Imperial Brands PLC (LON:IMB) has announced its full year results statement 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
| Twelve months ended 30 September 2024 | Reported | Adjusted2 | |||||||
| 2024 | 2023 | Change | 2024 | 2023 | Actual | Constant currency3 | |||
| Revenue | £m | 32,411 | 32,475 | -0.2% | – | – | – | – | |
| Tobacco & NGP net revenue1 | £m | – | – | – | 8,157 | 8,012 | +1.8% | +4.6% | |
| Operating profit | £m | 3,554 | 3,402 | +4.5% | 3,911 | 3,887 | +0.6% | +4.6% | |
| Earnings per share | p | 300.7 | 252.4 | +19.1% | 297.0 | 278.8 | +6.5% | +10.9% | |
| Net debt | £m | (8,340) | (8,438) | – | (7,740) | (8,026) | – | – | |
| Dividend per share | p | 153.42 | 146.82 | +4.5% | 153.42 | 146.82 | +4.5% | +4.5% | |
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, Imperial Brands 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
We are now working on our strategy for the next five-year period through to 2030, which will build on the strong foundations established under the current strategy. Further details will be provided at a Capital Markets Day in London on 26 March 2025. In the meantime, our priority is to deliver on the final 12 months of the current five-year plan and, while we take nothing for granted, we remain confident in our ability to deliver on our existing operational and financial commitments.
In the coming year, we expect to deliver tobacco and NGP net revenue growth at low single-digit constant currency and to grow our Group adjusted operating profit close to the middle of our mid-single-digit range at constant currency. This will be driven by continued profit growth from our combustible tobacco business and a further reduction in operating losses in our NGP portfolio. Given the strong momentum in our NGP business, we will continue to invest to drive another year of double-digit constant currency net revenue growth, while balancing our objective to build a sustainable and profitable business.
In line with previous years, performance will be weighted to the second half of the year driven by the phasing of combustible pricing and investment. As a result, first half Group adjusted operating profit is expected to grow at low single digits at constant currency.
We expect to deliver at least high-single-digit earnings per share growth at the full year at constant currency supported by the ongoing share buyback and partly offset by higher adjusted finance and tax costs. At current rates, foreign exchange translation is expected to be a headwind of 1-2% to net revenue, adjusted operating profit and earnings per share.
We remain focused on driving sustainable growth in cash flows to underpin another year of shareholder returns and to support our growing role in this industry’s transition to a healthier future.
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.
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.
