TIDMIMB
RNS Number : 3065T
Imperial Brands PLC
14 November 2023
IMPERIAL BRANDS PLC
Legal Entity Identifier (LEI) No. 549300DFVPOB67JL3A42
FULL YEAR RESULTS STATEMENT
14 NOVEMBER 2023
CONSUMER-FOCUSED
TRANSFORMATION DRIVES
IMPROVING RETURNS
Report for the year ended 30 September 2023
Business Highlights
-- Delivered an acceleration in adjusted operating profit growth
in line with five-year strategic plan
-- Improved combustible tobacco performance with 10 basis points
aggregate market share growth in top-five priority markets and
strong, broad-based pricing gains
-- Next generation product net revenue up 26% as momentum grows
in all categories; Europe NGP up 40%
-- Operational and financial delivery underpinned by new
consumer capabilities, ways of working and cultural change, with
employee engagement 100 basis points ahead of global benchmark at
74%
-- Enhanced shareholder returns with 4.0% dividend increase as
well as a 10% increase in share buybacks; total FY24 returns of
GBP2.4 billion equivalent to c. 15% of total market value
Financial Summary
Reported Adjusted(2)
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Constant CC ex
2023 2022 Change 2023 2022 Actual currency(3) Russia(4)
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Revenue/Net revenue(1) GBPm 32,475 32,551 -0.2% 8,012 7,793 +2.8% +0.7% +1.4%
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Operating profit GBPm 3,402 2,683 +26.8% 3,887 3,694 +5.2% +3.8% +3.9%
======================= ===== ======= ======= ====== ======= ======= ====== ============ ==========
Earnings per
share p 252.4 165.9 +52.1% 278.8 265.2 +5.1% +4.2% +4.3%
======================= ===== ======= ======= ====== ======= ======= ====== ============ ==========
Free cash flow GBPm 2,364 2,562 - 2,364 2,562 - - -
======================= ===== ======= ======= ====== ======= ======= ====== ============ ==========
Net debt GBPm (8,438) (8,492) - (8,026) (8,054) - - -
======================= ===== ======= ======= ====== ======= ======= ====== ============ ==========
Dividend per
share p 146.82 141.17 4.0% 146.82 141.17 4.0% 4.0% -
======================= ===== ======= ======= ====== ======= ======= ====== ============ ==========
1. Reported revenue includes duty, similar items, Distribution
gross profit (Logista) and sale of peripheral products, which are
excluded from net revenue; net revenue comprises reported revenue
less duty and similar items, excluding sale of peripheral products
and Distribution gross profit (Logista).
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.
4. Constant currency movement excluding the prior year financial
contribution from Russia, following our exit in April 2022.
Stefan Bomhard Chief Executive
"Three years into Imperial's transformation, our investments in
consumer capabilities, changes to the way we work, and a new
performance culture are translating into stronger, more sustainable
operational and financial outcomes. In combustible tobacco,
improving brand equity and investment in our salesforce
capabilities has led to the third consecutive year of stable or
growing aggregate market share in the five priority markets which
account for 70% of our operating profit. At the same time, we have
offset structural volume declines with strong pricing in all key
markets.
"In next generation products, our challenger approach, which
combines partnership-based innovation with disciplined market
entry, is delivering positive results. We now have credible
propositions across all categories - vape, heated tobacco and oral
nicotine. Following recent launches, we now offer consumers
potentially reduced-harm choices in more than 20 European markets,
as well as the United States. This step-up in investment in Europe
has driven an acceleration in net revenue growth.
"Underpinning this broad-based progress is our continued
transformation, which includes new innovation hubs in Liverpool,
Hamburg and Shenzhen, modernisation of legacy systems, and
investments in upskilling our leaders.
"All of this means we are well placed to deliver on our
commitment to enhance returns to investors, with increases to both
our dividend and buyback programme. Looking ahead, we expect the
continuing benefits of our transformation to enable a further
acceleration in our adjusted operating profit growth in the final
two years of our five-year strategy. We look forward to building on
our growing operational track record to deliver sustainable returns
to shareholders and play a positive, distinctive role in this
industry's transition to a healthier future."
Delivering Against our Strategic Priorities
Growing market share in aggregate across our portfolio of five
priority combustible markets
-- 10 bps aggregate market share gain in our five priority
markets, while achieving strong pricing in all markets
-- Continued investment in brand equity building and sales force
initiatives is driving performance
-- Three out of five markets in share growth: gains in US,
Australia and Spain offset declines in Germany and UK
Accelerating our NGP performance with disciplined execution
-- New product and market launches delivering acceleration in
NGP net revenue growth in second half of the year
-- Driving growth across all three categories: vapour, heated
tobacco and modern oral nicotine
-- Our new heated tobacco offering, Pulze 2.0 and iD launched
across seven European markets
-- All-new blu 2.0 now available nationally in nine markets;
disposable blu bar now available in 11 markets
-- In modern oral, growth in Zone X, and Skruf Super White
supported by flavour launches
-- Acquisition of US nicotine pouch business creates opportunity
to launch new modern oral in US in FY24
Driving value from our broader market portfolio
-- Strong pricing in our wider footprint markets has driven
financial performance
-- Good progress in several smaller clusters, e.g. Africa, Asia,
Middle East and Taiwan
-- Leveraging our capabilities in driving growth from portfolios
of smaller markets with transfer of Central and Eastern Europe
cluster from Europe region to the Africa, Asia and Australasia
(AAA) region
Transforming our ways of working
-- Consumer centricity: Significantly strengthened our
consumer-facing capabilities under Global Consumer Office
-- Performance-based culture: Continued roll-out with 'how'
objectives incorporated within remuneration incentives as well as
senior leadership coaching programme
-- Benchmark-beating employee engagement scores - showing buy-in
to new strategy, vision, purpose and behaviours
-- Simplified and efficient operations: have delivered the
target cost savings of GBP150m by end FY23
Results Overview*
Tobacco & NGP net revenue growth driven by resilient tobacco
pricing
-- Strong tobacco pricing across all key markets mitigating
volume declines
-- Excluding Russia, tobacco price mix of 8%: pricing +11% with
adverse mix of -3%, driven primarily by adverse product mix in the
USA (mass market cigars and cigarettes)
-- Tobacco volumes down 10.4% driven by our exit from Russia and
weakness in US mass market cigars
-- Excluding Russia, tobacco volumes declined 7.1%, as
anticipated against a stronger prior year comparator, down 1.2%
-- NGP net revenue up 26.4% driven by growth across all
categories; Europe net revenue up 40.4%
-- Reported revenue declined -0.2% reflecting lower excise
partially offset by higher Logista revenue
Delivering improved profitability and increased investment
-- Group adjusted operating profit grew +3.8%, driven by our
tobacco portfolio and Logista; excluding Russia, Group adjusted
operating profit grew +3.9%
-- Reported operating profit grew 26.8% because charges relating
to our Russia exit last year were not repeated
-- Tobacco adjusted operating profit grew +3.9%, reflecting
strong pricing and cost control; excluding Russia +4.1%
-- Tobacco adjusted operating margins increased +180bps driven
by pricing more than offsetting cost inflation; ex. Russia
+150bps
-- NGP adjusted losses increased +48.3% to GBP135m as new
product and market launches led to higher investment
-- Distribution adjusted operating profit up 17.0% reflecting
organic growth and the contribution from acquisitions
-- Adjusted EPS grew +4.2% driven by operating results and
reduced share count, partially offset by higher finance costs and
increased minority interests; excluding Russia adjusted EPS grew
+4.3%
-- Reported EPS grew 52.1% driven by higher reported operating
profit and a reduction in tax charge relating to favourable FX
translation
Strong free cash flow and clear capital allocation framework
supports growing shareholder returns
-- Adjusted operating cash conversion of 92%, against a strong
comparator (102%); free cash flow of GBP2.4bn
-- Investing in organic growth initiatives and targeted bolt-on
acquisitions in NGP and Logista
-- Adjusted net debt GBP8.0bn (2022: GBP8.1bn); adjusted net
debt to EBITDA at 1.9x (2022: 2.0x)
-- Reported net debt GBP8.4bn (2022: GBP8.5bn)
-- Annual dividend per share up 4.0% to 146.82 pence per share,
in line with our progressive dividend policy
-- Ongoing multi-year share buyback with GBP1.1bn underway for
FY24; 10% increase on FY23 buyback
-- Cumulative capital returns of GBP4.7bn in FY23 and FY24
* All measures at constant currency unless otherwise stated
Outlook
Our five-year strategy is continuing to drive the operational and cultural
changes which, despite challenging macro-economic headwinds, are strengthening
financial delivery. This underpins our confidence in delivering against
the final two years of our plan with a further improvement in adjusted
operating profit growth to support a mid-single-digit constant currency
CAGR over FY23-FY25, in line with our medium-term guidance.
In the coming year, we expect to deliver low-single-digit constant currency
revenue growth and to grow our constant currency adjusted operating
profit close to the middle of our mid-single digit range.
Performance will be weighted to the second half of the year driven by
the phasing of our pricing in the prior year and investments in NGP.
As a result, first-half operating profit is expected to grow at low
single digits. at constant currency.
Our earnings per share growth will benefit additionally from the continued
reduction in share count as a result of our ongoing share buyback programme,
although this will be offset slightly by increased adjusted finance
and tax costs.
At current rates, foreign exchange translation is expected to be a 0-1%
headwind to net revenue, adjusted operating profit and earnings per
share.
We look forward to building on our growing operational track record
to deliver shareholder returns through an ongoing buyback and progressive
dividend, and to play a positive, distinctive 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/FY23
and it is also available here:
http://www.rns-pdf.londonstockexchange.com/rns/3065T_1-2023-11-13.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 14 November 2023 for investors and investment analysts
following
the publication of our interim 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/mmry9v55. To participate in the
Q&A session, please register in advance via this link:
https://register.vevent.com/register/BI3cc04a0f77b246ea8dfafdf340b87071.
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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