Half Year Results Statement


Half Year Results Statement


Report for the six months ended 31 March 2023

Business Highlights

  • Robust pricing and aggregate market share up 20 basis points across top-five combustible market portfolio
  • Next generation product (NGP) net revenue up 19.8% - acceleration driven by product launches across categories
  • Volumes affected by COVID unwind and Russian exit last year; profitability impacted by higher NGP investment
  • Strong contribution from Logista following recent M&A
  • Dividend up 1.5% and on track to complete £1bn share buyback this year
  • On course to meet our full-year guidance, with improving returns in line with five-year strategy

Financial Summary

Six months ended 31 March 2023 Reported Adjusted2  
  2023 2022 Change 2023 2022 Actual Constant
CC ex Russia4
Revenue/Net revenue1 £m 15,411 15,362 -0.3% 3,663 3,495 +4.8% -1.0% +0.6%
Operating profit £m 1,534 1,201 27.7% 1,716 1,600 +7.3% +0.8% +1.2%
Basic earnings per share pence 117.0 105.2 11.2% 118.5 113.0 +4.9% -1.7% -1.2%
Net debt £m (10,239) (9,757)   (9,799) (9,157) - - -
Dividend per share pence 43.18 42.54 1.5% 43.18 42.54 +1.5% 1.5% -

1 Reported revenue includes duty, similar items, Distribution (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 (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.

4 Constant currency movement excluding the prior year financial contribution from Russia, following our exit in April 2022.

Stefan Bomhard, Chief Executive

“We are now in the third year of our five-year strategy, and this means we are moving from the initial foundationbuilding phase to a period of improving financial delivery. We remain strongly committed to an ongoing programme of shareholder returns and will complete our initial £1 billion buyback during the second half.

“Business performance for the first half of fiscal year 2023 was resilient, despite temporarily increased volume declines against a strong comparator. As expected, this reflects a return to pre-COVID buying patterns as well as our decision to exit Russia last year. In tobacco, we have delivered further share gains in aggregate across our portfolio of top five markets, while also achieving strong pricing to help mitigate the volume declines. We have now recorded stable or growing aggregate market share in these markets in each of the last four six-month periods after many years of sharp declines. In NGP, we have delivered a step-up in innovation with new product and market launches in all three categories: vapour, heated tobacco and modern oral.

“This performance is underpinned by targeted investments in capabilities and people. Earlier this month we opened a new innovation facility in Liverpool, which brings together consumers, product developers and third-party partners in a single collaborative space. We are making good progress in our programmes to modernise legacy systems, and we continue to invest in upskilling our leaders to drive forward our performance culture.

“We remain on track to deliver the acceleration in adjusted operating profit growth in the second half in line with our guidance and expectations. I am confident the actions we have taken are creating a stronger, more resilient business capable of driving shareholder returns through a growing dividend and an ongoing share buyback.”

Delivering Against our Strategic Priorities

Delivering strong pricing across our portfolio of five priority combustible markets

  • 20 bps aggregate market share gain in top five combustible markets
  • Share positions supported by continued investment in brand equity building and sales force initiatives
  • 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

  • Step-up in innovation across all NGP categories driving NGP net revenue growth in Europe by 35.1%
  • Our heated tobacco offering, Pulze and iD, is now available in seven European markets
  • All-new blu 2.0 now available nationally in eight markets, disposable blu bar launched in seven markets including UK, France and Spain
  • In modern oral, Zone X, and Skruf Super White have grown well in Norway

Driving value from our broader market portfolio

  • Strong pricing in our wider footprint markets more than offset volume declines
  • Leveraging our capabilities in driving growth from portfolios of smaller markets with transfer of Central and Eastern Europe cluster from Europe region to Africa, Asia and Australasia (AAA) region

Transforming our ways of working

  • On track to deliver annual savings target of £150m by end FY23
  • Centralised global business services model beginning to enable efficient ways of working in key functions
  • Initial design stage of five-year digital transformation well advanced to replace 60 legacy systems with single ERP system

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 6.8%: pricing +9.3% with adverse mix of -2.5%, driven primarily by adverse product mix in the USA (mass market cigars and cigarettes)
  • Tobacco volumes down 12.7% driven by our exit from Russia and the unwind of COVID restrictions on buying patterns
  • Excluding Russia, tobacco volumes declined 6.8%
  • NGP revenue up 19.8% as strong growth in Europe more than offset declines in USA caused by MDO uncertainty
  • Reported revenue increased 0.3%; the decline in tobacco and NGP revenue was offset by growth in Distribution revenue as a result of acquisitions at Logista

Delivering improved profitability and increased investment

  • Group adjusted operating profit grew +0.8%, driven by growth in tobacco and at Logista and tobacco; excluding Russia, Group adjusted operating profit grew +1.2%
  • Reported operating profit grew 27.7% because charges relating to our Russia exit last year were not repeated
  • Tobacco adjusted operating profit grew +0.2%, reflecting strong pricing and cost control; excluding Russia +0.7%
  • Tobacco adjusted operating margins increased +80bps despite cost inflation and investment; ex. Russia +30bps
  • NGP adjusted losses increased +33.3% to £56m as expected, with higher investment in new product and market launches
  • Distribution adjusted operating profit up 19.3% reflecting good underlying growth and the contribution from acquisitions, as we continue to support Logista’s strategic delivery
  • Adjusted EPS fell -1.7% driven by higher finance costs, increased minority interests caused by growth at Logista and a slightly higher tax rate partially offset by reduced share count; excluding Russia adjusted EPS fell -1.2%
  • Reported EPS grew 11.2% reflecting the higher reported operating profit

Free cash flow supporting investment and shareholder returns

  • Adjusted operating cash conversion of 77% on a 12-month basis, reflects temporary working capital outflow driven by increased stock associated with price increases and higher capex, as guided
  • Adjusted net debt £9.8bn; adjusted net debt to EBITDA on a 12-month basis flat at 2.4x
  • On track to deliver adjusted net debt to EBITDA of around 2.0 times at the year end
  • Reported net debt £10.2bn
  • Interim dividend per share up 1.5% to 43.18p, in line with our progressive dividend policy
  • £500m buyback completed in period; on track to complete £1bn by end September 2023

* All measures at constant currency unless otherwise stated


We remain firmly on track with our five-year strategic plan to transform Imperial and are on course to deliver against the guidance and expectations for the current year.

We continue to expect low single-digit constant currency tobacco and NGP net revenue growth with constant currency adjusted operating profit growth accelerating to deliver mid-single digit CAGR over the next three years.

As previously guided, for the current year – inclusive of the impact of our Russian exit – we expect to grow our adjusted Group operating profit at the lower end of our mid-single digit range at constant currency. This improvement in adjusted operating profit growth in the second half will be driven by the strong embedded pricing as a result of actions taken in the first half, the improving geographic mix driven by our priority market focus, operational gearing, cost savings and growth at Logista. These tailwinds will be partially offset by continued cost inflation and increased NGP investment. We expect the year-on-year effect of consumer buying patterns to normalise in the second half as we annualise the prior year COVID-related impact.

We expect our year end gearing to be around the lower end of our adjusted net debt to EBITDA range of 2.0-2.5 times.

Our full year adjusted effective tax rate is expected to be around 22-23%. At current rates, foreign exchange translation is expected to be a 3-4% tailwind to full year net revenue, adjusted operating profit and earnings per share.

We remain confident in our ability to navigate current macro-economic challenges and we are well placed to generate long-term value for shareholders and all our stakeholders.

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 6-month average to the end of March (MHT – moving half-year trend), unless otherwise stated. Aggregate market share is a weighted average across markets within our footprint.
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    

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We're a global consumer-focused organisation and the fourth largest international tobacco company.
We're a global consumer-focused organisation and the fourth largest international tobacco company.
We're a global consumer-focused organisation and the fourth largest international tobacco company.

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