up to £1.1 billion of shares in the period from 6 October 2023 to the end of
September 2024. This represents almost 8% of our share capital based on
yesterday's market closing share price. This is a 10% increase on last year's
£1 billion buyback, where we repurchased 52,107,043 shares, or 5.5%, of our
share capital in FY23.

 

This commitment forms part of an ongoing, multi-year buyback programme that
will deliver a material reduction in the capital base over time, which,
together with our progressive dividend policy, will provide an ongoing source
of shareholder returns. Taking our dividends and buyback together, we expect
our capital returns to shareholders will exceed £2.4 billion in the coming
fiscal year, representing around 17% of our current market capitalisation.

 

The full year results for the twelve months ended 30 September 2023 will be
announced on 14 November 2023.

 

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
FY22 for key metrics to assist with the modelling the year-on-year impact.

 

 FY22 Russia contribution          Russia
 Tobacco volume             bn SE  7.8
 Total net revenue          £m     56
 Tobacco net revenue        £m     56
 NGP net revenue            £m     -
 Adjusted operating profit  £m     5

 

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

In April 2023, we announced the transfer of the management of our Central and
Eastern Europe cluster from our Europe region to the Africa, Asia and
Australasia (AAA) region. The AAA region is now known as AAACE. 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.

 

As a reminder, we provide below the key regional metrics for FY22 restated for
the new reporting basis.

 

 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

 

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  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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