Final Results

IMPERIAL BRANDS PLC

Legal Entity Identifier (LEI) No. 549300DFVPOB67JL3A42

FULL YEAR RESULTS STATEMENT

19 NOVEMBER 2024

Delivering Growth
DRIVING RETURNS

Report for the year ended 30 September 2024

Business Highlights

·    Delivered a further acceleration with net revenue up 4.6% from tobacco & next generation products

·    Aggregate market share gains (+5bps) in our five priority markets with four out of five markets in share growth

·    Next generation product net revenue up 26% with growth from all three regions and improved gross margins

·    Growth at Logista reflected strong tobacco pricing and benefit of prior year acquisitions

·    Adjusted earnings per share up 10.9% driven by profit growth and share count reduction; reported EPS up 19.1%

·    Cash generation was strong; free cash flow of £2.4bn

·    Capital returns of c. £2.8bn underway for FY25 with £1.25bn buyback and FY24 dividend, up 4.5%

Financial Summary

1.   Tobacco & NGP net revenue is reported revenue less duty and similar items, sale of peripheral products and Distribution (Logista) gross profit.

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.

Stefan Bomhard Chief Executive

"As we enter the final year of our current strategy, the investment we have made in consumer capabilities, cultural transformation and agile ways of working has supported another year of accelerated financial delivery and growing capital returns. These results demonstrate how we are fulfilling our role as an effective challenger for the industry, able to deliver consistently against operational and financial expectations.

"In tobacco, investment in our brands and sales force initiatives have delivered aggregate market share gains across our five priority markets, while delivering strong pricing. This was supported by an encouraging stabilisation in German market share for the first time under our strategy.

"In next generation products (NGP), we continue to build scale across our footprint with net revenues up 26.4% at constant currency driven by growth from all three regions and market share growth in all three categories. Our partnership approach to product innovation has enabled us to launch new products across all three categories during the year. This included our successful entry to the fast-growing modern oral category in the US with our brand 'Zone'.

"Our operational delivery coupled with consistently strong cash flow generation has supported enhanced shareholder returns with increases to both our ordinary dividend and share buyback. We are on track to deliver five-year capital returns of c. £10bn, representing 67% of our market capitalisation in January 2021 when we launched our strategy. We look forward to presenting the next phase of our strategy at a Capital Markets Day on 26 March 2025."

Delivering Against our Strategic Priorities

Gaining aggregate market share across our portfolio of five priority combustible markets

·    Aggregate market share gains of +5bps, in our five priority markets, while achieving strong pricing in all markets

·    Four out of five markets in share growth: gains in US (+15bps), Germany (+2bps), Spain (+5bps), and Australia (+5bps) more than offset declines in UK (-50bps)

·    Encouraging share stabilisation in Germany with share +2bps vs FY23 -80bps, as investment initiatives gain traction

Building a sustainable NGP business for a sustainable future

·    Challenger strategy delivering net revenue growth in all three regions and all three categories

·    Delivering market share growth in all categories

·    NGP net revenue now represents c. 8% of tobacco and NGP net revenue in Europe, including Central & Eastern Europe

·    In vaping, new blu formats launched to meet evolving consumer needs across several markets

·    Heated tobacco growing share with Pulze 2.0, iD and iSenzia sticks in Europe

·    In modern oral, encouraging share and repurchase rates following our targeted launch of Zone in 12 US metropolitan areas

Driving value from our broader market portfolio

·    Strong pricing in our wider footprint markets has underpinned a strong financial performance

·    AAACE performance recovered in the second half of the year, as expected, as disruption to shipment timings abated

·    Africa delivered a net revenue growth with strong pricing in key markets

·    Strong NGP growth across multiple European markets in our wider market portfolio

Transforming our ways of working

·    Consumer: Significantly strengthened our consumer-facing capabilities under our Group Consumer Office

·    Performance-based culture: Employee engagement survey scores continue to exceed global benchmarks as we build a performance-based culture and embed the benefits of our senior leadership coaching programme

·    Simplified and efficient operations: Good progress with new ways of working with the further deployment of Global Business Services across several functions and the successful go-live of our ERP pilot in the UK in October 2024

Results Overview*

Tobacco & NGP net revenue growth driven by strong tobacco pricing and NGP

·    Strong tobacco pricing across all key markets, price mix of 7.8%: reflecting continued strong pricing across all three regions

·    Tobacco volumes declined 4.0% (to 190.0bn SE) as volume declines have continued to normalise across our footprint

·    NGP net revenue up 26.4% to £335m driven by growth across all regions (£329m at actual rates)

·    Distribution (Logista) gross profit increased 4.4% driven by strong tobacco pricing and the benefit of prior year acquisitions

·    Reported revenue declined -0.2% reflecting the decline in tobacco revenue due lower volumes in high excise markets and adverse foreign exchange movements, largely offset by growth in NGP and Distribution revenues

Accelerating our adjusted profit growth alongside continued investment

·    Group adjusted operating profit grew +4.6%, driven by improved profitability in tobacco and NGP and Distribution

·    Reported operating profit grew +4.5% driven by strong operating performance, with adverse foreign exchange movements offset by the non-repeat of prior year charges for legal provisions and fair value adjustments and impairment of other financial assets

·    Tobacco adjusted operating profit grew +2.5%, reflecting strong pricing while absorbing cost inflation

·    NGP adjusted losses reduced by +43.0% to £79m, with improved gross margin while supporting continued investment in new product launches

·    Distribution adjusted operating profit increased 8.6% reflecting good underlying growth due to tobacco price increases

·    Adjusted EPS grew +10.9% with adjusted operating profit growth enhanced by reduced share count

·    Reported EPS grew +19.1% reflecting increased operating profit, a lower reported tax rate and a reduced share count, which more than offset higher interest costs and adverse foreign exchange translation

Strong free cash flow and disciplined capital allocation framework supports growing shareholder returns

·    Adjusted operating cash conversion of 100%; free cash flow of £2.4bn

·    Investing in organic growth initiatives and targeted bolt-on acquisitions in NGP and Distribution (Logista)

·    Adjusted net debt £7.7bn (2023: £8.0bn); adjusted net debt to EBITDA at 1.8x and 1.9x at constant currency (2023: 1.9x)

·    Reported net debt £8.3bn (2023: £8.4bn)

·    FY24 dividend per share up 4.5% to 153.42 pence per share, in line with our progressive dividend policy; move to four equal quarterly dividend payments for FY25 onwards

·    Ongoing multi-year share buyback with £1.25bn underway for FY25; 13.6% increase on FY24 buyback

·    Cumulative capital returns from FY21 to FY25 of c.£10bn, representing c. 67% of market capitalisation at January 2021

*  All measures at constant currency unless otherwise stated

Outlook

For a Copy of the full statement

To view  a copy of the full statement please click here:  https://www.imperialbrandsplc.com/FY24
and it is also available here: http://www.rns-pdf.londonstockexchange.com/rns/7018M_1-2024-11-18.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

Analyst Presentation Webcast

Imperial Brands PLC will be hosting a live webcast at 09:00 (GMT) on 19 November 2024 for investors and investment analysts following
the publication of our annual 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/emm9dnx5. To participate in the Q&A session, please register in advance via this link: https://register.vevent.com/register/BI9912be35fe704fbb9ace6789f5762e54. 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.